TIDMFLTR
RNS Number : 5970R
Flutter Entertainment PLC
02 March 2023
2 March 2023
Flutter Entertainment plc - 2022 Preliminary Results
Exceptional US performance; Strong recreational customer growth
across Group driving 2022 revenue
Flutter Entertainment plc (the "Group") announces preliminary
results for year ended 31 December 2022.
Reported(1) Adjusted(2)
FY FY FY FY
2022 2021 2022 2021 CC(3)
GBPm GBPm YoY % GBPm GBPm YoY % YoY %
--------------------------- -------- -------- ----- ------ ------ ----- -----
Average monthly players(4)
('000s) 10,245 8,146 +26%
------
Group Revenue 7,693 6,036 +27% 7,693 6,036 +27% +22%
Group EBITDA(5) 918 723 +27% 1,045 1,001 +4% +4%
------
Group EBITDA excluding
US 1,295 1,244 +4% +2%
------
(Loss)/Profit after
tax (305) (412) 336 454 -26%
------
(Loss)/Earnings per
share (pence) (170.8p) (236.5p) 189.0p 252.7p -25%
-----
Net Debt at period end(6) (4,644) (2,647)
--------------------------- -------- -------- ----- ------ ------ ----- -----
Pro forma references include Junglee, tombola and Sisal for a
full 12-month period in both 2021 and 2022. Any differences due to
rounding.
Operational Highlights:
-- Group: Strong 2022 performance with average monthly players
('AMPs') +26%, due to rapid US expansion, combined with benefit of
Sisal and tombola acquisitions (pro forma +15%)
-- US: Scale benefits compounding, continuing to extend
leadership position with over 3m AMPs in Q4
- Clear #1 sportsbook; 50%(7) Q4 share; Maryland and Ohio most
successful state launches to date
- Improved iGaming proposition driving market share gains to 21% in Q4
- Positive EBITDA in Q2 and in Q4 excluding Maryland/Ohio investment
-- Group ex-US: Excellent recreational AMP growth
- UK & Ireland: Product improvements and World Cup driving
strong second half AMPs, partly offsetting annualisation of safer
gambling initiatives and prior year Covid frequency benefit
- Australia: Continued strong AMP growth, leading to resilient
performance against tough H2 Covid comparatives and highly
competitive environment
- International: At growth inflection point with major
regulatory headwinds annualised and exceptional revenue growth in
Consolidate and Invest(8) markets
-- Sustainability: Positive Impact Plan progressing well across
all pillars; 40.1% of AMPs using Play Well tools(9) in 2022, a 7.8
percentage point increase when compared with 2021
Financial Highlights:
-- Group reported revenue and EBITDA growth of 27%, benefiting
from tombola and Sisal acquisitions
-- US revenue of GBP2.6bn ($3.2bn) at upper end, and EBITDA loss
of GBP250m ($313m) at lower end, of guidance ranges
-- Group ex-US EBITDA within range, even after customer friendly sports results in December
-- Group Adjusted EBITDA +4% to GBP1,045m reflecting:
- Benefit from Sisal and tombola acquisitions in 2022
- Strong organic growth offset by GBP160m of known regulatory
changes and safer gambling initiatives
-- Reported loss after tax of GBP305m (2021: GBP412m) after
GBP608m charge for amortisation of acquired intangibles
-- Adjusted basic earnings per share reduced from 252.7p to
189.0p driven by higher interest and tax costs
-- Net debt of GBP4.6bn at 31 December 2022 following Sisal and
tombola acquisitions as well as Adjarabet buyout. Pro forma
leverage ratio of 3.9 times(6) (2021: 2.6 times), or 3.2 times
excluding US losses
Outlook:
-- Trading in the first 8 weeks of the year in line with expectations:
- US delivering continued strong growth across existing states
and from the very successful launches in Maryland and Ohio. US
remains on track to be EBITDA positive for the full year 2023
- Group ex-US revenues benefitting from strong momentum in UK
& Ireland, and International, offsetting the impact of a more
challenging environment and tough comparatives in Australia
Peter Jackson, Chief Executive, commented:
"Flutter delivered a strong performance in 2022, continuing to
execute on the strategic priorities we outlined last March. Growth
in our recreational customer base delivered 2022 revenue growth of
27% and we ended the year with a record 12.1m average monthly
players in Q4.
We have an unparalleled number one position in the US where we
continue to go from strength to strength. The combined power of the
'FanDuel Advantage' and the 'Flutter Edge' delivered our most
successful launches to date in Maryland and Ohio. Leveraging our
number one FanDuel brand we had a record Super Bowl and have
acquired over 1.2m customers in 2023 so far.
Outside of the US we have been pleased with the performance of
the business as we faced into regulatory changes and challenging
comparatives. We are well placed to build on gold medal positions
in our mature markets while we are delivering very strong growth in
a range of attractive high growth markets. We have been really
excited to add Sisal, the number one operator in the Italian
market, to our brand portfolio, and we are making good progress
with our integration strategy.
During the year, we invested GBP60m in safer gambling
initiatives across the Flutter Group and have been really
encouraged by the 8-percentage point increase achieved in safer
gambling tool usage to over 40% of our player base.
We recently announced that we believe an additional US listing
of Flutter's ordinary shares will yield a number of long-term
strategic and capital market benefits. We have begun an extensive
consultation with our shareholders and early feedback has been
supportive. We look forward to continued engagement with investors
and stakeholders on this matter and we will announce the results of
this engagement in due course.
2023 is off to a pleasing start driven by positive momentum from
the end of last year. With our combined US business on track to
deliver a positive EBITDA for the full year 2023 for the first
time, the Group is currently at an earnings' transformation point
and we look forward to delivering future growth and progressing
further against Flutter's strategic priorities in the coming
year."
Analyst briefing:
The Group will host a questions and answers call for institutional
investors and analysts this morning at 9:30am (GMT). Ahead of that
call, a 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 '+ 44 75 5715 5768
Relations and FP&A
Ciara O'Mullane, Director of Investor '+ 353 87 947 7862
Relations
Liam Kealy, Director of Investor Relations '+ 353 87 665 2014
Press:
Kate Delahunty, Group Director of Corporate '+ 44 78 1077 0165
Communications
Lindsay Dunford, Group Head of Corporate '+ 44 79 3197 2959
Affairs
Rob Allen, Group Head of Corporate Campaigns '+ 44 75 5444 1363
Billy Murphy, Drury Communications '+ 353 1 260 5000
James Murgatroyd, FGS Global '+ 44 20 7251 3801
------------------------------------------------- --------------------
Business review (2-5)
As the number one sports betting and iGaming operator globally,
Flutter represents a unique and compelling investment opportunity.
The US market is expected to be worth more than $40bn by 2030,
while outside of the US, the market is already worth GBP263bn,
growing at a projected 9% CAGR over the next five years(10) . With
just 30% of this combined market opportunity currently taking place
online, this provides a long runway for future growth.
Flutter has set clear strategic objectives to deliver
sustainable value in this market. An unparalleled portfolio of
products, diversified geographic footprint and the benefit of the
combined power of the Group, the Flutter Edge, provide key
competitive advantages which empower Flutter's brands to win in
their respective markets.
Within the US, our sustainable leadership position delivers
superior economics and will transform the earnings potential of the
Group. Outside of the US, our scale and diversified position
provides a resilient and robust model for further growth and cash
generation through regulatory change. This is evidenced by the
Group's strong track record of delivery with 22 % compound annual
EBITDA growth since 2017 .
During 2022, we leveraged our key advantages to deliver a strong
performance with excellent progress against our strategic
objectives. The US was our largest division by revenue in 2022.
FanDuel extended its leadership position with a Q4 online
sportsbook market share of 50% (10 percentage points higher than Q4
last year) while growing its podium position in iGaming to a 21%
share. Our US business remains firmly on track to be EBITDA
positive for the full year 2023.
In our Group ex-US business, we continued to see good growth
while facing into the impact of regulatory changes. In the UK &
Ireland, we delivered strong recreational customer growth as well
as benefiting from the reopening of our retail estate and the
acquisition of tombola. Product innovation resulted in an improved
H2 performance, driving momentum into 2023. This partially offset
the reversion of customer activity to pre Covid levels and the
annualisation of our proactive safer gambling measures from 2021.
In Australia we drove excellent AMP volumes against a more
challenging operating environment in the second half due to the
unwind of Covid player engagement and a more competitive
landscape.
In our International division we have reached a growth
inflection point. The business is set to annualise the major known
regulatory headwinds in March 2023. The division is also on a more
sustainable footing with minimal single unregulated market exposure
resulting in 97% of the Group's total revenue now coming from
regulated markets. Revenue in our Consolidate and Invest markets,
which represent 76% of the division, were up 22% on a pro forma
basis in 2022 and we also secured the #1 position in Italy
following completion of our acquisition of Sisal in August.
We made significant strides on our sustainability agenda with
our Positive Impact Plan . Under the Play Well pillar, we achieved
a 7.8 percentage point increase in tool usage in 2022 to 40.1% and
we invested a total of GBP60m in safer gambling initiatives during
the year. Our Work Better pillar also saw positive progress with
33% female representation at leadership level in 2022. Within our
communities our pledge to Do More saw over 440,000 lives improved
through funding activities focused on sport, technology for good
and health and well-being. Finally, we continued to develop our
path to zero and Science Based Targets as part of our Environmental
goals.
As we look forward into 2023, the Group is at an earnings
transformation point, and very well placed to deliver future growth
and progress further against our strategic priorities.
2022 review
Flutter delivered strong revenue growth of 22% with AMPs up 26%
to 10.2m during the year, driven by our ongoing expansion in the US
and the benefit of the Group's acquisitions of Sisal and tombola.
On a pro forma basis both revenue and AMPs delivered excellent
growth, up 14% and 15% respectively. Group Adjusted EBITDA was
GBP1,045m, 4% higher. On a pro forma basis, Group Adjusted EBITDA
was 5% lower after the impact of known regulatory headwinds and
safer gambling initiatives of GBP160m, excluding which EBITDA was
9% higher.
US
The US division delivered an exceptional performance in 2022,
with revenue at the upper end and an EBITDA loss at the lower end,
of our guidance ranges. Revenue grew 67% to GBP2.6bn ($3.2bn) with
AMPs exceeding 3m for the first time in Q4, while our EBITDA loss
reduced by 6% to GBP250m ($313m). At our Capital Markets Day in
November, the FanDuel team outlined how the FanDuel Advantage of
(i) acquiring customers more efficiently (ii) retaining customers
for longer and (iii) growing customer value better than competitors
is driving our significant market outperformance. Underpinned by
the Flutter Edge, this continued to play out in Q4 with FanDuel
commanding a 50% gross gaming revenue ('GGR') share of the online
sports betting market and now number one in 15 of the 18 states in
which it is live today. We continued to refine our state playbook.
Our sophisticated player acquisition strategy and market-leading
product have delivered our two most successful state launches to
date in Maryland (Nov 2022) and Ohio (Jan 2023). Both are gold
medal positions, with penetration reaching over 6% of the total
adult population in those states combined since launch.
We have a clear strategy to improve our iGaming performance and
grow our podium position, through increasing our focus on casino
direct iGaming customers and improving our product range and player
experience. Although it is early days, we are pleased by progress
to date. Q4 customer player days were 1.5 times the comparable
period last year benefitting from the introduction of our FanDuel
casino daily reward machine in Q3. Flutter exited the year with 63%
growth in Q4 iGaming AMPs and a 21% share of the Q4 iGaming market,
with FanDuel Casino share three percentage points higher than in Q4
2021.
Our flywheel continues to drive efficient expansion. Total
operating costs (sales and marketing combined with operating costs)
reduced as a percentage of revenue by 19 points in H2. We are also
outpacing our competition with Flutter US revenue in 2022 over
$900m higher than our next nearest competitor and with one third of
the EBITDA loss. We were the first operator to reach profitability
in the US in Q2. Additionally, in Q4, Flutter US EBITDA was GBP31m
($36m), excluding new state investment in Maryland and Ohio. The
increasingly profitable progression of our customer cohorts,
together with the compounding benefit of our flywheel underpin our
confidence in delivering a positive full year 2023 EBITDA.
Group excluding the US
Group ex-US revenue grew 7% with Adjusted EBITDA up 2% to
GBP1,295m, within guidance range even after customer friendly
sports results in December which cost nearly GBP40m.
On a pro forma basis revenue was flat year on year, while
Adjusted EBITDA declined 6%. After adjusting for the previously
guided headwinds of GBP160m (i) proactive safer gambling
initiatives in the UK & Ireland (GBP38m) (ii) Australian tax
changes (GBP22m) and (iii) regulatory changes in International
markets (GBP100m), Adjusted EBITDA for the Group ex-US was 6%
higher year on year.
UK & Ireland
Online momentum in Q4 was strong with pro forma revenue 14%
higher, despite adverse sports results in the quarter, which
impacted revenues by GBP66m. This Q4 performance helped deliver H2
pro forma revenue growth of 4%, reflecting improvements to our
product proposition throughout the year, and the actions we have
taken to ensure our teams work more efficiently. This compared to a
decline of 19% in H1, which was impacted by the annualisation of
our proactive safer gambling initiatives taken across 2021 and the
prior year Covid-related peak in player days. Full year reported UK
& Ireland revenue growth of 4% benefitted from the addition of
tombola in January 2022 and our retail shops being open during the
year.
Pro forma player volumes increased 4% (reported +18%) across
2022, peaking in Q4 at 18% higher aided by the World Cup. In Sky
Bet, two thirds of World Cup customers used the new BuildABet
product that was launched at the start of the year, while Paddy
Power dominated social media, driving double the Twitter engagement
of all other betting brands combined.
Ongoing delivery of new and improved products for customers is a
key element in our winning formula. During the second half, SkyBet
further enhanced their new BuildABet product making it easier for
players to track progress of their bets and updated their pre-game
football proposition. Betfair's gaming proposition was refreshed,
while Paddy Power launched Wonder Wheel bonus rounds during the
World Cup, which helped drive their multi-product players seven
percentage points higher year on year in H2. We also launched Paddy
Power's first fully native gaming iOS app and additional branded
gaming content boosting retention rates. These innovations drove
pro forma gaming AMPs 10% higher during 2022.
During the year, we launched a range of efficiency initiatives
to further integrate our UK & Ireland brands. We simplified
team structures to allow us to operate more effectively. These
offset the higher levels of wage inflation to keep pay competitive
in light of current macro-economic trends. We improved the
effectiveness of marketing and generosity spend by ensuring we more
accurately deliver the right value to the right customers. In 2022,
pro forma sales and marketing declined 13% or 100 basis points as a
percentage of revenue, with further efficiency savings expected in
2023.
In Ireland, we welcome the publication of the draft Bill to
establish the Gambling Regulatory Authority, as a consistent
supporter of regulation in Ireland. We will work with the Authority
as they create the new regulatory framework. In the UK, we believe
the proactive initiatives we have taken on safer gambling position
us well for the eventual publication of the Gambling Act Review
White Paper.
Australia
Sportsbet delivered a solid performance with AMPs up 8% to 1.1m.
Revenue was 6% lower, reflecting a Covid tailwind in H1, offset by
(i) the H2 unwind of Covid engagement levels against challenging
comparatives, (ii) increased competition in H2 and (iii) the impact
of event cancellations due to adverse weather conditions. These
factors, combined with increased point of consumption ('POC') taxes
introduced in July 2022 of GBP22m (annualised impact: GBP73m), led
to a decline in EBITDA of 13% to GBP390m.
As the clear market leader with over 48%(11) of the Australian
online sports-betting market, Sportsbet benefitted most from the
retail to online migration during the Covid lockdown periods in
2020 and 2021, growing 1.4 times that of the online market. Strong
execution against our retention strategy meant that customer growth
has been sustained. We delivered a record 1.3m AMPs in Q4, 1.8
times Q4 2019, positioning the business well into 2023. As retail
and society fully reopened during 2022, AMP growth was more than
offset by the reversion of online player engagement from peak Covid
levels (H2 average player days 9% lower than the same period in
2021) and competitive intensity which stepped up significantly in
2022, particularly in Q4. This led to high levels of generosity
with customers shopping around for the most generous offers.
Leveraging structural margin gains from continued product
leadership, Sportsbet increased promotional investment and sales
and marketing spend during Q4 which contributed to the record AMP
levels. We are confident that the plans we have in place for 2023
are the right strategy to drive future growth over the medium term.
We will do this through continuing to deliver product innovation
and personalised generosity while leveraging our growing
recreational customer base, unparalleled local scale and long track
record of growing through regulatory changes.
International
International division revenue grew 24%, or 7% on a pro forma
basis, reaching a growth inflection point after a period of
significant regulatory change. International has four market types:
(i) Consolidate existing #1 positions, (ii) Invest for leadership
in high growth markets, (iii) Optimise returns, or (iv) Maintain an
existing position. Our Consolidate and Invest markets now represent
76% of revenue and grew at 22% on a pro forma basis (reported +68%)
during 2022. This highlights the very attractive positions we have
in these markets, including India, which grew at 80% and is
expected to become our second largest market behind Italy in
2023.
In August, we completed the acquisition of Sisal, the #1
operator in Italy, Europe's largest gambling market with GGR of
GBP18bn in 2022, including lottery. The online market is expected
to grow at a compound rate of 9% over the next three years, with
just 19% of the market online in 2022(10) .
Sisal has significant competitive advantages through its
omni-channel offering in an Italian market with advertising
restrictions, a nine-year Italian lottery concession and monopoly
positions in other markets. Sisal's performance in 2022 was
fantastic, growing proforma revenues by 32% to GBP863m and EBITDA
by 22% to GBP247m. Sisal's online market share increased to 13.4%
in Q4(12) , 140 basis points higher than the prior year (Flutter
combined online market share 22%). This performance was driven
by:
-- High levels of cross sell to online from Sisal's retail
network of 9.5 million customers, including providing additional
opportunities for lottery players to win with an online account
-- Product leadership in sports from the launch of innovative
products such as 'Duo', which provides continuity of player bets on
a substituted player or the social betting game 'Tipster'
-- Significant improvements in Sisal's gaming offering across
2022, including the creation of a proprietary games' development
studio and integration of gaming content onto betting and lottery
apps
We provided Sisal with access to the Flutter Edge , which
resulted in Sisal being the first operator to launch cash-out in
the Italian market following its regulatory approval. We have also
supplemented the Sisal team with access to some of our people
talent and won a combined tender to be the monopoly Moroccan sports
betting operator.
Capital structure and balance sheet update(6)
The Group had gross debt of GBP5,442m(13) at 31 December 2022
and a net debt position of GBP4,644m (31 December 2021: GBP2,647m),
which represents a pro forma leverage ratio of 3.9x or 3.2x
excluding the 2022 US EBITDA loss. During 2022, the Group acquired
tombola for GBP410m in January, the remaining 49% stake in
Adjarabet for GBP204m and the Sisal business in August for
GBP1.7bn.
The Group remains committed to its previously stated medium-term
leverage target of 1-2 times, at which point the Board will review
the Group's dividend policy. The Group continues to generate
significant free cash flow and the future profitability profile of
the Group, in particular US profit growth, will facilitate rapid
de-levering.
Other updates
US listing
The Flutter Board has reached a preliminary view that an
additional US listing of Flutter's ordinary shares will yield a
number of long-term strategic and capital market benefits. As we
outlined here , we have begun a consultation with our shareholders
to determine whether to put forward a formal resolution for
approval. We will announce the results of this consultation, once
we have concluded an extensive program of engagement with our
investors and stakeholders.
FOX arbitration
As previously disclosed, the legal arbitration process with FOX
Corporation remains ongoing. As noted in our recent announcement,
in the event that there is shareholder support for an additional US
listing, this will take precedence over any plans to list a small
shareholding in FanDuel.
