TIDMPTEC
RNS Number : 7351M
Playtech PLC
23 September 2021
Playtech plc
("Playtech", or the "Company", or the "Group")
Results for the six months ended 30 June 2021
Strong online performance
Significant progress on strategic priorities
Playtech (LSE: PTEC) today announces its results for the six
months ended 30 June 2021, together with a trading update for July
and August 2021.
Financial summary(1)
Numbers in the table below are from continuing operations
(excluding Finalto and Casual & Social Gaming)
H1 2021 H1 2020 Change Change
(reported) (const.
currency)(4)
------------------------------------ ------------ ----------- ------------ --------------
Revenue EUR457.4m EUR476.7m -4% -4%
Adjusted EBITDA(2) EUR124.1m EUR109.5m 13% 14%
Adjusted post-tax profit(3) EUR54.6m EUR3.5m 1460% 1029%
Reported post-tax profit/(loss)(3) EUR401.9m -EUR22.1m n/a n/a
1.1
Adjusted diluted EPS 17.4 EURc EURc 1482% 1005%
-7.4
Reported diluted EPS 128.0 EURc EURc n/a n/a
Summary
-- H1 results in line with expectations at the start of the year
with online strength offsetting the impact of the longer than
expected retail closures in Italy
-- Very strong performance from B2B online, particularly
Caliente, as well as Snaitech's online business
-- Americas now the Group's biggest growth driver with revenue
growth of 106% at constant currency vs. H1 2020
-- Valuation of the Group's options embedded in Latin America
agreements (Caliente, Wplay and others) results in significant
unrealised gain of EUR299.9 million:
o fair value adjustment has material impact on reported post-tax
profit and reported diluted EPS in H1
o option valuations highlight progress being made and value
creation in the region
-- Continued progress on US strategy; launched with Parx in
Michigan; new strategic partnerships with Scientific Games and
Novomatic; additional licence applications underway
-- Brian Mattingley joined as Chairman on 1 June 2021; Linda
Marston-Weston appointed Non-Executive Director with effect from 1
October 2021; Ian Penrose to be Senior Independent Director
-- H1 performance, together with the momentum within the
business, underpins the Board's confidence of the Company's
prospects for the remainder of 2021 and beyond
Divisional highlights
B2B Gambling
-- Very strong online performance more than offset the impact of
lockdowns and drove B2B revenue growth of 16% to EUR267.2 million
(H1 2020: EUR229.7 million)
-- Continued expansion in the US and Latin America; revenue from
the Americas increased to EUR46.4 million (H1 2020: EUR22.9
million); growth of 106% at constant currency
-- Launched with Parx Casino in Michigan; new partnerships with
Scientific Games and Novomatic alongside continued progress with
bet365 and BetMGM in New Jersey
-- Caliente in Mexico saw significant growth alongside a growing
contribution from Wplay in Colombia, with new launches in Costa
Rica and Panama to build on presence in Latin America
-- Material gains of EUR299.9 million in the fair value of
Playtech's derivative financial assets driven by the options
relating to Caliente and Wplay and others in Latin America
-- New strategic agreement signed with Holland Casino in Europe
-- Continued diversification of B2B business with over 50
further brands added to SaaS offering in H1; 128% revenue growth
versus H1 2020; now over 250 new brands added since launch in
2019
-- Very strong growth in Live Casino; significant operational
momentum with new signings and product launches
B2C Gambling
-- Snaitech Adjusted EBITDA was EUR51.6 million (H1 2020:
EUR47.1 million) despite retail closures across the majority of H1;
leading retail and online sports betting brand in Italy in H1
-- Snaitech's online business saw excellent revenue growth of
95% to EUR123.4 million and Adjusted EBITDA growth of 118% to
EUR72.6 million
-- In July 2021, Snaitech agreed the sale of surplus land for
EUR20 million; EUR1 million was received on signing with the
remainder expected to be received in instalments in 2022 following
certain regulatory approvals
-- White label (including Sun Bingo) saw 59% growth in Adjusted
EBITDA to EUR5.4 million (H1 2020: EUR3.4 million)
Finalto
-- The Group remains in discussions with Gopher regarding
potential sale of Finalto; Finalto has been presented in these
results as a discontinued operation
Current trading and outlook
-- Strong start to H2 in July and August
-- B2B and B2C online businesses expected to continue to deliver strong performances
-- The macroeconomic outlook remains uncertain given the ongoing
pandemic with the possibility of further unexpected lockdowns in
the future
-- Given the strong H1 performance and the momentum within the
business into H2 combined with the easing of lockdown restrictions,
the Board is confident of the Company's prospects for the remainder
of 2021 and beyond
-- Continuing commitment to returning capital to shareholders
whilst balancing the needs of the business and taking a prudent
approach to capital structure and leverage
Mor Weizer, CEO, commented :
"I am delighted by our strong strategic and operational progress
to date in 2021, despite the ongoing challenges posed by the
pandemic. These results demonstrate the quality of our technology
and products, the significant progress made against our strategic
priorities, and wider momentum across Playtech's operations.