Current trading/outlook
Trading for the Group in the first 8 weeks of the year has been
in line with expectations. Our US division has been delivering
continued strong growth across existing states, as well as through
the very successful launches in Maryland and Ohio. We remain on
track to be EBITDA positive for the full year 2023.
Group ex-US revenues have benefitted from continued strong
momentum in UK and Ireland and International from Q4 2022, which
has offset the impact of a more challenging environment and tough
comparatives in Australia.
For 2023 the Group also anticipates:
-- Capital expenditure of GBP480m-GBP500m (2022 reported: GBP403m, pro forma: GBP456m)
-- Group Adjusted depreciation and amortisation charge of
approximately GBP480m (2022 reported: GBP370m, pro forma: GBP434m),
reflecting increased US product investment and Group investment in
casino studios and shared platforms
-- A weighted average cost of debt of 5.6%
-- An effective tax rate of 25-27% for the Group ex-US (2022:
22.9%) reflecting the addition of Sisal and the changing mix of
taxable earnings across our geographies
Operating and financial review(1-6)
Group
FY FY CC
2022 2021 Change Change
Unaudited Adjusted GBPm GBPm % %
------------------------------------ ------- ------- ------- -------
Average monthly players ('000s) 10,245 8,146 +26%
Sports revenue 4,788 3,774 +27% +21%
Gaming revenue 2,906 2,262 +28% +23%
------- ------- ------- -------
Total revenue 7,693 6,036 +27% +22%
Cost of sales (3,164) (2,262) +40% +33%
Cost of sales as a % of net revenue 41.1% 37.5% +370bps +350bps
------- ------- ------- -------
Gross profit 4,529 3,774 +20% +15%
Sales and marketing (1,853) (1,508) +23% +15%
------- ------- ------- -------
Contribution 2,676 2,266 +18% +15%
Other operating costs (1,524) (1,164) +31% +25%
Corporate costs (107) (101) +7% +6%
------- ------- ------- -------
Adjusted EBITDA(2,5) 1,045 1,001 +4% +4%
Adjusted EBITDA margin % 13.6% 16.6% -300bps -240bps
Depreciation and amortisation (370) (255) +45% +38%
------- ------- ------- -------
Adjusted operating profit 675 746 -9% -9%
Net finance expense (158) (126) +25%
------- ------- ------- -------
Adjusted profit before tax 518 620 -17%
Taxation (182) (166) +9%
------- ------- ------- -------
Adjusted profit for the period 336 454 -26%
Adjusted basic earnings per share 189.0p 252.7p -25%
Net debt(6) at period end (4,644) (2,647) +75%
------------------------------------ ------- ------- ------- -------
Acquired businesses Junglee (January 2021), Singular (September
2021), tombola (January 2022) and Sisal (August 2022) have been
included on a reported basis. Pro forma references within the
commentary for a specified period include Junglee, tombola and
Sisal as though part of the Group in both 2021 and 2022 for the
entire period. A full analysis of the Group's reported performance
can be found at pages 19-20.
Flutter delivered strong 2022 revenue growth of 22%, driven by
continued expansion of our recreational base with AMPs up 26% to
10.2m. Our rapidly scaling US business was a key driver of this
success with revenue 67% higher. Growth outside of the US of 7%
benefitted from the Group's acquisitions of Sisal and tombola
during the year.
Pro forma Group revenue and AMPs also delivered excellent
growth, up 14% and 15% respectively. Pro forma revenue outside of
the US was flat year on year, as we annualised the impact of our
proactive safer gambling changes in the UK & Ireland, faced
into Covid comparatives and a more challenging environment in
Australia as well as the known regulatory changes in our
International business.
Cost of sales as a percentage of net revenue increased by 350
basis points to 41.1%. This was primarily driven by our launch in
New York, where gaming tax rates are higher, as well as an increase
in Australian POC taxes.
Sales and marketing costs of GBP1.9bn were 15% higher year on
year, driven by continued investment in the US. As a proportion of
revenue, investment reduced by 150 basis points to 24.1% for the
Group.
Other operating costs increased 25% also reflecting US
investment, as well as the acquisition of Sisal. On a pro forma
basis, costs outside of the US costs increased by 4%, primarily
driven by the post Covid reopening of Sisal retail in H1, offset by
cost efficiencies in the UK & Ireland.
Group Adjusted EBITDA was GBP1,045m, up 4% including the GBP250m
US loss. On a pro forma basis, Adjusted EBITDA was 5% lower. Group
ex-US declined 6%, but was 6% higher after adjusting for the
previously guided impacts of (i) proactive safer gambling
initiatives in the UK & Ireland (GBP38m) (ii) Australian tax
changes (GBP22m) and (iii) regulatory changes in International
markets (GBP100m).
Group Adjusted depreciation and amortisation increased,
primarily due to the addition of Sisal during the year and growth
in our US division.
The Group's Adjusted effective tax rate in the period was 35.1%
(2021: 26.8%), driven by the changing mix of taxable earnings
across geographies, including the acquisition of Sisal. The Group
ex-US effective tax rate in the period was 22.9% (2021: 18.5%).
Adjusted basic earnings per share reduced from 252.7p to 189p.
This decline reflects the increased tax charge, as well as an
increase in interest expense, driven by the Sisal acquisition and
higher cost of debt in H2.
Net debt at 31 December 2022 was GBP4,644m. This was GBP2bn
higher than the prior year, due to the acquisitions of Sisal and
tombola and the buyout of Adjarabet minority shareholders, which
offset the free cash flow generated by the operating activities of
the Group during the year.
A full analysis of the Group's reported performance can be found
at pages 19-20.
US(3)
FY FY CC
2022 2021 Change Change
Unaudited Adjusted GBPm GBPm % US$
------------------------------------ ------- ------- ------- -------
Average monthly players ('000s) 2,319 1,557 +49%
Sportsbook stakes 23,550 11,284 +109% +87%
Sportsbook net revenue margin 7.3% 6.3% +100bps +100bps
Sports revenue 1,985 978 +103% +81%
Gaming revenue 619 413 +50% +34%
------- ------- ------- -------
Total revenue 2,604 1,391 +87% +67%
Cost of sales (1,306) (614) +113% +90%
Cost of sales as a % of net revenue 50.1% 44.1% +600bps +620bps
------- ------- ------- -------
Gross profit 1,298 778 +67% +49%
Sales and marketing (964) (663) +45% +30%
------- ------- ------- -------
Contribution 334 115 +192% +158%
Other operating costs (584) (357) +63% +47%
------- ------- ------- -------
Adjusted EBITDA(2,5) (250) (243) +3% -6%
Adjusted EBITDA margin (9.6%) (17.5%) +790bps +750bps
Depreciation and amortisation (78) (47) +68% +50%
------- ------- ------- -------
Adjusted operating loss (328) (289) +13% +3%
------------------------------------ ------- ------- ------- -------
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 67% to GBP2.6bn ($3.2bn) during 2022 with an
Adjusted EBITDA loss of GBP250m ($313m). This reflects a 6%
reduction in our EBITDA loss, while continuing to deliver
significant growth within the business. FanDuel Group represented
97% of US revenue and 70% of the Adjusted EBITDA loss.
Sports revenue grew 81% with sportsbook up 115% while DFS and
TVG (now less than 10% of total revenue) declined 12%, driven by
successful conversion of our DFS customer base to our sportsbook
product.
Sportsbook performance was also driven by:
-- Excellent staking growth of 87% through further expansion of
our online footprint to five new states (New York, Louisiana and
Wyoming in Q1, Kansas in Q3 and Maryland in Q4). We also benefited
from continued strong growth in states launched before 2021 with
staking and revenue up 24% and 42% respectively
-- Net revenue margin growth of 100 basis points, driven by a
significant improvement in structural margin, due to our market
leading pricing and risk management capabilities and superior
product proposition. This funded a step up in efficient generosity
spend in new and existing states, which continues to deliver a good
return. Sports results were broadly in line year on year, with
unfavourable results in H1 largely offset in H2 with bookmaker
friendly outcomes
iGaming revenue increased by 34%, due to strong player growth
and higher levels of engagement. This was particularly the case in
H2, with revenue up 37% (H1 +31%). Our focus on acquiring direct
casino customers, our broadened product portfolio and the new
FanDuel Casino brand strategy led to a step up in momentum, exiting
the year with iGaming AMPs up 63% in Q4.
Cost of sales was 620 basis points higher at 50.1% of revenue,
driven by our launch in New York in Q1 where the gaming tax rate is
unusually high. Excluding New York sportsbook, cost of sales would
have been 43.8% of revenue during 2022, compared with 44.1% in
2021.
Sales and marketing costs increased by GBP301m to GBP964m
($1.2bn), but declined as a percentage of revenue by almost 11
percentage points. This is driven by a greater proportion of our
business coming from existing states where the proportionate levels
of marketing spend are lower. Additionally, our footprint is also
expanding across the US, meaning we can benefit from the
efficiencies of national advertising.
Operating costs increased by 47% reflecting ongoing expansion,
delivering good operating leverage when compared with revenue
growth of 67%, which was 20 percentage points higher.
UK & Ireland
UK & Ireland UK & Ireland UK & Ireland Retail
Total Online
--------------------- ---------------------
FY FY CC FY FY CC FY FY CC
2022 2021 Change 2022 2021 Change 2022 2021 Change
------------------------------
Unaudited Adjusted GBPm GBPm % GBPm GBPm% GBPm GBPm %
------------------------------ ----- ------ ------ ----- ------ ----- ----- ------ ---------
Average monthly players
('000s) 3,710 3,153 +18%
Sportsbook stakes 9,981 11,376 -12% 8,633 10,473 -17% 1,348 904 +48%
Sportsbook net revenue
margin 10.6% 9.9% +70bps 10.1% 9.7% +40bps 13.5% 12.6% +90bps
Sports revenue 1,181 1,282 -8% 998 1,168 -14% 183 114 +60%
Gaming revenue 963 781 +23% 873 721 +21% 90 60 +49%
----- ------ ------ ----- ------ ------ ----- ------ ---------
Total revenue 2,144 2,063 +4% 1,871 1,889 -1% 272 174 +56%
Cost of sales (653) (621) +5% (592) (581) +2% (61) (40) +54%
Cost of sales as
a % of net revenue 30.5% 30.1% +30bps 31.6% 30.8% +80bps 22.5% 22.9% -30bps
----- ------ ------ ----- ------ ------ ----- ------ ---------
Gross profit 1,490 1,442 +3% 1,280 1,308 -2% 211 134 +57%
Sales and marketing (381) (391) -3% (374) (384) -3% (6) (6) +4%
----- ------ ------ ----- ------ ------ ----- ------ ---------
Contribution 1,110 1,051 +6% 905 923 -2% 204 128 +59%
Other operating costs (455) (435) +6% (293) (298) -% (162) (138) +18%
----- ------ ------ ----- ------ ------ ----- ------ ---------
Adjusted EBITDA(2,5) 654 616 +6% 612 626 -3% 42 (10) -551%
Adjusted EBITDA margin 30.5% 29.9% +50bps 32.7% 33.1% -60bps 15.4% (5.6%) +2,080bps
Depreciation and amortisation (136) (126) +8% (89) (85) +5% (47) (41) +15%
----- ------ ------ ----- ------ ------ ----- ------ ---------
Adjusted operating
profit 519 490 +5% 524 541 -4% (5) (50) -90%
------------------------------ ----- ------ ------ ----- ------ ------ ----- ------ ---------
The UK & Ireland division operates Paddy Power, Betfair, Sky
Betting & Gaming and tombola brands online, as well as retail
operations in the UK & Ireland. tombola was acquired in January
2022 and pro forma references within the commentary include tombola
as though part of the division in both 2021 and 2022 for the entire
period.
Total UK & Ireland revenue grew 4% and Adjusted EBITDA was
6% higher at GBP654m. This reflects (i) the acquisition of tombola
in January 2022, (ii) our retail business being open for the entire
year, compared to the Covid-related closures of the prior year and
(iii) an improved product offering, particularly in H2. This was
partially offset by a return to player activity closer to pre-Covid
levels and our safer gambling measures. On a pro forma basis
revenue was 4% lower with EBITDA flat year-on-year.
UK & Ireland Online
Player momentum remains strong with AMPs up 18% (pro forma +4%),
including 18% pro forma growth in Q4, aided by strong engagement
during the World Cup.
Revenue was 1% lower for the year with sequential improvement
from -12% in H1 to +15% in H2 (pro forma FY22 -9%, H1 -19%, H2
+4%). The growth in players, improved momentum across H2 and
addition of tombola was offset in H1 by the 2021 peak in Covid
related player engagement and the annualisation of our proactive
safer gambling measures introduced during 2021.
Sports revenue declined by 14% (H1 -24%, H2 +1%) reflecting
these challenging comparatives. World Cup sportsbook stakes were in
line with the prior year's European Championships, while sportsbook
net revenue margin increased 40 basis points, reflecting structural
gains following the launch of Bet Builder products during the year.
Sports results were slightly adverse for the year, including 300
basis points of adverse Q4 results mostly offset across the earlier
quarters.
Gaming revenue increased 21% (pro forma -1%) including 34%
growth in H2 (pro forma +8%). This was driven by strong player
momentum throughout the year and consistent delivery of product
improvements across all our brands.
Cost of sales as a percentage of revenue increased by 80 basis
points to 31.6%, reflecting higher transaction fees and streaming
costs.
Sales and marketing decreased by 3% (pro forma -13%) to 20.0% of
revenue. This was 100 basis points lower than the prior year on a
pro forma basis, from the delivery of efficiencies within our
marketing spend. Other operating costs were in line, but 10% lower
on a pro forma basis. This reflects cost efficiencies, along with
the one-off benefits from the sale of Oddschecker in 2021 and lower
performance related pay, being partially offset by inflationary
increases in employee pay and data.
Online Adjusted EBITDA declined GBP14m year on year to GBP612m,
with a 35% increase in H2 being offset by a H1 decline of 24%. This
trend reflects the revenue performance outlined above and
consistent cost reduction throughout the year.
UK & Ireland Retail
Retail revenue grew 56% with our estate open throughout the
year, generating Adjusted EBITDA of GBP42m. This compared to an
Adjusted EBITDA loss of GBP10m in 2021, when our shops were closed
from January to April in the UK and to May in Ireland due to
Covid-related restrictions.
Revenue and Adjusted EBITDA have returned to 87% and 55% of 2019
levels, respectively reflecting the slower return of footfall in
Ireland post-Covid restrictions and inflationary cost pressures. UK
revenue is in line with 2019, with strong performance from betting
and gaming terminals, while the Irish estate is at 70% of 2019
revenue.
Other operating costs increased by 18% year on year, reflecting
our shops being fully open for the year and inflationary cost
pressures.
At 31 December 2022, we had 608 (31 December 2021: 625) retail
outlets with 356 in the UK and 252 in Ireland.
Australia (3)
FY FY CC
2022 2021 Change Change
Unaudited Adjusted GBPm GBPm % A$
------------------------------------ ------ ------ ------- -------
Average monthly players ('000s) 1,090 1,008 +8%
Sportsbook stakes 11,296 11,702 -3% -7%
Sportsbook net revenue margin 11.2% 11.1% +10bps +10bps
Total revenue 1,263 1,294 -2% -6%
Cost of sales (635) (636) -% -4%
Cost of sales as a % of net revenue 50.3% 49.2% +120bps +110bps
------ ------ ------- -------
Gross profit 628 658 -5% -8%
Sales and marketing (134) (119) +12% +8%
------ ------ ------- -------
Contribution 494 539 -8% -11%
Other operating costs (104) (102) +2% -3%
------ ------ ------- -------
Adjusted EBITDA(2,5) 390 437 -11% -13%
Adjusted EBITDA margin 30.9% 33.7% -290bps -270bps
Depreciation and amortisation (29) (26) +15% +12%
------ ------ ------- -------
Adjusted operating profit 361 411 -12% -15%
------------------------------------ ------ ------ ------- -------
The Australian division encompasses Sportsbet, which offers
online sports betting in the Australian market.
Sportsbet AMPs were 8% higher while revenue declined 6% and
EBITDA of GBP390m was 13% lower year on year. This reflects a
strong performance in H1 (revenue +5%, EBITDA +10%) offset by the
impact of more challenging conditions in H2 (revenue -14%, EBITDA
-32%).
Revenue performance during 2022 reflected:
-- A reduction in staking of 7% (H1: +4%, H2: -15%), driven by:
- An enlarged player base with heightened player engagement, due
to Covid lockdowns in 2020/2021, which carried into H1 2022,
driving growth
- Followed by a reversion of H2 player engagement from Covid
levels. H2 average player days were -9% year on year
- Sporting event cancellations and disruption, due to adverse
weather conditions, costing c. GBP30m in revenue during the
year
- An increase in competition during H2 and particularly Q4,
which combined with the above led to a lower level of spend per
customer
-- A structural improvement to net revenue margin during the
year which, after reinvestment in generosity, led to 10-basis point
increase year on year. Within this movement, sports results
represented a small headwind year on year, with both 2022 and 2021
benefitting from 50 and 60 basis points in luck respectively
Cost of sales increased as a % of revenue to 50.3% or 53.1% in
H2, as guided POC tax increases of GBP22m took effect from July
(annualised impact GBP73m). The increased competition within the
Australian market, led to a corresponding step up in sales and
marketing spend, which was 24% higher year on year in H2.
Approximately half of this increase related to one-off items, such
as investment in the FIFA World Cup campaign.
Operating costs remained broadly in line when compared with the
prior year.
International(3)
Reported Pro forma
FY FY CC FY FY CC
2022 2021 Change Change 2022 2021 Change Change
Unaudited Adjusted GBPm GBPm %% GBPm GBPm %%
------------------------------ ----- ----- ------- ------ ----- ----- ------- ------
Average monthly players
('000s) 3,126 2,428 +29% 3,568 3,163 +13%
Sportsbook stakes 2,490 1,592 +56% +52% 3,637 3,273 +11% +10%
Sportsbook net revenue
margin 10.9% 8.7% +220bps +220bps 12.1% 11.1% +100bps +100bps
Sports revenue 358 220 +63% +58% 526 447 +18% +16%
Gaming revenue 1,324 1,068 +24% +18% 1,621 1,534 +6% +4%
----- ----- ------- ------- ----- ----- ------- -------
Total revenue 1,683 1,288 +31% +24% 2,147 1,981 +8% +7%
Cost of sales (570) (392) +45% +40% (778) (682) +14% +15%
Cost of sales as a
% of net revenue 33.9% 30.4% +350bps +370bps 36.2% 34.4% +180bps +240bps
----- ----- ------- ------- ----- ----- ------- -------
Gross profit 1,113 897 +24% +18% 1,369 1,299 +5% +3%
Sales and marketing (374) (335) +12% +6% (386) (360) +7% +3%
----- ----- ------- ------- ----- ----- ------- -------
Contribution 739 562 +31% +25% 983 939 +5% +3%
Other operating costs (381) (270) +41% +35% (488) (433) +13% +11%
----- ----- ------- ------- ----- ----- ------- -------
Adjusted EBITDA(2,5) 358 292 +22% +16% 494 506 -2% -3%
Adjusted EBITDA margin 21.3% 22.7% -140bps -160bps 23.0% 25.6% -250bps -250bps
Depreciation and amortisation (121) (52) +133% +107% (185) (153) +21% +17%
----- ----- ------- ------- ----- ----- ------- -------
Adjusted operating
profit 237 240 -2% -5% 309 353 -13% -12%
------------------------------ ----- ----- ------- ------- ----- ----- ------- -------
The International division includes Sisal, PokerStars,
Adjarabet, Betfair and Junglee brands but excludes PokerStars US
business and Betfair UK & Ireland operations. Sisal was
acquired in August 2022 and Junglee in January 2021. Pro forma
references within the commentary include Sisal and Junglee as
though part of the division in both 2021 and 2022 for the entire
period. A reconciliation of the division's reported and pro forma
income statement is included in Appendix 2.