"Significant progress in the US saw Playtech launch for the
first time in Michigan, the first step in our long-term multi-state
partnership with Parx Casino, and regulatory approvals progressed
in key strategic states. Structured agreements continue to deliver
in Latin America, with strong growth in H1 in Mexico and Colombia
and launches in Panama and Costa Rica. In Europe, we signed a major
new software and services agreement with Holland Casino and saw
continued growth across a number of existing licensees.
"Snaitech continued to outperform in Italy, cementing its
position as the number one retail and online sports betting brand
in Italy. The pandemic has structurally grown the higher margin
online business and we expect this growth to continue.
"Looking forward, given the strong H1 performance, the momentum
in the business and the easing of lockdown restrictions, we are
confident of Playtech's prospects for the remainder of 2021 and
beyond.
"We have established a new Sustainability and Public Policy
Board Committee to consolidate our position as a leader in safer
gambling products and strengthen governance around sustainability.
Sustainable Success is embedded in our core strategy."
- Ends -
For further information contact:
Playtech plc +44 (0) 20 3805
Mor Weizer, Chief Executive Officer 4822
Andrew Smith, Chief Financial Officer
c/o Headland
Chris McGinnis, Director of Investor Relations
and Strategic Analysis +44 (0) 20 3805
James Newman, Director of Corporate Affairs 4822
Headland (PR adviser to Playtech) +44 (0) 20 3805
Lucy Legh, Stephen Malthouse, Jack Gault 4822
(1) H1 2020 numbers are restated to reflect the discontinued
Finalto business for the purposes of comparison. Totals in tables
throughout this statement may not exactly equal the components of
the total due to rounding.
(2) Adjusted numbers relate to certain non-cash and one-off
items. The Board of Directors believes that the adjusted results
represent more closely the consistent trading performance of the
business. A full reconciliation between the actual and adjusted
results is provided in Note 9 of the interim financial
statements.
(3) Adjusted Profit refers to post-tax Profit from continuing
operations attributable to the owners of the Company after the
relevant adjustments as detailed above. Reported Profit refers to
post-tax Profit from continuing operations attributable to the
owners of the Company before adjustments.
(4) Constant currency numbers exclude the exchange rate impact
on the results by using previous period relevant exchange rate and
exclude the total cost/income of exchange rate differences
recognised in the period.
Conference call and presentation
A presentation will be held today at 9.00 am via a live audio
webcast accessible using this link:
https://www.investis-live.com/playtech/613f74e26fca31130036c85b/ypww
Analysts and investors can also dial into the call using the
following details:
United Kingdom: 0800 640 6441
USA: 1 855 9796 654
USA (Local): 1 646 664 1960
All other locations: +44 20 3936 2999
Access code: 917384
There will also be a replay available after the live conference
call at:
UK: 020 3936 3001
USA (Local): 1 845 709 8569
All other locations: +44 20 3936 3001
Access Code: 205967
The presentation slides will be available today from 8.30 am at:
http://www.investors.playtech.com/results-centre/presentations/2021.aspx
Forward looking statements
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". By their nature,
forward-looking statements involve risk and uncertainty since they
relate to future events and circumstances. Actual results may, and
often do, differ materially from any forward-looking
statements.