Pro forma
International AMPs grew 13% driving revenue 7% higher. Adjusted
EBITDA declined by 3%, reflecting the combined GBP100m impact of
the regulatory and tax changes in Germany, Russia, and the
Netherlands. Adjusting for these items, revenue and Adjusted EBITDA
grew 15% and 20% respectively.
Revenue in our Consolidate and Invest markets, which made up 76%
of revenue, increased 22% reflecting strong performances in Italy
(+22%), India (+80%) and Turkey (+80%). In Italy, Sisal's retail
business benefitted from a fully open retail estate in H1 with
retail revenue over 50% higher year on year. Italy online grew 5%,
retaining online migrators of the last two years and taking share
in the market. In India, Junglee's growth was player driven, with
AMPs 78% higher in 2022. Optimise and Maintain markets declined 22%
or 8% excluding regulatory headwinds, reflecting the unwind of the
prior year Covid-related benefit.
Cost of sales as a % of net revenue increased 240 basis points
to 36.2%, due to relief from some Italian retail charges in the
prior year during Covid-impacted periods.
Sales and marketing increased by 3% reflecting the ongoing
investment in our Consolidate and Invest markets offset by savings
elsewhere. Other operating costs increased by 11%, up 24% in H1 and
1% lower in H2. The increase in H1 reflects a fully open Sisal
retail estate and the annualisation of additional resources to
stabilise and improve our product and technology offering. This
additional resource extended to capital investment and when
combined with amortisation of Sisal's expanded lottery concessions,
drove depreciation and amortisation 17% higher.
Reported
Strong growth in players and revenue reflects a five-month
contribution from Sisal in 2022 along with growth in our
Consolidate and Invest markets. Adjusted EBITDA increased 16% to
GBP358m from:
-- Five months of Sisal EBITDA (+GBP111m)
-- Growth in other Consolidate and Invest markets (excludes
Italy and Turkey) where revenue increased 15%
-- Partly offset by the combined negative impact of market exits
in the Netherlands (GBP30m) and Russia/Ukraine (GBP50m), along with
a gaming tax change in Germany (GBP20m) of GBP100m
Revenue growth of 24% for the year reflects these factors. The
higher growth in sports revenue is due to Sisal having a higher mix
of sports revenue compared to the existing International
businesses.
Cost of sales as a % of net revenue increased 370 basis points
to 33.9%, due to relief from some Italian retail charges in the
prior year during Covid-impacted periods. Sales and marketing costs
increased by 6% but were 390 basis points lower as a % of revenue.
With advertising restrictions in Italy, Sisal's marketing spend is
minimal. Other operating costs increased by 35%.
Separately disclosed items
FY FY
2022 2021
GBPm GBPm
------------------------------------------------------ ----- -----
Transaction fees and associated costs (35) (22)
Restructuring and integration initiatives (131) (45)
Legal provision releases 38 -
Kentucky settlement and associated legal costs - (163)
Germany and Greece tax expense - (47)
------------------------------------------------------ ----- -----
EBITDA impact of separately disclosed items (127) (278)
Amortisation of acquisition related intangible assets (608) (543)
Disposal of Oddschecker Global Media - 12
----- -----
Operating loss impact of separately disclosed items (735) (809)
Financial income 11 -
Financial expense (68) (100)
------------------------------------------------------ ----- -----
Loss before tax impact of separately disclosed items (792) (909)
Tax credit on separately disclosed items 152 43
------------------------------------------------------ ----- -----
Total separately disclosed items (641) (866)
------------------------------------------------------ ----- -----
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.
Transaction fees and associated costs of GBP35m related to fees
for the FOX arbitration as well as the acquisition of tombola and
Sisal.
Restructuring and integration costs primarily relate to the
integration with The Stars Group ('TSG').
During 2022, two legacy TSG litigation matters were settled
resulting in the release of GBP38m from our legal provisions.
Amortisation of acquisition related intangible assets increased
GBP65m to GBP608m following the acquisitions of Sisal and tombola
in 2022.
The tax credit of GBP152m primarily relates to the tax effect of
the amortisation of acquisition-related intangibles.
Statutory review(1)
Group
FY FY
------------------------------------ -------- --------
2022 2021 Change
------------------------------------ -------- -------- ---------------
Unaudited GBPm GBPm %
------------------------------------ -------- -------- ---------------
Sports revenue 4,788 3,774 +27%
Gaming revenue 2,906 2,262 +28%
-------- -------- ---------------
Total revenue 7,693 6,036 +27%
Cost of sales (3,146) (2,310) +36%
Cost of sales as a % of net revenue 40.9% 38.3% +260 bps
Gross profit 4,547 3,727 +22%
Operating costs (3,629) (3,003) +21%
-------- -------- ---------------
EBITDA 918 723 +27%
EBITDA margin % 11.9% 12.0% -10 bps
Amortisation of acquisition related
intangibles (608) (543) +12%
Depreciation and amortisation (369) (254) +45%
Gain on disposal (1) 12
-------- -------- ---------------
Operating loss (60) (63)
Net finance expense (215) (226) -5%
-------- -------- ---------------
Loss before tax (275) (288)
Taxation (30) (124) -76%
-------- -------- ---------------
Loss after tax (305) (412)
-------- -------- ---------------
Basic loss per share (170.8p) (236.5p)
Diluted loss per share (170.8p) (236.5p)
Net current liabilities (416) (112)
Net assets 10,337 10,288
Net cash from operating activities 1,297 775 +67%
------------------------------------ -------- -------- ---------------
Note: A full analysis of the Group's adjusted performance can be
found at pages 9-17.
Flutter delivered strong 2022 revenue growth of 27%, driven by
continued expansion of our recreational base with AMPs up 26% to
10.2m. Our rapidly scaling US business was a key driver of this
success, with the Group outside of the US benefitting from the
acquisitions of Sisal and tombola during the year.
Cost of sales as a percentage of net revenue increased by 260
basis points to 40.9% primarily driven by our launch in New York,
where gaming tax rates are higher than other states, as well as an
increase in Australian POC taxes and relief from some Italian
retail charges in the prior year during Covid-impacted periods.
Operating costs increased by 21% driven by US investment in
sales and marketing, as well as the acquisition of Sisal and
tombola during the year with reported EBITDA growing 27% in line
with revenue growth.
The statutory Group effective tax rate was -11% (2021: -42.8%).
A reduced tax charge in the period of GBP30m (2021: GBP124m)
resulted in a lower loss after tax of GBP305m. The lower tax
charge, compared with 2021, was primarily due to a one-off deferred
tax charge of GBP104m 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 decreased 65.7p in line with the movement in
the loss after tax.
Net current liabilities increased from GBP112m at 31 December
2021 to GBP416m at 31 December 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 of GBP10.3bn at 31 December 2022 were broadly in line
year on year with increases in total assets, due to the Sisal
acquisition and further growth in our US business offset by
corresponding increases in total liabilities.
Net cash flow from operating activities increased to GBP1,297m
from GBP775m. This was due to the Kentucky litigation payment in
2021, as well as a higher working capital benefit (including
movement in customer balances) in 2022 than in the prior year, due
to the continued growth within the business.
A full analysis of the Group's Adjusted performance can be found
at pages 9-17.
Cash flow and financial position
FY FY
2022 2021
Unaudited GBPm GBPm
--------------------------------------------------------- -------------------- -------------------
Adjusted EBITDA 1,045 1,001
Capex (403) (308)
Working capital 222 119
Corporation tax (163) (138)
Lease liabilities paid (72) (48)
-------------------- -------------------
Adjusted free cash flow 628 625
Cash flow from separately disclosed items (118) (61)
-------------------- -------------------
Free cash flow 510 563
Interest cost (136) (140)
Other borrowing costs (75) (57)
Settlement of swaps - (68)
Amounts paid in respect of Kentucky settlement - (234)
Purchase of shares by the Employee Benefit Trust ("EBT") (3) (181)
Acquisitions and disposals (2,289) 73
Cash transferred in acquisitions/ disposals 105 4
Other (1) (13)
-------------------- -------------------
Net (decrease)/increase in cash (1,889) (53)
-------------------- -------------------
Net debt(6) at start of year (2,647) (2,814)
Foreign currency exchange translation (260) (5)
Change in fair value of hedging derivatives 152 225
-------------------- -------------------
Net debt as at 31 December (4,644) (2,647)
--------------------------------------------------------- -------------------- -------------------
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 GBP628m in 2022 was broadly in line
with the prior year while reflecting the following:
-- An increase in capital expenditure of GBP95m, with GBP43m
relating to the acquisition of Sisal and the balance reflecting
investment in growth-driving product and technology across our
divisions, particularly International
-- Higher corporate tax payments reflecting the increased effective tax rate for the Group
-- A larger working capital benefit year on year, as our
business continues to expand, primarily in the US
Cash outflow from separately disclosed items of GBP118m
primarily relates to restructuring and integration costs. This
relates to the combination with TSG, fees associated with the Fox
arbitration and the acquisitions of Sisal and tombola during the
year.
Interest payments were in line year on year, reflecting 2020
accrued interest costs which were paid in 2021. Excluding these
timing differences, interest payments would have increased driven
by debt associated with the Sisal acquisition and higher cost of
debt in H2.
The acquisitions of tombola and Sisal and the Adjarabet
minorities buyout during the year resulted in a cash outflow of
GBP2.3bn.
As at 31 December 2022, the Group had net debt of GBP4,644m,
excluding customer balances, representing a leverage ratio of 3.9x
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 6 to the financial
statements).
(3) Growth rates in the commentary are in local or constant
currency(14) 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. Average Monthly Player numbers now include Junglee players,
and comparative figures have been adjusted to show a like for like
comparison.
(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 pro forma Adjusted EBITDA for the
appropriate 12-month period.
(7) Online sportsbook market share is the GGR market share of
FanDuel and FOXBet for Q4 2022 in the states in which FanDuel was
live based on published gaming regulator reports in those states.
During Q4 2022 FanDuel was live in 17 states; Arizona (AZ),
Colorado (CO), Connecticut (CT), Illinois (IL), Indiana (IN), Iowa
(IA), Kansas (KS), Louisiana (LA), Maryland (MD), Michigan (MI),
New Jersey (NJ), New York (NY), Pennsylvania (PA), Tennessee (TN),
Virginia (VA), West Virginia (WV) and Wyoming (WY). During Q4 2022
FOXBet was live in 4 states; CO, NJ, MI and PA. Market share does
not include AZ for December as the data has yet to be released.
(8) Consolidate and invest markets in International are Italy,
Spain, Georgia, Armenia, Brazil, Canada, India and Turkey.
(9) Global Play Well goal is 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 2022,
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) US total addressable market based on internal estimates and
excluding Canada (estimated mature total addressable market of
$3bn). Total addressable market outside US based on H2GC data and
internal estimates. Italian market estimate based on internal
estimates
(11) Australian gross gaming revenue market share for 2022 based
on competitor filings and internal estimates.
(12) Sisal market share based on Italian regulatory filings.
(13) Includes the gross value of derivatives.
(14) Constant currency ("CC") growth is calculated by
retranslating the non-sterling denominated component of 2021 at
2022 exchange rates (see Appendix 3).
Appendix 1: 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
on the income statement and earnings per share is set out
below.
Separately
Adjusted disclosed Statutory
results items(1) results
---------------- ------------
FY FY FY FY FY FY
GBPm unaudited 2022 2021 2022 2021 2022 2021
---------------------------------- ------- ------- ----- ----- ------- -------
Sports revenue 4,788 3,774 4,788 3,774
Gaming revenue 2,906 2,262 2,906 2,262
------- ------- ----- ----- ------- -------
Total revenue 7,693 6,036 - - 7,693 6,036
Cost of sales (3,164) (2,262) 18 (47) (3,146) (2,310)
Cost of sales as a % of net
revenue 41.1% 37.5% 40.9% 38.3%
Gross profit 4,529 3,774 18 (47) 4,547 3,727
Sales and marketing (1,853) (1,508) (1,853) (1,508)
Contribution 2,676 2,266 18 (47) 2,694 2,219
Other operating costs (1,524) (1,164) - (163) (1,524) (1,328)
Corporate costs (107) (101) (145) (67) (252) (168)
------- ------- ----- ----- ------- -------
EBITDA 1,045 1,001 (127) (278) 918 723
EBITDA margin 13.6% 16.6% 11.9% 12.0%
Depreciation and amortisation (370) (255) (608) (531) (977) (786)
------- ------- ----- ----- ------- -------
Operating profit/ (loss) 675 746 (735) (809) (60) (63)
Net finance expense (158) (126) (57) (100) (215) (226)
------- ------- ----- ----- ------- -------
Profit/ (loss) before tax 518 620 (792) (909) (275) (288)
Taxation (182) (166) 152 43 (30) (124)
------- ------- ----- ----- ------- -------
Profit/ (loss) for the period 336 454 (641) (866) (305) (412)
Profit/ (loss) attributable
to non controlling interest (1) (10) 4 6 3 (4)
------- ------- ----- ----- ------- -------
Profit/ (loss) attributable
to equity holders 334 444 (636) (860) (302) (416)
Weighted average number of shares
('000s) 176,833 175,780 176,833 175,780
Adjusted basic EPS (pence) 189p 253p (171p) (237p)
(1) See note 6 of the financial statements.
Appendix 2: Reconciliation of International pro forma to
statutory results
Acquired businesses Junglee (January 2021), Singular (September
2021) and Sisal (August 2022) have been included on a reported
basis.
Pro forma measures for the International division have been
included in these preliminary results where they best represent
underlying performance. The difference between the reported and pro
forma results for the International division is the inclusion of
the results of Sisal and Junglee in the period prior to completion
as per the table below.
Adjusted Separately
Adjusted results disclosed Statutory
pro forma pre- completion items(1) reported
------------ ------------------ ------------
FY FY FY FY FY FY FY FY
2022 2021 2022 2021 2022 2021 2022 2021
Unaudited Adjusted GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ----- ----- -------- -------- ----- ----- ----- -----
Sports revenue 526 447 (168) (227) 358 220
Gaming revenue 1,621 1,534 (297) (465) 1,324 1,068
----- ----- -------- -------- ----- ----- ----- -----
Total revenue 2,147 1,981 (465) (692) - - 1,683 1,288
Cost of sales (778) (682) 209 290 (570) (392)
Cost of sales as
a % of net revenue 36.2% 34.4% 33.9% 30.4%
----- ----- -------- -------- ----- ----- ----- -----
Gross profit 1,369 1,299 (256) (402) - - 1,113 897
Sales and marketing (386) (360) 12 25 (374) (335)
----- ----- -------- -------- ----- ----- ----- -----
Contribution 983 939 (244) (377) - - 739 562
Other operating costs (488) (433) 107 163 21 (210) (361) (480)
----- ----- -------- -------- ----- ----- ----- -----
Adjusted EBITDA 494 506 (137) (214) 21 (210) 378 82
Adjusted EBITDA margin 23.0% 25.6% 21.3% 22.7%
Depreciation and amortisation (185) (153) 64 101 (306) (276) (427) (328)
----- ----- -------- -------- ----- ----- ----- -----
Adjusted operating
profit/(loss) 309 353 (72) (113) (285) (487) (48) (246)
------------------------------ ----- ----- -------- -------- ----- ----- ----- -----
(1) See note 6 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 FY 2021 at FY 2022 exchange
rates as per the table below.
FY FY
FY FY % 2021 2021 CC %
GBPm unaudited 2022 2021 Change FX impact CC Change
------------------------------ ------- ------- ------- --------- ------- -------
Sports revenue 4,788 3,774 +27% 171 3,945 +21%
Gaming revenue 2,906 2,262 +28% 105 2,367 +23%
------- ------- ------- --------- ------- -------
Total revenue 7,693 6,036 +27% 275 6,311 +22%
Cost of sales (3,164) (2,262) +40% (112) (2,374) +33%
Cost of sales as
a % of net revenue 41.1% 37.5% +370bps 37.6% +350bps
Gross profit 4,529 3,774 +20% 164 3,938 +15%
Sales and marketing (1,853) (1,508) +23% (104) (1,612) +15%
Contribution 2,676 2,266 +18% 59 2,326 +15%
Other operating costs (1,524) (1,164) +31% (51) (1,215) +25%
Corporate costs (107) (101) +7% (1) (101) +6%
------- ------- ------- --------- ------- -------
Adjusted EBITDA 1,045 1,001 +4% 8 1,009 +4%
Adjusted EBITDA margin 13.6% 16.6% -300bps 16.0% -240bps
Depreciation and amortisation (370) (255) +45% (13) (268) +38%
Adjusted operating
profit/(loss) 675 746 -9% (5) 741 -9%
Revenue by division
UK & Ireland 2,144 2,063 +4% (1) 2,062 +4%
Australia 1,263 1,294 -2% 45 1,339 -6%
International 1,683 1,288 +31% 64 1,352 +24%
US 2,604 1,391 +87% 167 1,558 +67%
Adjusted EBITDA by
division
UK & Ireland 654 616 +6% 3 619 +6%
Australia 390 437 -11% 13 449 -13%
International 358 292 +22% 16 308 +16%
US (250) (243) +3% (23) (266) -6%
Corporate costs (107) (101) +7% (1) (101) +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.
Debt and
Adjusted customer balances Statutory
cash flow adjustments cash flow
---------------- --------------------
GBPm unaudited 2022 2021 2022 2021 2022 2021
-------------------------------------------- ------- ------- --------- --------- -------
Adjusted EBITDA(1) 1,045 1,001 1,045 1,001
Capex(2) (403) (308) (403) (308)
Working capital(3) 222 119 222 119
Corporation tax (163) (138) (163) (138)
Lease liabilities paid (72) (48) (72) (48)
------- ------- --------- --------- ------- -----
Adjusted free cash flow 628 625 - - 628 625
Cash flow from separately disclosed
items(4) (118) (61) (118) (61)
------- ------- --------- --------- ------- -----
Free cash flow 510 563 - - 510 563
Interest cost(5) (136) (140) (136) (140)
Other borrowing costs(5) (75) (57) (75) (57)
Settlement of swaps - (68) - (68)
Amounts paid in respect of Kentucky
settlement - (234) - (234)
Purchase of shares by the EBT (3) (181) (3) (181)
Acquisitions and disposals(6) (2,289) 73 (2,289) 73
Cash acquired in business combinations(6) 105 4 304 409 4
Other(7) (1) (13) (1) (13)
Movement in cash and cash equivalents
- customer balances - - 311 89 311 89
Net amounts repaid on borrowings(8) - - 1,706 416 1,706 416
------- ------- --------- --------- ------- -----
Net (decrease)/increase in cash (1,889) (53) 2,321 506 432 453
------- ------- --------- --------- ------- -----
Net (debt)/cash at start of year(9) (2,647) (2,814) 4,276 4,005 1,629 1,191
Foreign currency exchange translation (260) (5) 290 (10) 30 (15)
Change in fair value of hedging derivatives 152 225 (152) (225) - -
Net (debt)/cash as at 31 December(9) (4,644) (2,647) 6,735 4,276 2,091 1,629
-------------------------------------------- ------- ------- --------- --------- ------- -----
(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 (GBP2,289m)
and cash acquired in business combinations (GBP409m) reconciles to
the statutory cash flow amounts for purchase of businesses net of
cash acquired (GBP1,675m) and acquisition of further interest in
subsidiary (GBP204m).
(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.
Designated Foreign Issuer Status
In connection with its acquisition of The Stars Group Inc. on 5
May, 2020, the Company became a "reporting issuer" under applicable
securities laws in each of the provinces and territories of Canada.
The Company also qualifies as a "designated foreign issuer", as
such term is defined in National Instrument 71-102 - Continuous
Disclosure and Other Exemptions Relating to Foreign Issuers of the
Canadian Securities Administrators. As such, the Company is not
subject to the same ongoing reporting requirements as most other
reporting issuers in Canada. Generally, the Company will be in
compliance with Canadian ongoing reporting and disclosure
requirements if it complies with the requirements of the UK
Financial Conduct Authority in its capacity as the competent
authority for the purposes of Part VI of the Financial Services and
Markets Act 2000 (United Kingdom), as amended from time to time,
and the applicable laws of England and Wales (the "UK Rules") and
files any documents required to be filed or furnished pursuant to
the UK Rules on its profile on the System for Electronic Document
Analysis and Retrieval (SEDAR) at www.sedar.com maintained by the
Canadian Securities Administrators.
Condensed Consolidated Income Statement
For the year ended 31 December 2022
2022 2021
Note GBPm GBPm
----------------------------------- ---- ------------------------------------- ------------------------------------
Continuing operations
Revenue 5 7,693.2 6,036.2
Cost of sales (3,146.3) (2,309.5)
----------------------------------- ---- ------------------------------------- ------------------------------------
Gross profit 4,546.9 3,726.7
Operating costs excluding
depreciation,
amortisation and (loss)/gain on
disposal (3,629.3) (3,003.4)
----------------------------------- ---- ------------------------------------- ------------------------------------
EBITDA(1) 917.6 723.3
Amortisation of acquisition-related
intangible assets 6 (607.8) (543.3)
Depreciation and amortisation of
other assets (368.6) (254.4)
(Loss)/gain on disposal (1.0) 11.9
----------------------------------- ---- ------------------------------------- ------------------------------------
Operating loss (59.8) (62.5)
Financial income 7 22.1 3.2
Financial expense 7 (237.1) (229.1)
----------------------------------- ---- ------------------------------------- ------------------------------------
Loss before tax (274.8) (288.4)
Tax expense 8 (30.1) (123.5)
----------------------------------- ---- ------------------------------------- ------------------------------------
Loss for the year (304.9) (411.9)
----------------------------------- ---- ------------------------------------- ------------------------------------
Attributable to:
Equity holders of the Company (302.0) (415.8)
Non-controlling interest (2.9) 3.9
----------------------------------- ---- ------------------------------------- ------------------------------------
(304.9) (411.9)
----------------------------------- ---- ------------------------------------- ------------------------------------
Earnings per share
Basic 9 (GBP1.708) (GBP2.365)
Diluted 9 (GBP1.708) (GBP2.365)
----------------------------------- ---- ------------------------------------- ------------------------------------
1 EBITDA is defined as profit for the period before
depreciation, amortisation, impairment, loss/gain on disposal,
financial income, financial expense and tax expense. It is
considered by the Directors to be a key measure of the Group's
financial performance.
Notes 1 to 21 form an integral part of these condensed
consolidated financial statements.
Condensed Consolidated Statement of Other Comprehensive
Income
For the year ended 31 December 2022
2022 2021
Note GBPm GBPm
------------------------------------------- ---- --------------------------------- --------------------------------
Loss for the year (304.9) (411.9)
------------------------------------------- ---- --------------------------------- --------------------------------
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 7 210.7 61.4
Fair value of cash flow hedges transferred
to the income statement 7 (182.7) (28.4)
Foreign exchange (loss)/gain on net
investment hedges, net of tax(1) 7 (113.7) 68.2
Foreign exchange gain/(loss) on translation
of the net assets of foreign currency
denominated entities 7 371.4 (309.6)
Debt instruments at FVOCI 7 (2.6) (1.3)
------------------------------------------- ---- --------------------------------- --------------------------------
Other comprehensive income/(loss) 283.1 (209.7)
------------------------------------------- ---- --------------------------------- --------------------------------
Total comprehensive loss for the year (21.8) (621.6)
------------------------------------------- ---- --------------------------------- --------------------------------
Attributable to:
Equity holders of the Company (22.1) (627.9)
Non-controlling interest 0.3 6.3
------------------------------------------- ---- --------------------------------- --------------------------------
Total comprehensive loss for the year (21.8) (621.6)
------------------------------------------- ---- --------------------------------- --------------------------------
1 Foreign exchange (loss)/gain on net investment hedges is
presented including an income tax charge of GBP4.9m (year ended 31
December 2021 : GBP17.2m) which relates to the tax effect of the
Group's hedging activities.
Notes 1 to 21 form an integral part of these condensed
consolidated financial statements.
Condensed Consolidated Statement of Financial Position
As at 31 December 2022
31 December 31 December
2022 2021
Restated (See
Note 2)
Note GBPm GBPm
-------------------------------------- ---- ------------------------------------ ----------------------------------
Assets
Property, plant and equipment 702.2 451.4
Intangible assets 5,879.9 4,875.6
Goodwill 10 10,860.0 9,346.8
Deferred tax assets 67.2 8.2
Non-current tax receivable 13.0 21.5
Investments 12 9.2 5.5
Derivative financial assets 17 - 68.0
Financial assets - restricted cash 13 13.0 7.4
Other receivables 12 38.5 29.3
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total non-current assets 17,583.0 14,813.7
Trade and other receivables 12 345.0 203.9
Derivative financial assets 17 279.6 -
Cash and cash equivalents - customer
balances 13 1,293.2 677.6
Cash and cash equivalents - available
for corporate use 13 797.9 951.7
Current investments at FVOCI -
customer
deposits 13 138.0 83.0
Current tax receivable 45.5 45.6
Total current assets 2,899.2 1,961.8
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total assets 20,482.2 16,775.5
-------------------------------------- ---- ------------------------------------ ----------------------------------
Equity
Issued share capital and share premium 18 484.6 477.6
Shares held by Employee Benefit
Trust 18 (0.2) (4.0)
Cash flow hedge reserve 18 50.7 22.7
Other reserves 18 300.2 (61.7)
Retained earnings 18 9,373.3 9,816.3
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total equity attributable to equity
holders of the Parent 10,208.6 10,250.9
Non-controlling interest 18 128.3 37.5
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total equity 10,336.9 10,288.4
Liabilities
Trade and other payables 14 1,533.1 1,096.4
Customer balances 1,394.6 721.0
Derivative financial liabilities 17 144.7 74.0
Provisions 15 46.7 71.3
Current tax payable 75.4 42.3
Lease liability 85.4 47.0
Borrowings 16 35.6 22.1
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total current liabilities 3,315.5 2,074.1
Trade and other payables 14 50.8 19.8
Derivative financial liabilities 17 73.7 55.1
Provisions 15 67.5 47.8
Deferred tax liabilities 760.1 498.0
Non-current tax payable 15.0 25.2
Lease liability 320.8 217.4
Borrowings 16 5,541.9 3,549.7
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total non-current liabilities 6,829.8 4,413.0
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total liabilities 10,145.3 6,487.1
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total equity and liabilities 20,482.2 16,775.5
-------------------------------------- ---- ------------------------------------ ----------------------------------
Notes 1 to 21 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
1 March 2023
Condensed Consolidated Statement of Cash Flows
For the year ended 31 December 2022
2022 2021
Restated
(See Note
2)
Note GBPm GBPm
------------------------------------------------ ----- --------------------------- ---------------------------
Cash flows from operating activities
Loss for the year (304.9) (411.9)
Tax expense 8 30.1 123.5
Financial income 7 (22.1) (3.2)
Financial expense 7 237.1 229.1
Amortisation of acquisition related intangible
assets 6 607.8 543.3
Depreciation and amortisation of other
assets 368.6 254.4
Loss/(gain) on disposal 1.0 (11.9)
Separately disclosed items included within
EBITDA 6 127.4 277.7
Employee equity-settled share-based payments
expense 123.2 79.1
Foreign currency exchange (gain)/loss (18.4) 15.7
Cash from operations before changes in
working capital 1,149.8 1,095.8
Increase in trade and other receivables (42.6) (40.5)
Increase in trade, other payables and
provisions 160.1 64.0
Movement in cash and cash equivalents
- customer balances 311.4 89.3
------------------------------------------------ ----- --------------------------- ---------------------------
Cash generated from operating activities 1,578.7 1,208.6
Taxes paid (163.4) (138.5)
------------------------------------------------ ----- --------------------------- ---------------------------
Cash generated from operations, net of
taxes paid 1,415.3 1,070.1
Transaction fees, restructuring and integration
costs paid 6 (117.9) (61.2)
Amounts paid in respect of Kentucky litigation 6 - (234.1)
------------------------------------------------ ----- --------------------------- ---------------------------
Net cash from operating activities 1,297.4 774.8
------------------------------------------------ ----- --------------------------- ---------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (101.5) (89.3)
Purchase of intangible assets (85.2) (62.4)
Capitalised internal development expenditure (201.5) (142.3)
Purchase of businesses net of cash acquired 11 (1,675.9) (50.7)
Payment of contingent deferred consideration 11 (15.3) (21.6)
Acquisition of further interest in subsidiary 11 (204.1) -
Net proceeds from disposal of subsidiary 11 - 127.1
Interest received 7 6.2 1.5
Other 5.0 (0.8)
------------------------------------------------ ----- --------------------------- ---------------------------
Net cash used in investing activities (2,272.3) (238.5)
------------------------------------------------ ----- --------------------------- ---------------------------
Cash flows from financing activities:
Proceeds from the issue of shares on exercise
of employee options 18 7.0 13.2
Dividend paid to non-controlling interest 18 (5.4) (16.7)
Payment of lease liabilities (72.2) (47.9)
Payment of lease interest (12.6) (8.4)
Lease incentive received 4.6 7.3
Proceeds from borrowings 16 4,020.5 1,167.7
Repayment of borrowings 16 (2,314.9) (751.2)
Interest paid 16 (142.5) (141.9)
Settlement of derivatives - (67.9)
Financing fees paid in respect of borrowing
facilities 16 (74.6) (56.7)
Ordinary shares of the Company acquired
by the Employee Benefit Trust 25 (2.8) (180.7)
------------------------------------------------ ----- --------------------------- ---------------------------
Net cash from/(used in) financing activities 1,407.1 (83.2)
------------------------------------------------ ----- --------------------------- ---------------------------
Net increase in cash and cash equivalents 432.2 453.1
Cash and cash equivalents at start of
year 13 1,629.3 1,191.3
Foreign currency exchange gain/(loss)
on cash and cash equivalents 29.6 (15.1)
------------------------------------------------ ----- --------------------------- ---------------------------
Cash and cash equivalents at end of year 13 2,091.1 1,629.3
------------------------------------------------ ----- --------------------------- ---------------------------
Presented on the Statement of Financial
Position within:
Cash and cash equivalents - customer balances 1,293.2 677.6
Cash and cash equivalents - available
for corporate use 797.9 951.7
2,091.1 1,629.3
------------------------------------------------ ----- --------------------------- ---------------------------
Notes 1 to 21 form an integral part of these condensed
consolidated financial statements.
Condensed Consolidated Statement of Changes in Equity
For the year ended 31 December 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
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
year - - - - - - - - (302.0) (302.0) (2.9) (304.9)
Foreign exchange
translation
including net
investment
hedges - - - - - 259.4 - - - 259.4 3.2 262.6
Effective
portion of
changes in fair
value
of cash flow
hedges (Note
7) - - - 210.7 - - - - - 210.7 - 210.7
Fair value of
cash flow
hedges
transferred to
the income
statement
(Note 7) - - - (182.7) - - - - - (182.7) - (182.7)
Financial assets
at FVOCI
(Note 7) - - - - (2.6) - - - - (2.6) - (2.6)
Tax on foreign
exchange
hedging (Note
8) - - - - - (4.9) - - - (4.9) - (4.9)
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
Total
comprehensive
income/(loss)
for the year - - - 28.0 (2.6) 254.5 - - (302.0) (22.1) 0.3 (21.8)
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
Transactions with owners of the Company,
recognised directly in equity
Shares issued on
exercise
of employee
share options 0.5 7.0 - - - - - - - 7.0 - 7.0
Acquisition of
non-controlling
interest in
Adjarabet
(Note 11) - - - - - - - - (169.9) (169.9) (34.2) (204.1)
Business
combinations
(Note 11) - - - - - - - - (12.3) (12.3) 130.1 117.8
Ordinary shares
of the
Company
acquired by the
Employee
Benefit Trust - - (2.8) - - - - - - (2.8) - (2.8)
Equity-settled
transactions
- expense
recorded in
the income
statement - - - - - - - 153.4 - 153.4 - 153.4
Equity-settled
transactions
- vesting - - 6.6 - - - - - (6.6) - - -
Tax on
share-based
payments
(Note 18) - - - - - - - - 4.4 4.4 - 4.4
Transfer to
retained
earnings on
exercise
of share
options and
vesting of
share awards - - - - - - - (43.4) 43.4 - - -
Dividend paid to
non-controlling
interest (Note
18) - - - - - - - - - - (5.4) (5.4)
Total
contributions
by
and
distributions
to
owners of the
Company 0.5 7.0 3.8 - - - - 110.0 (141.0) (20.2) 90.5 70.3
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
Balance at 31
December
2022 176.1 484.6 (0.2) 50.7 (4.3) 60.3 2.5 241.7 9,373.3 10,208.6 128.3 10,336.9
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
1 Included in other reserves in the Statement of Financial
Position.
Notes 1 to 21 form an integral part of these condensed
consolidated financial statements.
Condensed Consolidated Statement of Changes in Equity
For the year ended 31 December 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(1) reserve(1) reserves(1) reserve(1) earnings Company interest equity
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
year - - - - - - - - - - (415.8) (415.8) 3.9 (411.9)
Foreign exchange
translation
including net
investment
hedges - - - - - - - (226.6) - - - (226.6) 2.4 (224.2)
Tax on foreign
exchange
hedging - - - - - - - - - - - - - -
Effective
portion of
changes in fair
value
of cash flow
hedges - - - - - 61.4 - - - - - 61.4 - 61.4
Fair value of
cash
flow hedges
transferred
to the income
statement - - - - - (28.4) - - - - - (28.4) - (28.4)
Financial assets
at
FVOCI - - - - - - (1.3) - - - - (1.3) - (1.3)
Tax on foreign
exchange
hedging - - - - - - - (17.2) - - - (17.2) - (17.2)
---------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ------------------ --------------------- -------------------------- --------------------- ---------------------
Total
comprehensive
income / (loss)
for
the year - - - - - 33.0 (1.3) (243.8) - - (415.8) (627.9) 6.3 (621.6)
---------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ------------------ --------------------- -------------------------- --------------------- ---------------------
Transactions with owners of the Company,
recognised directly in equity
Shares issued on
exercise
of employee
share options 0.6 13.2 - - - - - - - - - 13.2 - 13.2
Business
combinations
(Note 11) - - - - - - - - - - - - 17.1 17.1
Cancellation of
Treasury
shares (Note
18) (2.0) (0.2) - 40.7 - - - - 0.2 - (40.7) - - -
Merger reserve
capitalisation
(Note 18) - 7,982.9 (7,982.9) - - - - - - - - - - -
Reduction of
capital
(Note 18) - (10,000.0) - - - - - - - - 10,000.0 - - -
Ordinary shares
of
the Company
acquired
by the Employee
Benefit
Trust - - - - (180.7) - - - - - - (180.7) - (180.7)
Equity-settled
transactions
- expense
recorded
in income
statement - - - - - - - - - 80.5 - 80.5 - 80.5
Equity-settled
transactions
- vesting - - - - 182.5 - - - - - (182.5) - - -
Tax on
share-based
payments - - - - - - - - - - 0.7 0.7 - 0.7
Exercise of
share awards - - - - - - - - - (49.6) 49.6 - - -
Dividend paid to
non-controlling
interest (Note
18) - - - - - - - - - - - - (16.7) (16.7)
Total
contributions
by and
distributions
to owners of
the Company (1.4) (2,004.1) (7,982.9) 40.7 1.8 - - - 0.2 30.9 9,827.1 (86.3) 0.4 (85.9)
---------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ------------------ --------------------- -------------------------- --------------------- ---------------------
Balance at 31
December
2021 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
---------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ------------------ --------------------- -------------------------- --------------------- ---------------------
1 Included in other reserves in the Statement of Financial
Position.
Notes 1 to 21 form an integral part of these condensed
consolidated financial statements.
Notes to the Consolidated Financial Statements
1. General information
Flutter Entertainment plc (the "Company") and its subsidiaries
(together referred to as the "Group") is a global sports betting
and gaming group, whose headquarters are in Dublin, Ireland. The
Group's four reportable segments are (i) UK and Ireland
("UK&I"), which includes Sky Betting & Gaming, Paddy Power
(both online and retail), tombola and Betfair's operations in the
UK and Ireland; (ii) Australia, comprising Sportsbet, the market
leader in the Australian online betting market; (iii) International
which includes online poker, gaming, betting, lottery, rummy and
daily fantasy sport product offerings under the Sisal, PokerStars,
Betfair International, Adjarabet and Junglee games brands; and (iv)
US, which includes sports betting, daily fantasy sports, poker and
gaming services under the FanDuel, TVG, FOX Bet, Stardust and
PokerStars brands.
The Company is a public limited company incorporated and
domiciled in the Republic of Ireland and has its primary listing on
the London Stock Exchange under the symbol FLTR and a secondary
listing on the Irish Stock Exchange under the symbol FLTR.IR.
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 2022, prepared in accordance with International
Financial Reporting Standards ("IFRSs") as adopted by the European
Union ("EU") together with an unqualified audit report thereon
under section 391 of the Companies Act 2014, will be annexed to the
annual return and filed with the Registrar of Companies.
The consolidated financial statements of the Group for the year
ended 31 December 2022 comprise the financial statements of the
Company and its subsidiary undertakings and were approved for issue
by the Board of Directors on 1 March 2023.
2. Recent accounting pronouncements
Adoption of new accounting standards
The IASB issued the following standards, policies,
interpretations and amendments which were effective for the Group
for the first time in the year ended 31 December 2022;
-- Amendments to IAS 37: Onerous contracts - Cost of Fulfilling a Contract;
-- Amendments to IAS 16: Property, Plant and Equipment: Proceeds before Intended Use;
-- Amendments to IFRS 1, IFRS 9 and IAS 41: Annual Improvements
to IFRS Standards 2018-2020; and
-- Amendments to IFRS 3: Reference to the Conceptual Framework.
The adoption of the new standards and interpretations did not
have a significant impact on the Group's consolidated financial
statements.
Demand Deposits with Restrictions on Use arising from a Contract
with a Third Party (IAS 7 Statement of Cash Flow)
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
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.
2. Recent accounting pronouncements (continued)
31 December 31 December 31 December 31 December 31 December 31 December
2021 2021 2021 2020 2020 2020
Originally Reclassification Restated Originally Reclassification Restated
reported reported
------------ ----------------------------- ------------------------------ ----------------------------- ----------------------------- ------------------------------ -----------------------------
Current
assets
Financial
asset
-
restricted
cash 677.6 (677.6) - 587.9 (587.9) -
------------ ----------------------------- ------------------------------ ----------------------------- ----------------------------- ------------------------------ -----------------------------
Cash and
cash
equivalents
- customer
balances - 677.6 677.6 - 587.9 587.9
Cash and
cash
equivalents
- available
for
corporate
use 951.7 - 951.7 603.4 - 603.4
Cash and
cash
equivalents 951.7 677.6 1,629.3 603.4 587.9 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. The Group acknowledges that in
accordance with this agenda decision that a change in accounting
policy gives rise to the requirement to present a third Statement
of Financial Position. In the context of the limited impact this
change in accounting policy has had on the Group's Statement of
Financial Position, and the fact that the full impact on the
Group's Statements of Financial Position as at 31 December 2021 and
2020 is set out above, the Group has concluded that a third
Statement of Financial Position would not give the users of these
financial statements any further information and on this basis, a
third Statement of Financial Position has not been presented.