Any forward-looking statements in this announcement reflect
Playtech's view with respect to future events as at the date of
this announcement. Save as required by law or by the Listing Rules
of the UK Listing Authority, Playtech undertakes no obligation to
publicly revise any forward-looking statements in this announcement
following any change in its expectations or to reflect events or
circumstances after the date of this announcement.
About Playtech
Founded in 1999 and premium listed on the Main Market of the
London Stock Exchange, Playtech is a technology leader in the
gambling and financial trading industries with over 7,000 employees
across 24 countries.
Playtech is the gambling industry's leading technology company
delivering business intelligence driven gambling software,
services, content and platform technology across the industry's
most popular product verticals, including, casino, live casino,
sports betting, virtual sports, bingo and poker. It is the pioneer
of omni-channel gambling technology through its integrated platform
technology, Playtech ONE. Playtech ONE delivers data driven
marketing expertise, single wallet functionality, CRM and
responsible gambling solutions across one single platform across
product verticals and across retail and online.
Playtech partners with and invests in the leading brands in
regulated and newly regulated markets to deliver its data driven
gambling technology across the retail and online value chain.
Playtech provides its technology on a B2B basis to the industry's
leading retail and online operators, land-based casino groups and
government sponsored entities such as lotteries. Playtech directly
owns and operates Snaitech, the leading sports betting and gaming
company in online and retail in Italy.
Playtech also owns Finalto, a technology leader in the CFD and
financial trading industry that operates both on a B2B and B2C
basis. Finalto has been classified as a discontinued operation
since 31 December 2020 and remained so as at 30 June 2021.
Chief Executive Officer's Review
Overview
Playtech made excellent progress on its strategic priorities in
the first half of the year, leaving the Group well-positioned to
capture the exciting market opportunity ahead.
Playtech continued to accelerate its US presence. The US is a
highly strategic market for Playtech and creates a significant
long-term opportunity across its full product suite. Since
launching in New Jersey with bet365 and BetMGM in 2020, Playtech
announced strategic agreements with the Greenwood companies in H1
2021 to license its products in four US states and has already
launched the Play Gun Lake App with Parx Casino in Michigan. During
the period, Playtech signed strategic partnerships with Scientific
Games and Novomatic Americas. Playtech has started the licensing
process in additional US states and will continue to increase its
investment in the US market, to take advantage of a strong pipeline
of opportunities with potential new customers and existing
customers from other markets.
Playtech continued to strengthen its market leadership in Latin
America. In Mexico, Caliente continued to grow impressively and in
Colombia, Wplay outperformed expectations. The Group launched in
Costa Rica and Panama in H1. Playtech also signed a strategic
agreement in Brazil ahead of expected regulation. The Company is
progressing on plans to develop a new Live Casino facility in Peru
as it continues to expand its addressable market across Latin
America. During H1, the Group recognised a significant unrealised
gain in relation to fair value of the Group's options in Latin
America. The gain relates to holdings in Caliente, Wplay and others
and highlights the value of the Group's strategic agreements in
Latin America.
In order to continue growing and diversifying its B2B Gambling
division, the Group continued to add customers, including
attracting new customers in both regulated and soon to be regulated
markets, progressing discussions on new strategic agreements and
joint ventures, as well as adding over 50 new brands to its SaaS
offering. Playtech has now added over 250 new brands since
launching the SaaS offering back in 2019.
While impacted by retail closures for most of the first half,
Snaitech continued to outperform in online with revenue growth of
95% compared to H1 2020, which helped it to achieve the number one
market share position by brand in the Italian sports betting market
(retail and online combined measured by GGR) in H1 2021.
As the leading technology company in the gambling industry,
Playtech recognises that licensees look to the Group to deliver
innovation that changes the way players experience gambling
entertainment. Following its launch in 2020, Playtech continued to
execute its Sustainable Success strategy in H1 2021, the highlights
of which are detailed below and include the establishment of a
Sustainability and Public Policy Committee to provide Board-level
oversight on key non-financial strategy, commitments, targets, and
reporting matters .
The Group's simplification strategy is also progressing. The
last remaining Casual Gaming assets were disposed of in early 2021
and the sale process of the Finalto business is ongoing. Once this
process is completed, Playtech will be a simpler business, focused
on the attractive markets of B2B Gambling and B2C Gambling.