IFRS standards issued not yet effective
The following IFRSs have been issued but have not been applied
in these financial statements. Their adoption is not expected to
have a material effect on the Group's consolidated financial
statements:
-- Amendments to IAS 1: Classification of Liabilities as Current
or Non -current (effective 1 January 2023);
-- IFRS 17 Insurance Contracts and amendments to Insurance
Contracts (effective date 1 January 2023);
-- IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting
Policies; (effective date 1 January 2023);
-- Amendments to IAS 8: Definition of Accounting Estimates (effective date 1 January 2023);
-- Amendments to IAS 12: Deferred Tax related to Assets and
Liabilities arising from a Single Transaction (effective date 1
January 2023);
-- Amendments to IFRS 10 and IAS 28: Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture
(effective date to be confirmed);
-- Initial Application of IFRS 17 and IFRS 9 - Comparative
Information (Amendments to IFRS 17) (effective date 1 January
2023); and
-- Lease Liability in a Sale and Leaseback (Amendments to IFRS
16) (effective date 1 January 2024).
IBOR reform
The Company has considered the impact of interest rate benchmark
reform ("IBOR reform") on its loan accounting and hedge accounting.
The Company has adopted the Interest Rate Benchmark Reform - Phase
2 Amendments to IFRS 9, IAS 39 and IFRS 7 issued in August 2020
("Phase 2 relief"). Adopting these amendments provides temporary
relief from applying specific loan accounting and hedge accounting
requirements for hedging relationships directly affected by IBOR
reform.
For loan accounting, the reliefs have the effect that the
Company can update its effective interest rate for the change to
the new risk-free rate without recognising an immediate gain or
loss. For hedge accounting, the reliefs have the effect that IBOR
reform should not generally cause hedge accounting to cease and
updates to hedge documentation relating to IBOR reform will not
result in a de-designation event for existing hedge relationships.
However, any hedge ineffectiveness should continue to be recorded
in the income statement. Qualifying for the reliefs is contingent
on the Company's transition, i.e. the new risk-free rate plus
credit adjustment spread, being economically equivalent to the
previous LIBOR basis.
2. Recent accounting pronouncements (continued)
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 has entered into agreements with its
lenders that amended the benchmark rate referenced in the Term Loan
A agreement from GBP LIBOR to GBP SONIA for the interest periods
commencing after 1 January 2022. In accordance with the Phase 2
amendments to IFRS 9, the Company has adjusted the effective
interest rate on its borrowings resulting in no immediate impact on
profit or loss.
The Group's USD First Lien Term Loan B, and certain of its
cross-currency interest rate swaps are indexed to USD-LIBOR. See
Notes 16 and 17 for details of the borrowings and hedging
derivatives notional amounts. The Group is monitoring and
evaluating the related risks, which include interest payments on
its borrowings, and amounts received on certain of its
cross-currency interest rate swaps. These risks arise in connection
with transitioning contracts to an alternative rate, including any
resulting value transfer that may occur. Additional risk exists as
the method of transitioning to an alternative reference rate may be
challenging and requires agreement with the respective counterparty
about how to make the transition.
The table below indicates the nominal amount and carrying amount
of financial instruments that will be affected by IBOR reform which
are yet to transition to alternative benchmark rates. The Company
has adopted the Interest Rate Benchmark Reform - Amendments to IFRS
9, IAS 39 and IFRS 7 issued in September 2019 ("Phase 1 relief") in
relation to its derivatives in hedge relationships. Adopting these
amendments provides temporary relief from applying specific hedge
accounting requirements to hedging relationships directly affected
by IBOR reform.
Non-Derivative Financial
Liability Nominal Derivative Instruments
Current Benchmark Rate Amount Nominal Amount
----------------------- ------------------------ ----------------------
USD Libor $2,901.7m $2,901.7m
----------------------- ------------------------ ----------------------
The reliefs have the effect that IBOR reform should not
generally cause hedge accounting to terminate. However, any hedge
ineffectiveness will continue to be recorded in the income
statement. Furthermore, the amendments set out triggers for when
the reliefs will end, which include the uncertainty arising from
interest rate benchmark reform no longer being present.
As illustrated above, the Company has a significant exposure to
changes in the USD IBOR benchmark. At 31 December 2022 the Company
has term loan of USD $2,901.7m and cross-currency interest rate
swaps with a notional amount of USD $2,901.7m, which are indexed to
USD LIBOR. The cross-currency interest rate swaps are designated in
a cash flow hedge relationship hedging the USD LIBOR term loan. In
assessing whether the hedges are expected to be highly effective on
a forward-looking basis, the Company has assumed that the USD LIBOR
interest rate on which the cash flows of its interest rate swaps
and its hedged floating rate loans are based are not altered by
IBOR reform.
The Company anticipates that USD LIBOR will transition to SOFR
and has considered an IBOR transition plan to be implemented in
2023. The 2028 Term Loan raised for the Sisal acquisition in 2022
uses SOFR + CSA as the underlying reference rate. At the time of
this financing, the loan agreements for the existing 2026 Term Loan
B were updated to ensure consistent treatment on transition to
SOFR. The transition project will include changes to systems,
processes, risk and valuation models, as well as managing related
tax and accounting implications. The Company currently anticipates
that the areas of greatest change will be amendments to the
contractual terms of its LIBOR referenced floating-rate swaps and
updating its hedge designation. None of the Group's cross-currency
interest rate swaps relating to the term loan of USD $2,901.7m have
interest rate reset dates which occur after 30 June 2023, the date
on which USD LIBOR is expected to be discontinued. The Group
expects the EURIBOR will continue to exist as a benchmark rate for
the foreseeable future.
The Group will continue to apply the amendments to IFRS 9/IAS 39
until the uncertainty arising from the interest rate benchmark
reforms with respect to the timing and the amount of the underlying
cash flows that the Group is exposed to ends. The Group has assumed
that this uncertainty will not end until the Group's contracts that
reference IBORs are amended to specify the date on which the
interest rate benchmark will be replaced, the cash flows of the
alternative benchmark rate and the relevant spread adjustment.
3. Basis of preparation and summary of significant accounting
policies
The condensed consolidated financial statements are prepared on
the historical cost basis except for derivative financial
instruments (which include betting transactions), equity securiti
es, certain financial assets which have been designated as fair
value through Profit and Loss (FVTPL), fair value through Other
Comprehensive Income (FVOCI), contingent deferred consideration and
share-based payments, all of which are stated at fair value (grant
date fair value in the case of share-based payments). The
consolidated financial statements are presented in pounds sterling
and are rounded to the nearest 0.1 million.
3. Basis of preparation and summary of significant accounting
policies (continued)
Further to IAS Regulation (EC1606/2002, 'Accounting standards
adopted for use in the EU'), EU law requires that the annual
consolidated financial statements of the Group be prepared in
accordance with International Financial Reporting Standards
("IFRS") adopted by the European Union ("EU"). These consolidated
financial statements have been prepared on the basis of IFRS
adopted by the EU and effective for accounting periods ending on or
after 1 January 2022.
The accounting policies applied in the preparation of these
consolidated financial statements have been applied consistently
during the year and prior year, except as noted above and in Note 2
'Recent accounting pronouncements'.
Going concern
The Group reported EBITDA of GBP917.6m and a loss after tax of
GBP304.9m for the year ended 31 December 2022. This includes
GBP976.4m of depreciation and amortisation charged against profit
in the year. The net cash generated from operating activities
during the year ended 31 December 2022 was GBP1,297.4m. The balance
sheet at 31 December 2022 reported a net current liability position
of GBP416.3m. During the 12 months ended 31 December 2022, the
Group has been in compliance with all covenants related to its
lending arrangements.
The Directors have considered the available financial resources
which include, at 31 December 2022, GBP2,091.1m of cash and cash
equivalents of which GBP797.9m is available for corporate use and a
GBP749m Revolving Credit Facility with undrawn capacity of GBP675m.
Whilst there are certain contractual loan repayments due within the
next 12 months of GBP35.6m, the Group's lending facilities
primarily fall due in 2025 and 2026 as set out in more detail in
Note 16. As a consequence, the Directors believe that the Group is
well placed to manage its business risks successfully.
The Group's forecasts for the 12 months from 1 March 2023 and
beyond 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 16
for at least a period of 12 months from the date of these
consolidated financial statements. 12 months from the date 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 the majority of the period and it also
reduces the degree of judgement and estimation uncertainty involved
in both the forecasts and the downside scenarios.
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
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.
Having given regard to the above, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for a period of at least 12
months from the date of approval of these consolidated financial
statements, and therefore they continue to adopt the going concern
basis in its consolidated financial statements.
Basis of consolidation
The Group's financial statements consolidate the financial
statements of the Company and its subsidiary undertakings based on
accounts made up to the end of the financial year. A subsidiary is
an entity controlled by the Company. The Group controls an entity
when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those
returns through its power over the entity. Intra-group balances and
any unrealised gains and losses or income and expenses arising from
intra-group transactions are eliminated on consolidation except to
the extent that unrealised losses provide evidence of
impairment.
4. Judgements and estimates
The preparation of 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 year
in which the estimates are revised and in any future years
affected.
Judgements
In preparing these 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.
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 areas of judgement are in relation to intercompany
transactions, including internally generated intangible asset
transfers, and the recognition of deferred tax, particularly in
respect to the US business. Whilst we have strong profitability
forecasts in respect to the US business, and we are confident the
US business will be profitable in the foreseeable future, the Group
recognises that the US business remains loss making during the
current period and has not been profitable to date, taking this
into account, the Group has partially recognised losses.
Recognition of deferred tax assets requires consideration of the
value of those assets and the likelihood that those assets will be
utilised in the foreseeable future. The recognition relies on the
availability of sound and relatively detailed forecast information
regarding the future performance of the business which has the
legal right to utilise the deferred tax assets. The Group performed
its assessment of the recovery of deferred tax assets at 31
December 2022, taking into account the Group's actual and historic
performance, the impact of tax legislation enacted at the reporting
date and the detailed financial forecasts and budgets for the
business covering the periods over which the assets are expected to
be utilised.
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 31
December 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.
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 year. The
following discussion sets forth key sources of estimation
uncertainty at the end of the reporting year 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.
Acquisition accounting and value of acquired assets and
liabilities
The acquisition method of accounting is used to account for all
business combinations. Identifiable assets acquired and liabilities
assumed in a business combination are measured initially at their
fair values at the acquisition date. The acquisition of Sisal (see
Note 11) during the year resulted in significant judgement and
estimation in particular in relation to the identification and
valuation of separable intangible assets, future cashflows,
appropriate discount rates and determining appropriate useful
economic lives for these assets. The discount rates used ranged
from 8.8% to 14.9% and the terminal growth rates were between 0%
and 5.0%. If the purchase consideration exceeds the fair value of
the net assets acquired, then the difference is recognised as
goodwill. The Group has one year from the acquisition date to
re-measure the fair values of the acquired assets and liabilities
and the resulting goodwill if new information is obtained relating
to conditions that existed at the acquisition date. Acquisition
related costs are expensed as incurred. The business combinations
entered into during the year are disclosed in Note 11.
4. Judgements and estimates (continued)
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.
5. 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 11). Revenues are earned
primarily 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 primarily online.
International
The International segment is comprised of PokerStars, Betfair
International, Adjarabet, Junglee Games and from August 2022, Sisal
(see Note 11). The International segment earns most of its revenues
from poker, casino, rummy, lottery and sports betting through
various brands. Services are provided primarily via the internet
but also through licensed retail outlets mainly in Italy following
the acquisition of Sisal.
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 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 year in particular. Gaming and other revenue is
not as dependent on the sporting calendar.
5. Operating segments (continued)
Reportable business segment information for the year ended 31
December 2022:
UK&I Australia International US Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ------------------ ----------------- ---------------------- ------------ ------------------ ------------------
Revenue from
external
customers 2,143.7 1,263.0 1,682.5 2,604.0 - 7,693.2
Cost of sales before
separately
disclosed
items (653.3) (635.4) (569.7) (1,305.6) - (3,164.0)
-------------------- ------------------ ----------------- ---------------------- ------------ ------------------ ------------------
Gross profit before
separately
disclosed
items 1,490.4 627.6 1,112.8 1,298.4 - 4,529.2
Operating costs
excluding
depreciation and
amortisation
before separately
disclosed
items (836.1) (237.4) (755.2) (1,548.1) (107.4) (3,484.2)
-------------------- ------------------ ----------------- ---------------------- ------------ ------------------ ------------------
Adjusted EBITDA(1)
before separately
disclosed
items 654.3 390.2 357.6 (249.7) (107.4) 1,045.0
Depreciation and
amortisation
before separately
disclosed
items (133.0) (29.4) (121.4) (79.4) (5.4) (368.6)
(Loss)/profit on
disposal
before separately
disclosed
items (2.6) - 0.5 1.1 - (1.0)
-------------------- ------------------ ----------------- ---------------------- ------------ ------------------ ------------------
Reportable segment
profit/(loss)
before
separately
disclosed
items 518.7 360.8 236.7 (328.0) (112.8) 675.4
Legal provision
releases - 17.7 20.6 - - 38.3
Amortisation of
acquisition-related
intangible assets
(Note
6) (261.1) (23.2) (305.6) (17.9) - (607.8)
Reportable segment
profit/(loss) after
amortisation of
acquisition-related
intangibles 257.6 355.3 (48.3) (345.9) (112.8) 105.9
Transaction fees and
associated costs(2) (35.0)
Restructuring and
integration
costs(2) (130.7)
Operating loss (59.8)
-------------------- ------------------ ----------------- ---------------------- ------------ ------------------ ------------------
5. Operating segments (continued)
Reportable business segment information for the year ended 31
December 2021:
UK&I Australia International US Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ----------------- ----------------- ----------------- ----------------- ------------------ ------------------
Revenue from
external
customers 2,062.9 1,293.5 1,288.4 1,391.4 - 6,036.2
Cost of sales before
separately
disclosed
items (621.2) (635.8) (391.6) (613.6) - (2,262.2)
-------------------- ----------------- ----------------- ----------------- ----------------- ------------------ ------------------
Gross profit before
separately
disclosed
items 1,441.7 657.7 896.8 777.8 - 3,774.0
Operating costs
excluding
depreciation and
amortisation
before separately
disclosed
items (825.8) (221.2) (604.6) (1,020.7) (100.7) (2,773.0)
-------------------- ----------------- ----------------- ----------------- ----------------- ------------------ ------------------
Adjusted EBITDA(1) 615.9 436.5 292.2 (242.9) (100.7) 1,001.0
Depreciation and
amortisation
before separately
disclosed
items (125.7) (25.6) (51.8) (46.5) (4.8) (254.4)
Loss on disposal
before
separately
disclosed
items - - - - (0.3) (0.3)
-------------------- ----------------- ----------------- ----------------- ----------------- ------------------ ------------------
Reportable segment
profit/(loss)
before
separately
disclosed
items 490.2 410.9 240.4 (289.4) (105.8) 746.3
Germany and Greece
tax
expense - - (47.3) - - (47.3)
Kentucky settlement
and associated
legal
costs - - (163.1) - - (163.1)
Gain on disposal 12.2 - - - - 12.2
Amortisation of
acquisition-related
intangible assets
(Note
6) (225.9) (20.9) (276.4) (20.1) - (543.3)
Reportable segment
profit/(loss) after
amortisation of
acquisition-related
intangibles 276.5 390.0 (246.4) (309.5) (105.8) 4.8
-------------------- ----------------- ----------------- ----------------- ----------------- ------------------
Transaction fees and
associated costs(2) (22.1)
Restructuring and
integration
costs(2) (45.2)
------------------
Operating loss (62.5)
-------------------- ----------------- ----------------- ----------------- ----------------- ------------------ ------------------
1 Adjusted EBITDA which is a non-GAAP measure in the above
segment note is defined as profit for the year before separately
disclosed items, depreciation, amortisation, impairment, (loss) /
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.
Reconciliation of reportable segment pre-Separately disclosed
items 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 4,529.2 17.7 4,546.9 3,774.0 (47.3) 3,726.7
Operating
costs
excluding
depreciation,
amortisation
and
(loss)/gain
on
disposal (3,484.2) (145.1) (3,629.3) (2,773.0) (230.4) (3,003.4)
-------------- ------------------- ------------------ ------------------- -------------------- ------------------ -----------------
EBITDA(1) 1,045.0 (127.4) 917.6 1,001.0 (277.7) 723.3
Depreciation
and
amortisation (368.6) (607.8) (976.4) (254.4) (543.3) (797.7)
(Loss) /gain
on disposal (1.0) - (1.0) (0.3) 12.2 11.9
Operating loss 675.4 (735.2) (59.8) 746.3 (808.8) (62.5)
Net finance
costs (157.8) (57.2) (215.0) (126.0) (99.9) (225.9)
Profit /
(loss)
before tax 517.6 (792.4) (274.8) 620.3 (908.7) (288.4)
Tax expense (181.9) 151.8 (30.1) (166.3) 42.8 (123.5)
-------------- ------------------- ------------------ ------------------- -------------------- ------------------ -----------------
Profit /
(loss)
for the
period 335.7 (640.6) (304.9) 454.0 (865.9) (411.9)
-------------- ------------------- ------------------ ------------------- -------------------- ------------------ -----------------
1 EBITDA is defined as profit for the year before depreciation,
amortisation, impairment, (loss)/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 6 for further detail on separately disclosed items.
5. Operating segments (continued)
Disaggregation of revenue under IFRS 15:
Group revenue disaggregated by product line for the year ended
31 December 2022:
UK&I Australia International US Total
GBPm GBPm GBPm GBPm GBPm
----------- ----------------------- ------------------------ ---------------------- ---------------------- ---------------------
Sports
revenue(1) 1,180.9 1,263.0 358.3 1,985.4 4,787.6
Gaming
revenue(2) 962.8 - 1,324.2 618.6 2,905.6
----------- ----------------------- ------------------------ ---------------------- ---------------------- ---------------------
Total Group
revenue 2,143.7 1,263.0 1,682.5 2,604.0 7,693.2
----------- ----------------------- ------------------------ ---------------------- ---------------------- ---------------------
Group revenue disaggregated by product line for the year ended
31 December 2021(:)
UK&I Australia International US Total
GBPm GBPm GBPm GBPm GBPm
----------- ---------------------- ------------------------ ---------------------- ---------------------- ---------------------
Sports
revenue(1) 1,281.8 1,293.5 220.2 978.3 3,773.8
Gaming
revenue(2) 781.1 - 1,068.2 413.1 2,262.4
----------- ---------------------- ------------------------ ---------------------- ---------------------- ---------------------
Total Group
revenue 2,062.9 1,293.5 1,288.4 1,391.4 6,036.2
----------- ---------------------- ------------------------ ---------------------- ---------------------- ---------------------
1 Sports revenue comprises sportsbook, exchange sports betting,
daily fantasy sports and pari-mutuel betting.
2 Gaming revenue includes Games, Poker, Casino, Lottery, Rummy
and Bingo.
Geographical information
Group revenue disaggregated by geographical market for the year
ended 31 December 2022:
UK&I Australia International US Total
GBPm GBPm GBPm GBPm GBPm
------------ ------------------------- ---------------------------- ---------------------------- ---------------------- --------------------
US - - - 2,594.3 2,594.3
UK 1,869.3 - 59.4 - 1,928.7
Australia - 1,263.0 - - 1,263.0
Rest of
World(1) 3.2 - 702.6 9.7 715.5
EU (excl.
Ireland)(2) 47.9 - 915.5 - 963.4
Ireland 223.3 - 5.0 - 228.3
------------ ------------------------- ---------------------------- ---------------------------- ---------------------- --------------------
Total Group
revenue 2,143.7 1,263.0 1,682.5 2,604.0 7,693.2
------------ ------------------------- ---------------------------- ---------------------------- ---------------------- --------------------
1 The Rest of World category includes multiple countries, that
individually represent less than 1% of total Group revenue.
2 The EU (excl. Ireland) category includes multiple countries,
the largest of which is Italy, that individually represent less
than 7% of total Group revenue.
Group revenue disaggregated by geographical market for the year
ended 31 December 2021:
UK&I Australia International US Total
GBPm GBPm GBPm GBPm GBPm
US - - - 1,391.4 1,391.4
UK 1,860.1 - 73.7 - 1,933.8
Australia - 1,293.5 - - 1,293.5
Rest of
World(1) 8.7 - 551.9 - 560.6
EU (excl.
Ireland)(2) - - 656.4 - 656.4
Ireland 194.1 - 6.4 - 200.5
------------ ------------------------- ---------------------------- ----------------------------- ---------------------- ----------------------
Total Group
revenue 2,062.9 1,293.5 1,288.4 1,391.4 6,036.2
------------ ------------------------- ---------------------------- ----------------------------- ---------------------- ----------------------
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.
Revenues are attributable to geographical location on the basis
of the customers location.
5. Operating segments (continued)
Non-current assets
Non-current assets (property, plant and equipment, intangible
assets and goodwill) by geographical area are as follows:
31 December 31 December
2022 2021
GBPm GBPm
----------------- -------------------------------- ----------------------------------
UK 8,855.7 8,492.3
Ireland 151.9 159.9
Australia 667.1 645.6
US 1,037.6 868.5
Italy(2) 2,053.4 -
Rest of World(1) 4,676.4 4,507.5
----------------- -------------------------------- ----------------------------------
Total 17,442.1 14,673.8
----------------- -------------------------------- ----------------------------------
1 This relates mainly to goodwill and fair value adjustments on
acquisition intangibles such as brand and customer relationships
pertaining to PokerStars worldwide operations (reported within the
International segment) not otherwise allocated to any specific
country or region.
2 This relates to the acquisition of Sisal in 2022. See Note 11
for more details.
6. Separately disclosed items
The separately disclosed items noted in Note 5 are comprised as
follows:
2022 2021
GBPm GBPm
-------------------------------------------- ----------------------------------- -----------------------------------
Transaction fees and associated costs (35.0) (22.1)
Restructuring and integration costs (130.7) (45.2)
Legal provision releases 38.3 -
Kentucky settlement and associated legal
costs - (163.1)
Germany and Greece tax expense - (47.3)
EBITDA impact of separately disclosed
items (127.4) (277.7)
Amortisation of acquisition-related
intangible
assets (607.8) (543.3)
Disposal of Oddschecker Global Media - 12.2
Operating loss impact of separately
disclosed
items (735.2) (808.8)
Financial income 11.0 -
Financial expense (68.2) (99.9)
-------------------------------------------- ----------------------------------- -----------------------------------
Loss before tax impact of separately
disclosed
items (792.4) (908.7)
-------------------------------------------- ----------------------------------- -----------------------------------
Tax credit on separately disclosed items 151.8 42.8
-------------------------------------------- ----------------------------------- -----------------------------------
Total separately disclosed items (640.6) (865.9)
-------------------------------------------- ----------------------------------- -----------------------------------
Attributable to:
Equity holders of the Company (636.2) (860.0)
Non-controlling interest (4.4) (5.9)
-------------------------------------------- ----------------------------------- -----------------------------------
(640.6) (865.9)
-------------------------------------------- ----------------------------------- -----------------------------------
Amortisation of acquisition-related intangible assets
Amortisation of GBP607.8m has been incurred in the year (year
ended 31 December 2021: GBP543.3m) 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 acquisitions
of tombola and Sisal in 2022.
Transaction fees and associated costs
During the year ended 31 December 2022, GBP35.0m ( year ended 31
December 2021: GBP22.1m) of costs were incurred relating to various
acquisitions and the FOX option arbitration proceedings. The costs
were included as separately disclosed items as they have not been
incurred in the ordinary course of business.
6. Separately disclosed items (continued)
Restructuring and integration costs
During the year ended 31 December 2022 costs of GBP130.7m (year
ended 31 December 2021: GBP45.2m) relating to incremental, one-off
costs, were incurred by the Group mainly as a result of significant
restructuring and integration initiatives following the Combination
with TSG in 2020.
Legal provision releases
During the year ended 31 December 2022, the settlement of two
separate legacy TSG litigation matters in the International and
Australian divisions resulted in the release of various legal
provisions and an Income Statement credit of GBP38.3m. These were
included as separately disclosed items as they have not been
incurred in the ordinary course of business.
Kentucky settlement and associated legal costs
On 22 September 2021, the Group announced that the legal dispute
between Flutter and the Commonwealth of Kentucky had been settled
in full. The Group agreed to pay a further $200m (GBP145.2m) to
Kentucky in addition to the $100m (GBP71.1m) previously forfeited
to the Commonwealth as part of the supersedeas bond in the case in
line with the provision outstanding at 31 December 2020. In return,
Kentucky released Stars Interactive Holdings (IOM) Ltd, Rational
Entertainment Enterprises Ltd and, inter alia, all Flutter entities
from any claims relating to the matters in issue in the Kentucky
proceedings, and the proceedings were consequently dismissed with
prejudice. As a result of this settlement, costs of GBP163.1m
(including associated legal costs of GBP17.9m) were incurred during
the year ended 31 December 2021.
Germany and Greece tax expense
Germany
In 2012 Betfair was issued with a German tax assessment relating
to the Betfair Exchange, which operated in Germany until November
2012. The assessment deemed that a tax liability of approximately
EUR30.6m was payable. This represented a multiple of the revenues
generated by the Exchange during the assessment period.
The Group paid the EUR30.6m German tax assessment in 2019, with
the late payment interest of approximately EUR10m to be paid when
assessed.
In September 2021 the German Federal Tax Court dismissed the
Group's appeal of the tax assessment. Whilst the Group has lodged a
formal complaint to the Federal Constitutional Court, it has
decided to recognise the amount of the German tax assessment
including the late payment interest. This resulted in an expense of
EUR40.6m (GBP34.5m) being recorded during the year ended 31
December 2021 in relation to the principal amount of tax and late
payment interest.
Greece
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 year ended 31 December 2021.
The Group considered these cost as one-off costs and not as part
of ongoing operations in the period.
Disposal of Oddschecker Global Media
On 31 August 2021 the Group sold all of the shares of
Oddschecker Global Media ("OGM"), a fully owned subsidiary of the
Group, to Bruin Capital, in exchange for GBP127.1m in cash
(proceeds of GBP141.3m net of GBP14.2m cash already on the balance
sheet) and recorded a gain on the disposal of GBP12.2m. There is
potential for the Group to receive further consideration of up to
GBP20m pending future events. However, it is currently not probable
that further amounts will be received and therefore no asset has
been recorded. Prior to the disposal, the non-current assets were
measured at the lower of their carrying amount and fair value less
costs sell. No impairments were recognised. The assets and
liabilities of OGM were included within the UK&I segment up to
the date of sale.
Financial income
During the year ended 31 December 2022, foreign exchange gains
of GBP11.0m were recorded. These gains were included as separately
disclosed items due to their volatile nature.
6. Separately disclosed items (continued)
Financial expense
During the year ended 31 December 2022, the Group recorded a
charge of GBP56.9m upon the settlement of the Sisal bridging loan
and a further GBP11.3m mainly relating to financing fees associated
with the debt drawdown for the Sisal acquisition that were not
eligible for capitalisation. These charges were included as
separately disclosed items due to their non-recurring nature. See
also Note 7 and Note 16.
During the year ended 31 December 2021, on repayment of the
Senior Notes in 2021, the Group recorded a charge of GBP78.8m
relating to the Senior Notes settlement. In conjunction with the
repayment and refinancing, the Group incurred an additional
GBP16.8m of fees that were not subject to capitalisation and
GBP4.3m of fees relating to debt covenant amendments as a result of
the Kentucky litigation. These charges were included as separately
disclosed items due to their non-recurring nature. See also Note
7.
Presentation within the Consolidated Income Statement
The release of the Australia legal provision and the Germany and
Greece tax expense are included in the Consolidated Income
Statement within cost of sales. Transaction fees and associated
costs, restructuring and integration costs, the release of the
International legal provision and the Kentucky settlement costs are
included in the Consolidated Income Statement within operating
costs excluding depreciation, amortisation, and loss / (gain) on
disposal.
Tax credit on separately disclosed items
The tax credit of GBP151.8m (2021: GBP42.8m) has arisen
primarily on the tax effect of acquisition related intangible
amortisation of GBP87.1m, the recognition of a deferred tax asset
of GBP42.9m following an internal transfer of intangibles and the
tax effect of other separately identified items of GBP21.8m. The
2021 tax credit amounts in respect to acquisition related
intangible amortisation, internal transfer of intangibles and other
separately identified intangibles were offset by an increase of
GBP104.1m in the deferred tax liability on separately identifiable
acquisition-related intangible assets as result of the increase in
the UK's main corporation tax rate from 19% to 25% from 1 April
2023.
7. Financial income and expense
Recognised in profit or loss
2022 2021
GBPm GBPm
----------------------------------------------- --------------------------------- ----------------------------------
Financial income:
Foreign exchange gain on financing instruments
associated with financing activities (Note
6) 11.0 -
Movement in fair value of investment 4.9 1.7
On financial assets at amortised cost:
Interest income 6.2 1.5
----------------------------------------------- --------------------------------- ----------------------------------
Total 22.1 3.2
----------------------------------------------- --------------------------------- ----------------------------------
Financial expense:
Settlement of borrowings (see Note 6 and
Note 16) 56.9 78.8
Change in fair value of contingent
consideration - 3.3
Foreign exchange loss on financing instruments
associated with financing activities - 1.2
Financing related fees not eligible for
capitalisation (see Note 6 and Note 16) 11.3 21.1
On financial liabilities at amortised
cost:
Interest on borrowings, bank guarantees
and bank facilities 137.4 106.0
Interest on lease liabilities 12.6 8.5
Other interest 18.9 10.2
----------------------------------------------- --------------------------------- ----------------------------------
Total 237.1 229.1
----------------------------------------------- --------------------------------- ----------------------------------
7. Financial income and expense (continued)
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 210.7 61.4
Fair value of cash flow hedges transferred
to income statement (182.7) (28.4)
---------------------------------------------- ---------------------------------- ----------------------------------
Net change in fair value of cash flow hedge
reserve 28.0 33.0
Debt instruments at FVOCI (2.6) (1.3)
Foreign exchange (loss) / gain on net
investment
hedges, net of tax (113.7) 68.2
Foreign exchange gain/(loss) on translation
of the net assets of foreign currency
denominated
entities 371.4 (309.6)
---------------------------------------------- ---------------------------------- ----------------------------------
Total 283.1 (209.7)
---------------------------------------------- ---------------------------------- ----------------------------------
A charge of GBP1.8m was recorded in the income statement in
respect of ineffective cash flow hedges in the year ended 31
December 2022 (2021: GBP2.5m).
8. Tax expense
2022 2021
GBPm GBPm
--------------------------------------- --------------------------------- ----------------------------------
Recognised in profit or loss:
Current tax charge 168.8 127.3
Prior year under provision 6.4 1.0
--------------------------------------- --------------------------------- ----------------------------------
Total current tax 175.2 128.3
--------------------------------------- --------------------------------- ----------------------------------
Deferred tax credit (146.7) (6.2)
Prior year under provision 1.6 1.4
--------------------------------------- --------------------------------- ----------------------------------
Decrease in net deferred tax liability (145.1) (4.8)
--------------------------------------- --------------------------------- ----------------------------------
Total tax expense in income statement 30.1 123.5
--------------------------------------- --------------------------------- ----------------------------------
The difference between the total tax expense shown above and the
amount calculated by applying the standard rate of corporation tax
to the profit before tax is as follows:
2022 2021
GBPm GBPm
---------------------------------------------- ---------------------------------- ----------------------------------
Loss before tax (274.8) (288.4)
---------------------------------------------- ---------------------------------- ----------------------------------
Tax on Group profit before tax at the standard
Irish corporation tax rate of 12.5% (34.4) (36.1)
Depreciation on non-qualifying property,
plant and equipment (4.0) (5.4)
Effect of different statutory tax rates
in overseas jurisdictions (19.2) 5.5
Non-deductible expenses 36.0 26.8
Non-taxable income (1.4) (4.0)
Effect of changes in statutory tax rates (1.9) 104.4
Movement on deferred tax balances not
recognised 47.0 29.9
Under provision in prior year 8.0 2.4
---------------------------------------------- ---------------------------------- ----------------------------------
Total Tax Expense 30.1 123.5
---------------------------------------------- ---------------------------------- ----------------------------------
The Group's adjusted effective tax rate before separately
disclosed items for the year was 35.1% (year ended 31 December
2021: 26.8%), which compares to the standard Irish tax rate of
12.5%. A total tax credit on separately disclosed items of
GBP151.8m was recorded during the year ended 31 December 2022 (year
ended 31 December 2021: GBP42.8m) (see Note 6).
The Group's consolidated effective tax rate on profits including
separately disclosed items for 2022 is (11.0)% (2021: (42.8)%). The
separately disclosed items impacting the consolidated tax rate
include the unwind of deferred tax liabilities recognised in
respect of acquisition-related intangibles.
The Group's adjusted effective tax rate is also materially
impacted by the movement on deferred tax balances which remain
unrecognised due to the doubt over the future recoverability of
those assets including the unrecognised US losses referred to in
Note 4, as well as the effect of expenses which are not deductible
for tax purposes.
8. Tax expense (continued)
The future effective tax rate of the Group will be affected by
the ongoing geographic mix of profits in accordance with the OECD
guidelines in relation to Base Erosion and Profit Shifting. On 15
December 2022, European Union (EU) Member States unanimously
adopted the Minimum Tax Directive via written procedure ensuring a
global minimum level of taxation (set at 15%) for multinational
enterprise groups. GLoBE Model rules were released in March 2022
and broadly EU Member States have until 31 December 2023 to
transpose the Directive into national legislation with the rules to
be applicable for fiscal years starting on or after 31 December
2023. None of the countries in which the Group operates has enacted
or substantively enacted Pillar Two Model Rules as part of their
national laws as of 31 December 2022. Whilst consultation on a
number of areas remains ongoing, we will continue to monitor
developments closely and we expect this to lead to an increase in
tax from 2024 onwards.
9. 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 (302.0) (415.8)
--------------------------------------------- -------------------------------- --------------------------------
Numerator in respect of adjusted earnings
per share (GBPm):
Loss attributable to equity holders of
the Company (302.0) (415.8)
Separately disclosed items (Note 6) 636.2 860.0
--------------------------------------------- -------------------------------- --------------------------------
Profit for adjusted earnings per share
calculation 334.2 444.2
--------------------------------------------- -------------------------------- --------------------------------
Weighted average number of ordinary shares
in issue during the period (in '000s)(1) 176,833 175,780
--------------------------------------------- -------------------------------- --------------------------------
Basic earnings per share (GBP1.708) (GBP2.365)
--------------------------------------------- -------------------------------- --------------------------------
Adjusted basic earnings per share GBP1.890 GBP2.527
--------------------------------------------- -------------------------------- --------------------------------
Adjustments to derive denominator in respect
of diluted earnings per share (in '000s):
---------------------------------------------
Weighted average number of ordinary shares
in issue during the period 176,833 175,780
Diluted earnings per share (GBP1.708) (GBP2.365)
--------------------------------------------- -------------------------------- --------------------------------
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 2,537,536 (2021: 2,289,170).
The average market value of the Company's shares of GBP99.09 (31
December 2021: GBP137.61) was used to calculate the dilutive effect
of share options based on the market value for the period that the
options were outstanding.
10. Goodwill
Goodwill acquired through business combination activity has been
allocated to CGUs that are expected to benefit from synergies in
that combination. The CGUs represent the lowest level within the
Group at which the associated goodwill is monitored for internal
management purposes, and are not larger than the operating segments
determined in accordance with IFRS 8. A total of 16 (2021: 13) CGUs
have been identified and these are grouped together for goodwill
impairment purposes as per the below. Any indefinite life
intangible assets attributed to one of the 16 CGUs (2021: 13) is
tested for impairment at the CGU level.
10. Goodwill (continued)
Number of cash generating
units Goodwill
-------------- --------------------------- --------------------------------------------------------------
31 December 31 December 31 December 31 December
2022 2021 2022 2021
UK&I Online 4 3 5,984.7 5,766.9
UK Retail 1 1 18.9 18.9
Irish Retail 1 1 20.7 20.7
International 6 4 3,696.3 2,490.3
Australia 1 1 505.1 482.4
US 3 3 634.3 567.6
-------------- ------------- ------------ ------------------------------ ------------------------------
Total Group 16 13 10,860.0 9,346.8
-------------- ------------- ------------ ------------------------------ ------------------------------
UK&I Irish
Online UK Retail Retail International Australia US Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- ------------ ------------- ------------ ---------------------- -------------- ------------ -------------
Balance at 1
January
2021 5,845.5 18.9 20.7 2,560.9 507.7 563.0 9,516.7
Arising on
acquisitions
during the
year (Note
11) - - - 58.5 - - 58.5
Disposals
(Note 11) (78.0) - - - - - (78.0)
Foreign
currency
translation
adjustment (0.6) - - (129.1) (25.3) 4.6 (150.4)
------------- ------------ ------------- ------------ ---------------------- -------------- ------------ -------------
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
11) 217.2 - - 1,021.9 - - 1,239.1
Foreign
currency
translation
adjustment 0.6 - - 184.1 22.7 66.7 274.1
------------- ------------ ------------- ------------ ---------------------- -------------- ------------ -------------
Balance at 31
December
2022 5,984.7 18.9 20.7 3,696.3 505.1 634.3 10,860.0
----------------------
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).
Goodwill in the UK&I online segment arose from the
acquisition of tombola in 2022 (see Note 11), the acquisition of
the Sky Betting and Gaming business as part of the TSG acquisition
in 2020, and the acquisition of the Betfair online business
(excluding operations outside of Ireland and the UK) as part of the
all-share merger with Betfair Group plc in 2016.
Goodwill in UK Retail arose from the acquisition of two London
bookmaking businesses in 2004, the acquisition of a retail
bookmaking company in Northern Ireland in 2008 and the acquisition
of a number of retail bookmaking shop properties since 2010.
Goodwill in Irish Retail arose from the amalgamation of three
bookmaking businesses to form Paddy Power in 1988 and the
acquisition of a number of retail bookmaking shop properties since
2007.
The International goodwill amount arose from the acquisition of
Sisal in 2022 (see Note 11), the acquisitions in 2021 of a 57.3%
controlling stake in Junglee Games, an Indian online rummy operator
and Singular, a B2B operator which offers a flexible, modular
sports betting and gaming technology platform (see Note 11), the
acquisition of the PokerStars business as part of the TSG
acquisition in 2020, the acquisition of an initial 51% controlling
stake in Adjarabet, the market leader in online betting and gaming
in the regulated Georgian market, in February 2019 and the
acquisition of the Betfair online business (excluding the
operations of Ireland, the UK, and the US) acquired as part of the
all-share merger with Betfair Group plc in 2016.
The Australia segment goodwill amount arose from the acquisition
of an initial 51% interest in Sportsbet Pty Limited ("Sportsbet"),
the subsequent acquisition of International All Sports Limited
("IAS") by Sportsbet, both in 2009, and goodwill arising from
BetEasy through the 2020 combination with TSG.