B2B Gambling
Core B2B Gambling
Regulated markets
The strategic focus of Playtech's B2B Gambling business
continues to be on opportunities in regulated or soon to be
regulated markets, with a focus on high-growth markets such as the
US, Latin America and certain parts of Europe.
Regulated markets saw growth of 19% compared to H1 2020, driven
by excellent revenue growth from Caliente in Mexico, as well as
strong growth in other regulated markets such as Colombia, Poland,
Italy, and Greece.
US
Playtech continues to expand its presence in the US market. In
February 2021, the Company signed strategic agreements with various
subsidiaries of Greenwood Racing Inc. which own and operate the
Parx Casino in Pennsylvania. The agreements include the licensing
of Playtech products to the Greenwood companies in the states of
Michigan, Indiana, New Jersey, and Pennsylvania.
Following the signing of the agreement, Parx launched online
casino in Michigan on Playtech's IMS Platform and Player Account
Management (PAM) software in April and will continue to launch in
further states and with additional products going forward.
Playtech also signed a global iGaming distribution partnership
with Scientific Games which will enable both parties to mutually
benefit from each other's scale and reach across the US, as well as
other regulated markets. The Company also announced a strategic
partnership with Novomatic Americas to jointly market, sell and
distribute sports betting products in the US.
The launch of Playtech's first Live Casino facility in the US is
imminent in Michigan, while further facilities are progressing in
New Jersey and Pennsylvania. The Company has significantly expanded
its operational and back-office teams in the US in order to
accelerate its presence in the region.
The regulatory landscape in the US is ever progressing. Since
the repeal of PASPA in 2018, numerous states have approved
legislation to legalise sports betting. Many of these markets have
already launched in both online and retail channels, with others
expected to launch soon. In total, 26 states now offer or have
introduced legislation to allow sports betting with further states
expected to pass legislation in the coming years.
Online casino, which was not subject to PASPA, is allowed at the
discretion of individual states. The tribes of Connecticut most
recently received federal approval to operate online casino games,
while Michigan launched in early 2021, joining New Jersey,
Pennsylvania, Delaware, and West Virginia, while Nevada allows
online poker only.
Latin America
In Latin America, Playtech saw outstanding growth from Caliente
and this business continues to outperform. Following its migration
to Playtech's technology platform in late 2020, Wplay saw very
strong growth in H1 and is well-positioned to continue its growth
and capitalise on the exciting opportunity in Colombia in the years
ahead.
Playtech has continued to execute on its latest strategic
agreements in the region and launched its IMS platform alongside
Casino, Live and Sports products in Panama in H1, as well as
launching its Bingo product in Costa Rica.
Playtech is also opening a new Live Casino facility in Peru as
it continues to extend its presence across the region, in order to
better serve its existing clients in Latin America as well as in
anticipation of the continued regulation and strong growth expected
in the region in the years ahead.
Elsewhere in the region, sports betting legislation has been
passed in Brazil, which is expected to be implemented in the near
future. Brazil is anticipated to be a significant market given the
large population and its access to the mobile channel. The Company
has an exciting strategic agreement in place with Galerabet, with
economics similar to its other arrangements in Latin America, in
anticipation of regulation in this market.
During H1, the Group recognised a significant unrealised gain in
relation to fair value of the Group's options in Latin America. The
gain relates to holdings in Caliente, Wplay and others and
highlight value of the Group's strategic agreements in Latin
America.
Europe
In Europe, revenue growth was driven by several licensees
including Totalizator Sportowy in Poland, Sisal in Italy as well as
various customers in Greece.
Playtech signed a new, extended long-term strategic agreement
with Holland Casino, the state-owned land-based casino operator in
the Netherlands. Holland Casino operates 14 casinos across the
country and will expand into the online betting and gaming space
with Playtech's solution. Playtech will provide its full turnkey
multichannel offering, consisting of its IMS platform, all product
verticals as well as certain operational and marketing
capabilities. Furthermore, Playtech will build a Live Casino
facility in the immediate vicinity of one of Holland Casino's
existing locations as part of the agreement.