The US segment goodwill amount arose from the acquisition of the
US business acquired as part of the all-share merger with Betfair
Group plc in 2016, the acquisition of an initial 61% of FanDuel
Limited, a market leading operator in the daily fantasy sports
market in the United States, in 2018 and goodwill arising on FoxBet
through the combination with TSG in 2020.
Impairment tests for cash generating units containing goodwill
and indefinite life intangible assets
In accordance with accounting requirements, the Group performs
an annual impairment test of its CGUs. The most recent test was
performed at 31 December 2022.
10. Goodwill (continued)
For the purpose of impairment testing, the Group's CGUs include
amounts in respect of goodwill and indefinite life intangible
assets, comprising licences acquired as part of the purchase of the
D McGranaghan Limited business in 2008 and a shop acquisition in
2011 and brands acquired as part of the purchase of Sportsbet and
IAS in 2009. Based on the reviews as described above, no impairment
has arisen.
11. Business combinations and disposals
Year ended 31 December 2022
Acquisition of Sisal
On 4 August 2022, the Group completed the acquisition of 100% of
Sisal, Italy's leading retail and online gaming operator with
operations also in Turkey (of which it has a controlling 49%
interest) and Morocco. The purchase comprised of a cash payment of
GBP1,674.8m (EUR2,002m).
Details of the provisional fair value of identifiable assets and
liabilities acquired, purchase consideration and goodwill are as
follows:
Provisional fair
values as at
4 August 2022
GBPm
Assets
Property, plant and equipment 156.0
Trade and other receivables 9.7
Deferred tax assets 16.2
Intangible assets 1,057.8
Total non-current assets 1,239.7
Trade and other receivables 67.3
Cash and cash equivalents - available for corporate
use 89.9
Cash and cash equivalents - customer balances 304.2
Total current assets 461.4
Total assets 1,701.1
Liabilities
Trade and other payables 195.6
Customer balances 304.2
Lease liability 16.7
Total current liabilities 516.5
Trade and other payables 24.0
Lease liability 45.2
Provisions 39.8
Deferred tax liability 291.1
Total non-current liabilities 400.1
Total liabilities 916.6
Net assets acquired 784.5
Goodwill 1,015.8
Non-controlling interest measured at the fair
value of net assets identified (125.5)
Consideration 1,674.8
The consideration is analysed as:
Consideration satisfied by cash 1,674.8
Consideration 1,674.8
Included within the intangible assets were GBP1,057.8m of
separately identifiable intangibles comprising brand, customer
relations, licences, and technology acquired as part of the
acquisition, with the additional effect of a deferred tax liability
of GBP291.1m 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.
11. Business combinations and disposals (continued)
The main factors leading to the recognition of goodwill (none of
which is deductible for tax purposes) is the opportunity to
increase the Group's exposure to an attractive fast-growing
regulated online market with Sisal's omni-channel offering
delivering a competitive advantage to the Group. The acquisition
provides the Group with lottery capabilities for the first time and
presents the opportunity to grow outside of Italy as Sisal have
already done in Turkey via this product offering. There are also
tangible opportunities to deliver material revenue synergies from
the acquisition of Sisal through (i) leveraging Sisal's retail
channel to grow online deposits for existing Flutter brands, (ii)
enhancing Sisal's sports betting offering by utilising Flutter's
pricing and risk management capabilities and (iii) enhancing
Sisal's casino product by providing it with access to Flutter's
in-house gaming content. The goodwill has been allocated to the
existing International CGU.
Since the date of acquisition to 31 December 2022, Sisal has
contributed revenue of GBP397.7m and GBP23.8m of profit after tax
to the results of the Group. If the acquisition had occurred on 1
January 2022, Sisal's contribution to revenue and profit after tax
would have been GBP862.5m and GBP69.0m respectively.
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.
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:
Fair values as
at
10 January 2022
GBPm
Assets
Property, plant and equipment 11.4
Intangible assets 245.0
Total non-current assets 256.4
Trade and other receivables 12.6
Cash and cash equivalents - available for corporate
use 14.7
Total current assets 27.3
Total assets 283.7
Liabilities
Trade and other payables 29.7
Total current liabilities 29.7
Deferred tax liabilities 61.3
Total non-current liabilities 61.3
Total liabilities 91.0
Net assets acquired 192.7
Goodwill 217.2
Consideration 409.9
The consideration is analysed as:
Consideration satisfied by cash 409.9
Consideration 409.9
Included within the intangible assets were GBP245.0m 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 GBP61.3m
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.
11. 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 sharing of product
capabilities, expertise and technology across the UK&I Online
division. The goodwill has been allocated to the existing UK&I
Online CGU.
Since the date of acquisition to 31 December 2022, tombola has
contributed revenue of GBP175.0m and GBP10.2m 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.
Other business combinations
Adjarabet
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 could be settled, at the Group's election, in cash or
shares. During the year ended 31 December 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 (GBP204.1m) in line with the terms
of the original agreement.
Sachiko
The Group also during the year completed the acquisition of 100%
of Sachiko Gaming Private Limited, an online poker gaming developer
based in India in exchange for a 5% equity stake in the Group's
subsidiary Junglee Games. The fair value of the consideration was
GBP6m based on the fair value of Junglee at the date of the
acquisition. The purpose of the acquisition is to combine it with
the the Group's existing Indian business and widen and expand its
product offering in the fast growing Indian market. Due to the
immaterial size of the transaction, no further disclosures are
provided.
As part of the acquisition of Sachiko, the Group has put in
place arrangements, consisting of call and put options, that could
result in it acquiring the 5% of Junglee held by the former
shareholders of Sachiko in 2028 and 2032 based on the future
Revenue and EBITDA performance of Junglee. As the Group cannot
avoid settling the call/put options in cash, a liability of
GBP12.3m has been recorded at 31 December 2022.
Year ended 31 December 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 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.
Since the date of acquisition to 31 December 2021, Junglee has
contributed GBP50m of revenue and GBP7.4m of a net loss after tax
to the results of the consolidated Group.
If the acquisition had occurred on 1 January 2021, Junglee's
contribution to revenue and net loss after tax for the year ended
31 December 2021 would have been GBP53m and GBP6.6m
respectively.
11. 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 - available for corporate
use 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
11. Business combinations and disposals (continued)
Acquisition of Singular
On 10 September 2021, the Group completed the acquisition of a
100% stake in Singular, an European sports betting and gaming
technology platform which is already fully integrated with our
Adjarabet business and will provide us with greater optionality as
we enter new markets. The purchase comprised of an initial cash
payment of EUR16.5m (GBP14.1m) with a further EUR20.1m (GBP17.2m)
payable subject to the business meeting strategic milestones in the
future, recorded as contingent consideration and EUR1.0m (GBP0.8m)
included within deferred consideration.
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill are as follows:
Fair values as
at
10 September 2021
GBPm
Assets
Property, plant and equipment 0.2
Intangible assets 4.3
Total non-current assets 4.5
Trade and other receivables 0.9
Cash and cash equivalents - available for corporate
use 0.5
Total current assets 1.4
Total assets 5.9
Liabilities
Trade and other payables 0.9
Total current liabilities 0.9
Deferred tax liabilities 0.2
Total non-current liabilities 0.2
Total liabilities 1.1
Net assets acquired 4.8
Goodwill 27.3
Consideration 32.1
The consideration is analysed as:
Consideration satisfied by cash 14.1
Contingent consideration 17.2
Deferred consideration 0.8
Consideration 32.1
Included within the intangible assets were GBP4.3m of separately
identifiable intangibles comprising technology and customer
relations acquired as part of the acquisition, with the additional
effect of a deferred tax liability of GBP0.2m thereon. These
intangible assets are being amortised over their useful economic
lives of up to five years. The book value equated to the fair value
on the remaining assets 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
Singular. The goodwill has been allocated to the existing
International CGU and it has been deemed that a separate CGU is not
appropriate.
If the acquisition had occurred on 1 January 2021, Singular's
contribution to revenue and net profit after tax for the 12 months
ended 31 December 2021 would have been insignificant in terms of
third party revenue and GBP0.1m respectively. Since the date of
acquisition to 31 December 2021, Singular has contributed
insignificant third party revenue and a GBP0.2m profit after tax to
the results of the Group.
Disposal of Oddschecker Global Media
On 31 August 2021 the Group sold all of the shares of
Oddschecker Global Media ("OGM"), a fully owned subsidiary of the
Group, to Bruin Capital, in exchange for GBP127.1m in cash
(proceeds of GBP141.3m net of GBP14.2m cash already on the balance
sheet) and recorded a gain on the disposal of GBP12.2m (see also
Note 6). There is potential for the Group to receive further
consideration of up to GBP20m pending future events. However, it is
currently not probable that further amounts will be received and
therefore no asset has been recorded. Prior to the sale, the
non-current assets were measured at the lower of their carrying
amount and fair value less costs to sell. No impairments were
recognised. The assets and liabilities of OGM were included within
the UK&I segment up to the date of sale.
11. Business combinations and disposals (continued)
The net assets disposed and the gain on disposal recognised by
the Group were as follows:
31 August 2021
GBPm
Property, plant and equipment 0.8
Intangible assets 48.1
Goodwill 78.0
Trade and other receivables 2.1
Cash and cash equivalents 14.2
Total assets 143.2
Accounts payable and other liabilities (7.3)
Deferred taxes (11.6)
Total liabilities (18.9)
Net assets disposed 124.3
Disposal costs (4.8)
Proceeds 141.3
Gain on disposal 12.2
Cash (outflows) / inflows from business combinations:
31 December 31 December
2022 2021
GBPm GBPm
---------------------------------------------- --------------------------------- ----------------------------------
Cash consideration paid for acquisitions
in the period (2,084.7) (63.4)
Cash consideration paid for put option
exercised in the period - (5.5)
Cash consideration paid for further interest
in subsidiary (204.1) -
Cash and cash equivalents - available for
corporate use acquired from acquisitions
in the period 104.6 18.2
Cash and cash equivalents - customer balances
acquired from acquisitions in the period 304.2 -
Cash consideration - acquisitions in previous
periods (15.3) (21.6)
As presented in the statement of cash
flows:
Purchase of businesses net of cash acquired (1,675.9) (50.7)
Acquisition of further interest in subsidiary (204.1) -
Payment of contingent deferred consideration (15.3) (21.6)
---------------------------------------------- --------------------------------- ----------------------------------
During the year 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.
12. Investments and trade and other receivables
Non-current assets
31 December 31 December
2022 2021
GBPm GBPm
-------------------- --------------------------------- ----------------------------------
Investments - FVTPL 9.2 5.5
-------------------- --------------------------------- ----------------------------------
Investments relate to a small number of individually immaterial
equity investments in various companies.
31 December 31 December
2022 2021
GBPm GBPm
--------------------------------------- --------------------------------- ----------------------------------
Other receivables
Other receivables 21.4 11.8
Prepayments 12.6 13.8
Deferred financing costs (see Note 16) 4.5 3.7
Total 38.5 29.3
12. Investments and trade and other receivables (continued)
Other receivables
Other receivables are comprised primarily of deposits for
licences and property as well as VAT refunds due.
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 initial transaction costs and fees relating to
the Revolving Credit Facility with an additional GBP3.7m
capitalised following the increase of the facility in September
2022, which have been capitalised and included within non-current
receivables. The balance at 31 December 2022, net of accretion, was
GBP4.5m (2021: GBP3.7m). These fees are charged as financial
expenses over the term of Revolving Credit Facility agreement. As
at 31 December 2022, GBP63.0m was drawn under the Revolving Credit
Facility (31 December 2021: GBPNil).
Current assets
31 December 31 December
2022 2021
GBPm GBPm
--------------------------------------- --------------------------------- ----------------------------------
Trade and other receivables
Trade receivables 95.4 39.5
Other receivables 73.4 34.4
Value-added tax and goods and services
tax 7.5 5.1
Prepayments 168.7 124.9
---------------------------------------
Total 345.0 203.9
--------------------------------------- --------------------------------- ----------------------------------
13. Current investments, financial assets - restricted cash and
cash equivalents
31 December 31 December
2022 2021
Restated
GBPm GBPm
-------------------------------- ----------------------------------
Non-current:
Financial assets - restricted cash 13.0 7.4
Current:
Investments at FVOCI - customer deposits 138.0 83.0
Cash and cash equivalents - customer balances 1,293.2 677.6
Cash and cash equivalents - available for
corporate use 797.9 951.7
---------------------------------------------- -------------------------------- ----------------------------------
Total 2,242.1 1,719.7
---------------------------------------------- -------------------------------- ----------------------------------
Financial assets
Non-current financial assets - restricted cash include:
-- amounts required to be held as to guarantee third party letter of credit facilities.
Cash and cash equivalents - customer balances include:
-- customer funds balances securing player funds held by the
Group. These customer funds match customer liabilities of equal
value.
The effective interest rate on bank deposits at 31 December 2022
was 2.2% (31 December 2021: 0.3%). The bank deposits also have a
weighted average maturity date of 1.8 days from 31 December 2022
(2021: one day). The Directors believe that all short-term bank
deposits can be withdrawn without significant penalty.
Investments - customer deposits
Investments relate to customer deposits, and are held in
accounts segregated from investments held for operational purposes.
Investments held in relation to customer deposits are liquid
investments in short duration corporate and government bonds and
are classified as current assets consistent with the current
classification of customer deposits to which the investments
relate. Management's investment strategy for the portfolio results
in the majority of the bonds being held to maturity. Bonds are
classified as FVOCI.
Amounts held in trust
As at 31 December 2022, GBP366.2m (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
nor 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. Current investments, financial assets - restricted cash and
cash equivalents (continued)
Currency details
Investments - customer deposits, financial assets - restricted
cash, cash and cash equivalents - customer balances and cash and
cash equivalents - available for corporate use are analysed by
currency as follows:
31 December 31 December
2022 2021
GBPm GBPm
-------------------------- ------------------------
GBP 201.6 708.7
EUR 745.2 165.0
AUD 160.5 238.2
USD 992.6 570.8
Other 142.2 37.0
------------------------
Total 2,242.1 1,719.7
------------------------
14. Trade and other payables
Current liabilities
31 December 31 December
2022 2021
GBPm GBPm
---------------------------------------------
Trade and other payables
Trade payables 204.4 74.2
PAYE and social security 36.8 19.7
Value-added tax, goods and services tax,
betting duties, data rights, and product
and racefield fees 352.9 220.7
Employee benefits 181.4 156.1
Contingent deferred consideration - business
combinations - 21.0
Accruals and other liabilities 757.6 604.7
Total 1,533.1 1,096.4
Non-current liabilities
31 December 31 December
2022 2021
GBPm GBPm
-----------------------------------
Trade and other payables
Employee benefits 6.2 2.1
Contingent deferred consideration - business
combinations 17.8 16.9
Put/call liability for acquisition 12.3 -
Accruals and other payables 14.5 0.8
Total 50.8 19.8
Contingent deferred consideration - business combinations
The Group's contingent deferred consideration liabilities
amounted to GBP17.8m at 31 December 2022 relates to the acquisition
of Singular in 2021 (see also Note 11).
At 31 December 2021, the contingent deferred consideration
liabilities of GBP37.9m related to the following:
-- GBP17.8m relating to the acquisition of Singular in 2021 (see also Note 11).
-- GBP15.4m contingent and deferred consideration relating to
Betfair's historical acquisition of HRTV, a horse racing television
network based in the United States. This liability was settled in
full during 2022; and
- GBP4.7m in respect of Diamond Game Enterprises, assumed as
part of the Combination with TSG. This liability was released to
the income statement during 2022.
Sachiko
As part of the acquisition of Sachiko (see Note 11), the Group
has put in place arrangements, consisting of call and put options,
that could result in it acquiring the 5% of Junglee held by the
former shareholders of Sachiko in 2027 and 2032 based on the future
Revenue and EBITDA performance of Junglee. As the Group cannot
avoid settling the put/call options in cash, a liability of
GBP12.3m has been recorded at 31 December 2022.
15. Provisions
Provisions balances at 31 December 2022 and 31 December 2021 and
movements during the year ended 31 December 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
Acquired on
business
combinations - - 4.4 35.4 - 39.8
Additional
provisions
recognised 1.1 1.0 6.6 0.7 9.1 18.5
Amounts used
during
the year (0.5) (6.3) (9.4) (3.4) (5.9) (25.5)
Unused
amounts
reversed (0.3) - (2.5) (38.3) (3.2) (44.3)
Foreign
currency
translation 0.2 1.0 1.1 3.6 0.7 6.6
Balance at 31
December
2022 4.0 9.4 22.6 70.0 8.2 114.2
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 31
December
2022:
Current 2.9 4.8 18.3 14.5 6.2 46.7
Non-current 1.1 4.6 4.3 55.5 2.0 67.5
Total 4.0 9.4 22.6 70.0 8.2 114.2
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 31 December 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 31 December 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 judgement
(see Note 4), 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 including those that were acquired
as part of the Sisal business combination during the year. The most
significant relates to the foreign payments contingent liabilities
outlined in more detail in Note 19. 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.
15. Provisions (continued)
Other
Other provisions primarily comprise a number of different
regulatory provisions.
16. Borrowings
The following is a summary of borrowings, including accrued
interest, outstanding as at 31 December 2022 and 31 December
2021:
31 December 2022 31 December 2021
Principal Principal
outstanding Carrying outstanding
Contractual balance amount (including balance Carrying
interest in currency accrued in currency amount (including
rate(1) of borrowing interest)(2) of borrowing accrued interest)
Local currency Local currency
% (m) GBPm (m) GBPm
GBP First
Lien Term
Loan A 2025 5.18 GBP1,017.9 1,012.0 GBP1,017.9 1,009.6
EUR First
Lien Term
Loan A 2026 4.65 EUR549.5 486.9 EUR- -
USD First
Lien Term
Loan A 2026 7.08 $200.0 165.3 $- -
USD First
Lien Term
Loan B 2026 2.76 $2,901.7 2,375.7 $2,931.0 2,142.6
USD First
Lien Term
Loan B 2028 6.74 $1,246.9 1,030.5 $- -
EUR First
Lien Term
Loan B 2026 4.70 EUR507.2 443.9 EUR507.2 419.6
GBP
Revolving
Credit
Facility
2025 5.18 GBP63.0 63.2 GBP- -
Total
borrowings 5,577.5 3,571.8
Presented
in:
Current
portion 35.6 22.1
Non-current
portion 5,541.9 3,549.7
Total
borrowings 5,577.5 3,571.8
1 The rates include the impact of the contractual Swap
Agreements (as defined below).
2 The carrying amounts at 31 December 2022 include accrued
interest of GBP1.1m (31 December 2021: GBP0.4m) presented within
the current portion of borrowings above.
During the year ended 31 December 2022, the Group incurred the
following interest on its then outstanding borrowings:
Effective
interest Interest Interest Total Interest
rate(1) accretion (2) (2)
% GBPm GBPm GBPm
GBP First
Lien Term
Loan
A 2025 5.59 2.5 31.6 34.1
EUR First
Lien Term
Loan
A 2026 4.81 - 5.1 5.1
USD First
Lien Term
Loan
A 2026 7.30 - 3.5 3.5
USD First
Lien Term
Loan
B 2026 3.10 5.7 51.7 57.4
USD First
Lien Term
Loan
B 2028 7.00 0.0 21.1 21.1
EUR First
Lien Term
Loan
B 2026 5.24 1.4 12.4 13.8
EUR First
Lien Term
Loan
B4 2026 4.20 1.8 7.7 9.5
GBP
Revolving
Credit
Facility
2025 5.20 - 4.3 4.3
Total 11.4 137.4 148.8
1 The effective interest rate calculation includes the impact of
the Swap Agreements (as defined below).
2 Interest shown includes the impact of the Swap Agreements and
is the cash cost. In addition to the amount included above, the
Group incurred GBP3.1m of interest expense relating to commitment,
utilisation, and fronting fees associated with its Revolving Credit
Facility.
16. Borrowings (continued)
The Group's change in borrowings during the year ended 31
December 2022 was as follows:
Balance
Balance Adjustments Loss at 31
at 1 New Principal to amortised Interest on December
Jan 2022 debt payments costs(1) accretion(2) extinguishment FX translation 2022
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
GBP First
Lien
Term Loan
A 2025 1,009.2 - - - 2.5 - - 1,011.7
EUR First
Lien
Term Loan
A 2026 - 480.0 - - - - 6.8 486.8
USD First
Lien
Term Loan
A 2026 - 177.5 - - - - (12.3) 165.2
USD First
Lien
Term Loan
B 2026 2,142.6 - (24.3) - 5.7 - 251.3 2,375.3
USD First
Lien
Term Loan
B 2028 - 1,109.5 (2.6) - - - (76.6) 1,030.3
EUR First
Lien
Term Loan
B 2026 419.6 - - - 1.4 - 23.1 444.1
EUR First
Lien
Term Loan
B4 2026 - 1,669.5 (1,767.0) (56.1) 1.8 56.9 94.9 -
GBP
Revolving
Credit
Facility
2025 - 584.0 (521.0) - - - - 63.0
Total 3,571.4 4,020.5 (2,314.9) (56.1) 11.4 56.9 287.2 5,576.4
Accrued
interest 0.4 1.1
Total
borrowings 3,571.8 5,577.5
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.
The Group's change in borrowings during the year ended 31
December 2021 was as follows:
Balance Adjustments Embedded Balance
at 1 New Principal to amortised Interest derivative at 31
Jan 2021 debt payments costs accretion settlement FX translation Dec 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
GBP First
Lien
Term Loan
A 2025 939.5 67.9 - (0.5) 2.3 - - 1,009.2
USD First
Lien
Term Loan
A 2026 1,042.9 1,099.8 (18.0) (5.4) 5.3 - 18.0 2,142.6
EUR First
Lien
Term Loan
A 2026 449.1 - - (2.2) 1.3 - (28.6) 419.6
Senior
Notes 682.8 - (733.2) - (46.8) 96.1 1.1 -
Total 3,114.3 1,167.7 (751.2) (8.1) (37.9) 96.1 (9.5) 3,571.4
Accrued
interest 24.6 0.4
Total
borrowings 3,138.9 3,571.8
16. Borrowings (continued)
As at 31 December 2022, the contractual principal repayments of
the Group's outstanding borrowings, excluding accrued interest,
amount to the following:
< 1 year 1-2 years 2-3 years 3-4 years >4 years(1)
GBPm GBPm GBPm GBPm GBPm
GBP First - - 1,017.9 - -
Lien Term
Loan A
2025
EUR First - - - 486.8 -
Lien Term
Loan A
2026
USD First - - - 165.3 -
Lien Term
Loan A
2026
USD First
Lien Term
Loan B
2026 23.8 23.8 23.8 2,326.4 -
USD First
Lien Term
Loan B
2028 10.9 10.9 10.9 10.9 986.9
EUR First - - - 449.3 -
Lien Term
Loan B
2026
GBP - - 63.0 - -
Revolving
Credit
Facility
2025
34.7 34.7 1,115.6 3,438.7 986.9
1 Principal repayments due > 4 years are payable in 2028.
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, certain members of the Group, comprising 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. From this GBP100m, the Group received GBP68m
cash drawings from the TLA with the remaining GBP32m becoming
available as incremental RCF. As part of the refinancing noted
further below, during the year we entered into the Third Amendment
of the TLA Agreement on 23 September 2022 which enabled the
drawdown of EUR549.5m and $200.0m during the year. 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 CAS 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%;
-- EUR549.5m (2021: EUR0) priced at 1M EURIBOR plus 2.75% and a
EURIBOR floor of 0% (the "EUR First Lien Term Loan A") with a
maturity date of 31 July 2026; and
-- $200.0m (2021: $0) priced at Daily Compound SOFR plus 0.2616%
CAS plus a margin of 2.75% (the "USD First Lien Term Loan A") with
a maturity date of 31 July 2026.
There is no amortisation on the GBP, EUR and USD First Lien Term
Loan A and the principals are 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 in 2020 and
are recorded as financial expense over the term of the debt using
the effective interest rate method. As part of an internal
restructure in 2022, the Group has added subsidiaries FanDuel Group
Financing LLC and Betfair Interactive US Financing LLC as borrowers
to the TLA.
TLA Agreement - Revolving Credit Facility
The TLA Agreement described above provides a multi-currency
revolving credit facility in an aggregate amount of GBP748.8m
(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. As part of the amendment to the
TLA Agreement described above, the Group increased the size of the
Revolving Credit Facility by an additional GBP267m. The Group
incurred GBP5.3m of initial transaction costs and fees relating to
the Revolving Credit Facility in May 2020 with an additional
GBP3.7m incurred following the increase of the facility in
September 2022. These fees have been capitalised and included
within non-current receivables. During the year ending 31 December
2022 the Group drew down GBP584.0m of this facility and repaid
GBP521.0m leaving an outstanding principal amount of GBP63.0m
(2021:GBPnil).
16. Borrowings (continued)
The Group has an undrawn capacity of GBP675m (2021: GBP441m) on
the Revolving Credit Facility with GBP11m (2021: GBP41m) of
capacity reserved for the issuance of Group guarantees as of 31
December 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. The TLA Agreement requires, subject
to a testing threshold, that the Company comply on a bi-annual
basis with a maximum net total leverage ratio of 5.1 to 1.0. During
the twelve months ended 31 December 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's First Lien Term Loan B has three separate tranches
outstanding as follows:
-- USD first lien term loan with an outstanding principal
balance of $2,901.7m (2021: $2,931.0m) priced at USD-LIBOR plus
2.25% (2021: 2.25%) (the "USD First Lien Term Loan B") with a
maturity date of 21 July 2026, and a LIBOR floor, as applicable, of
0%;
-- USD first lien term loan with an outstanding principal
balance of $1,246.9m (2021: $0) priced at 3M Term SOFR plus CSS
plus 3.25% margin with a 0.5% SOFR floor (the "the USD First Lien
Term Loan B 2") with a maturity date of 22 July 2028; and
-- EURO 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") with a maturity
date of 21 July 2026 and EURIBOR floor, as applicable, of 0%.
The two USD First Lien Term Loan B tranches requires scheduled
quarterly principal payments in amounts equal to 0.25% of the
combined initial aggregate principal amount of the USD First Lien
Term Loan B of $4,188m (2021: $2,938m), with the balance due at
maturity of each tranche. There is no amortisation on the EUR First
Lien Term Loan B and the principal is due at maturity.
In December 2021, Flutter executed a EUR2,000m TLB Facility
Agreement to underwrite the Sisal acquisition. This facility was
drawn on 2 August, 2022 to fund the Sisal acquisition. The facility
had a maturity date of 31 July 2026. The Group incurred EUR67.5m
(GBP56.1m) of initial transaction costs and fees on drawdown which
was capitalised against the principal of the debt and recorded as a
financial expense over the term of the debt using the effective
interest rate method. On 23 September 2022, the Group refinanced
the EUR2,000m TLB facility by raising First Lien Term Loan B of
$1,250m, EUR549.5m and $200.0m of Term Loan A as outlined above.
The Group recognised a loss on extinguishment of GBP56.9m upon
repayment of the EUR2,000m TLB Facility.
The three tranches of First Lien Term Loan B 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
twelve months ended 31 December 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 4,020.5 1,167.7
Repayment of borrowings (2,314.9) (751.2)
Interest paid (142.5) (141.9)
17. 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 and USD First
Lien Term Loan A in their entirety into EURO and GBP to better
match the currency mix of the Group's EBITDA. In 2022 as part of
the refinancing described above, the Group executed additional
cross-currency interest rate swaps to swap the additional USD First
Lien Term Loan B and USD First Lien Term Loan A into EURO and GBP.
In combination, these hedging instruments comprise of: (i) USD-EUR
amortising cross-currency interest rate swap agreements (the "EUR
Cross-Currency Interest Rate Swaps") with an outstanding notional
amount of EUR2,009m (GBP1,780m) (31 December 2021: EUR1,489m
(GBP1,251m)), which fix the USD to EUR exchange rate at 1.127
(2021: 1.174) and fix the euro interest payments at an average
interest rate of 2.92% (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 GBP1,689m (31 December 2021: GBP895m), which fix the USD
to GBP exchange rate at 1.234 and fix the GBP interest payments at
an average interest rate of 5.63% (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 maturity dates in July 2023 and September 2024.
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 31 December 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 31 December 2022 and 31 December 2021:
31 December 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 - current 275.1 - - -
Cross-currency interest
rate
swaps - non-current - (61.0) 31.7 (54.6)
Total derivatives
designated
as cash flow hedges 275.1 (61.0) 31.7 (54.6)
Derivatives designated as
net
investment hedges:
Cross-currency interest
rate
swaps - current 4.5 (37.1) - -
Cross-currency interest
rate
swaps - non-current - (12.2) 36.3 -
Total derivatives
designated
as net investment hedges 4.5 (49.3) 36.3 -
Total derivatives held for
hedging 279.6 (110.3) 68.0 (54.6)
Derivatives held for risk
management
and other purposes not
designated
as hedges
Sports betting open
positions
- current - (107.6) - (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 - (108.1) - (74.5)
17. Derivatives (continued)
Hedge accounting
Cash flow hedge accounting
In accordance with the Group's risk management strategy and
Group Treasury Policy, the Group executed the Swap Agreements to
mitigate the risk of fluctuation of coupon and principal cash flows
due to changes in foreign currency and interest rates related to
the USD First Lien Term Loan B and USD First Lien Term Loan A and
to better align the currency of the Group's debt to the currency of
its EBITDA. At the inception of designated hedging relationship,
the Group documents the risk management objectives and strategy for
undertaking hedge documentation about economic relationship of the
hedge item and hedging instrument.
The Group assesses hedge effectiveness by comparing the changes
in fair value of a hypothetical derivative reflecting the terms of
the debt instrument issued due to movements in the applicable
foreign currency exchange rate and benchmark interest rate with the
changes in fair value of the cross-currency interest rate swaps and
cross-currency swaps used to hedge the exposure, as applicable. The
Group uses the hypothetical derivative method to determine the
changes in fair value of the hedged item. The Group has identified,
and to the extent possible, mitigated, the following possible
sources of ineffectiveness in its cash flow hedge
relationships:
-- the use of derivatives as a protection against currency and
interest rate risk creates an exposure to the derivative
counterparty's credit risk which is not offset by the hedged item.
This risk is minimised by entering into derivatives with
counterparties with strong investment grade credit ratings;
-- differences in the timing of settlement of the hedging instrument and hedged item; and
-- the designation of off-market hedging instruments.
Certain of the EUR Cross-Currency Interest Rate Swaps in
combination with the GBP Cross-Currency Interest Rate Swaps are
designated in cash flow hedge relationships to hedge the foreign
exchange risk and interest rate risk on the USD First Lien Term
Loan B. The remaining EUR Cross-Currency Interest Rate Swaps have
been bifurcated for hedge accounting purposes with the GBP portion
of the exposure designated in a cash flow hedge relationship and
the EUR exposure designated in a net investment hedge
relationship.
As at 31 December 2022, GBP11.2m (2021: GBP12.1m) of accumulated
other comprehensive income is included in the cash flow hedging
reserve (see Note 18) related to de-designated cash flow hedges and
is reclassified to the consolidated income statement as the hedged
cash flows impact income/(loss).
Net investment hedge accounting
In accordance with the Group's risk management strategy, as
noted above the Group designates certain EUR cross-currency
interest rate swap contracts in net investment hedging
relationships to mitigate the risk of changes in foreign currency
rates with respect to the translation of assets and liabilities of
subsidiaries with foreign functional currencies.
The Group assesses hedge effectiveness by comparing the changes
in fair value of the net assets designated, due to movements in the
foreign currency rate with the changes in fair value of the hedging
instruments used to hedge the exposure. The Group uses the
hypothetical derivative method to determine the changes in fair
value of the hedged item. The only source of ineffectiveness is the
effect of the counterparty and the Group's own credit risk on the
fair value of the derivative, which is not reflected in the fair
value of the hypothetical derivative.
The Group has also designated the carrying amount of the EUR
First Lien Term Loans as a hedge of the spot foreign exchange risk
of its net investment in its EUR functional subsidiaries. The Group
assesses hedge effectiveness using the forward rate method by
comparing the currency and the carrying amount of the EUR First
Lien Term Loan B and EUR First Lien Term Loan A with the currency
and the net assets of its EUR functional subsidiaries.
As at 31 December 2022, nil (2021: GBP61.4m) of accumulated
other comprehensive income is included in the foreign exchange
translation reserve (see Note 18) related to de-designated net
investment hedges and is reclassified to the consolidated income
statement upon disposal of the net investment in the applicable
foreign subsidiaries.
18. Share capital and reserves
Share capital
The total authorised share capital of the Company comprises
300,000,000 ordinary shares of EUR0.09 each (2021: 300,000,000
ordinary shares of EUR0.09 each). All issued share capital is fully
paid. The holders of ordinary shares are entitled to vote at
general meetings of the Company on a one vote per share held basis.
Ordinary shareholders are also entitled to receive dividends as may
be declared by the Company from time to time.
Transactions during the year ended 31 December 2022:
-- A total of 465,782 ordinary shares were issued as a result of
the exercise of employee share options, giving rise to share
capital and share premium of GBP7.0m;
Transactions during the year ended 31 December 2021:
-- A total of 558,275 ordinary shares were issued as a result of
the exercise of employee share options, giving rise to share
capital and share premium of GBP13.2m;
- On 25 August 2021, the Group announced it cancelled all its
1,965,600 ordinary shares of EUR0.09 each previously held by it as
treasury shares; and
- In accordance with the authority conferred by shareholders
pursuant to resolution 10 at Flutter's Annual General Meeting
("AGM") held on Thursday, 29 April 2021, the Board on 10 September
2021 confirmed that it had completed the capitalisation of
GBP7,982.9m, being the entirety of the amounts standing to the
credit of Flutter's merger reserve account at 31 December 2020. In
accordance with the provisions of sections 84 and 85 of the
Companies Act 2014 and the authority conferred by resolution 11 as
approved by shareholders at the AGM, the Board applied to the Irish
High Court to reduce the Company's capital by the amount of
GBP10,000m standing to the credit of Flutter's share premium
account following completion of the capitalisation. On 3 November
2021, the Irish High Court approved the reorganisation of the
Company's capital by the reduction of GBP10,000m standing to the
credit of Flutter's share premium account, and the transfer of such
sum to the Company's distributable reserves account. This resulted
in the transfer of GBP10,000m from share premium to retained
earnings.
Equity reserves
Equity reserves at 31 December 2022 and at 31 December 2021
include the following classes of reserves:
Merger reserve
In accordance with the authority conferred by shareholders
pursuant to resolution 10 at Flutter's Annual General Meeting held
on Thursday, 29 April 2021, the Board on 10 September 2021
confirmed that it had completed the capitalisation of GBP7,982.9m,
being the entirety of the amounts standing to the credit of
Flutter's merger reserve account at 31 December 2020. This resulted
in the transfer of GBP7,982.9m from merger reserve to share
premium.
Treasury shares
On 25 August 2021, the Group announced it cancelled all its
1,965,600 ordinary shares of EUR0.09 each previously held by it as
treasury shares which resulted in the transfer of GBP40.7m from
treasury shares to retained earnings and share capital.
Shares held by Employee Benefit Trust
At 31 December 2022, the Paddy Power Betfair plc Employee
Benefit Trust ("EBT") held 1,396 (31 December 2021: 33,158) of the
Company's own shares, which were acquired at a total cumulative
cost of GBP0.2m (31 December 2021: GBP4.0m) in respect of potential
future awards relating to the Group's employee share plans. The
Company's distributable reserves at 31 December 2022 are restricted
by this cost amount. 23,775 shares were purchased at a cost of
GBP2.8m during the year ended 31 December 2022 (31 December 2021:
1,337,894 shares at a cost of GBP180.7m). During the year ended 31
December 2022, 55,537 shares with an original cost of GBP6.6m were
transferred from the EBT to the beneficiaries of the EBT (year
ended 31 December 2021: 1,372,056 shares with an original cost of
GBP182.5m).
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.
Fair value reserve
The fair value reserve represents the fair value movement in
Current Investments at FVOCI - customer deposits.
Foreign exchange translation reserve
The foreign exchange translation reserve at 31 December 2022
amounted to a credit balance of GBP60.3m (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 year ended 31 December 2022, reflects
mainly the strengthening of EUR and USD against GBP in the
period.
18. Share capital and reserves (continued)
Other reserves
Other reserves comprise undenominated capital. Undenominated
capital at 31 December 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 year ended 31 December 2022, an amount of GBP153.4m
was expensed in the Consolidated Income Statement with respect to
share based payments (year ended 31 December 2021: GBP80.5m) and an
amount of GBP43.4m (year ended 31 December 2021: GBP49.6m) in
respect of share options exercised during the year was transferred
from the share-based payment reserve to retained earnings.
An amount of GBP3.7m of deferred tax relating primarily to the
Group's share-based payments was credited to retained earnings in
the year ended 31 December 2022 (year ended 31 December 2021: debit
of GBP0.2m). An amount of GBP0.7m of current tax relating to the
Group's share-based payments was credited to retained earnings in
year ended 31 December 2022 (year ended 31 December 2021: credit of
GBP0.9m).
Non-controlling interest
During the year ended 31 December 2022 the Group paid dividends
totalling GBP5.4m to the non-controlling interest in Adjarabet
(year ended 31 December 2021: GBP16.7m).
As outlined in more detail in Note 11, 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
(GBP204.1m), an amount of GBP34.2m was recorded in non-controlling
interest with the remaining amount of GBP169.9m booked to retained
earnings.
As a result of the acquisition of Sisal during the year (see
Note 11), GBP125.5m was recorded in respect of the non-controlling
interest. The acquisition of 100% of Sachiko Gaming Private Limited
an online Poker gaming developer based in India in exchange for a
5% equity stake in the Group's subsidiary Junglee Games resulted in
an amount of GBP4.6m being recorded in non-controlling
interest.
19. 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 31 December 2022 was GBP246.7m (31 December 2021: GBP44.4m). No
claims had been made against the guarantees as of 31 December 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 GBP22.6m at 31 December 2022
(31 December 2021: GBP17.5m).
As mentioned in Note 16, 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.
19. Commitments and contingencies (continued)
Prior to the combination with TSG in 2020, 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. The prospect of these judgements being successfully
enforced against our Maltese licenced subsidiaries is unknown. 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.
The Group has also provided remote services in Germany (outside
of Schleswig-Holstein) on the basis of multi-jurisdictional Maltese
licences and EU law. While some German Courts consider that such
services are contrary to local law, no Court has ruled against our
subsidiaries.
Capital commitments
Capital expenditure contracted for at the statement of financial
position date but not yet incurred was as follows:
31 December 31 December
2022 2021
GBPm GBPm
------------------------------- --------------------------------- ----------------------------------
Property, plant and equipment 10.7 1.3
Intangible assets 9.0 1.6
------------------------------- --------------------------------- ----------------------------------
Total 19.7 2.9
20. Related parties
There were no material transactions with related parties during
the year ended 31 December 2022 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.
21. Events after the reporting date
There are no items that require further disclosure.
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END
FR FFFVFVEILIIV
(END) Dow Jones Newswires
March 02, 2023 02:00 ET (07:00 GMT)
Paddy Power Betfair (LSE:PPB)
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