Elsewhere in Europe, Playtech's Live Casino business added
several new customers including LeoVegas in Spain and went live
with, among others, 888 and Betsson each in multiple territories.
Playtech's Casino business launched with several new customers
across Europe and signed agreements to expand into new territories
with its existing customers, for example in Croatia with
Fortuna.
Regulation in Europe continues to evolve and regulated markets
in the region represent significant growth opportunities.
Netherlands and Germany, both top 10 markets in Europe, progressed
on their respective regulatory resolutions with the Netherlands
initiating its online gambling licensing process on 1 April, ahead
of the market's expected opening on 1 October 2021. Playtech is
well positioned in the Netherlands through its agreement with
Holland Casino.
After many years of uncertainty for online gambling in Germany,
the Interstate Treaty became effective on 1 July 2021 and now paves
the way for license holders to offer online slots, online poker and
sports betting. The main impacts of the Treaty included switching
off casino table games (Blackjack and Roulette) until the
individual Länder choose to issue licenses under the Treaty,
deposit limits of EUR1,000 per month, EUR1 maximum stakes per spin
on online slots, 5-second minimum duration of slot spins and
certain advertising restrictions, while operators could begin
applying for licenses.
UK
UK revenues saw a decline of 10% compared to H1 2020, largely
driven by retail closures as a result of the COVID-19 pandemic.
Retail closures, which were in place for the majority of the
period, significantly impacted Playtech's B2B sports business which
is heavily weighted towards retail via its self-service betting
terminals (SSBTs).
On an underlying basis, when excluding the impact of retail and
sports and the impact of material changes to customer contracts,
the online gaming business increased 7% in the UK.
Betting shops began to reopen starting in mid-April. Activity
levels continued to gradually improve following reopening as
various lockdown restrictions were eased.
Playtech continued to extend its presence in the UK with several
new customer signings, including Les Ambassadeurs Online, and
numerous go-lives including Sky Vegas and Novibet on its Live
Casino product.
The UK remains a key regulated market for Playtech given its
ongoing relationships with major operators. Playtech has been
actively involved in discussions around safer game design and
online advertising and, through the industry trade body the Betting
and Gaming Council (BGC), is co-leading a working group on the
subject. Playtech expects that its commitment to safer gambling and
its use of technology and data to support its licensees in this
area will see it remain the go-to platform for regulated markets
including the UK.
In December 2020 the UK Government announced a call for evidence
to review the existing gambling laws in the UK. Since the initial
16-week call for evidence which ended on 31 March, the Government
has been assessing the evidence presented, alongside other data,
with the aim of setting out conclusions and any proposals for
reform in a white paper later this year. Playtech has submitted
data and evidence relating to the call, in line with the
Government's request and will continue to support this wherever
possible.
Other unregulated (excl. Asia)
The Group's strategy to focus on both regulated and regulating
markets includes unregulated markets which are likely to regulate
in the future. Some of these are classified in the 'Other
unregulated' line within B2B Gambling. Other unregulated markets
grew 17% versus H1 2020, driven by markets such as Canada and
Brazil.
Following the progress in the US, regulation advanced in Canada
as parliament approved an amendment to Canadian law to allow
single-game sports betting at the discretion of individual
provinces. As of 27 August 2021, seven provinces including the
country's largest province, Ontario, began allowing bets to be
placed on single-game sporting events. As regulation progresses
across Canada, it will continue to add to the size of the North
America market opportunity.
Unregulated Asia
Unregulated Asia saw revenue growth of 6% compared to H1 2020,
delivering a trading performance in line with H2 2020. This was
driven by the contribution from the new distributor the Company
added in 2020, as well as a favourable comparator in H1 2020 given
the impacts of COVID-19 in Asia during the peak of the
pandemic.
Reflecting the actions taken over recent periods, the Asia
business is now more diversified in terms of both distributors as
well as geographically compared to recent years.
B2B - Product Developments
Playtech continues to support existing licensees with new
technologies and tools and provide them with greater flexibility in
their operations. In order to diversify its B2B Gambling division,
the Group continued to add customers depending on commercial
suitability and market dynamics, including attracting new customers
in both regulated and soon to be regulated markets, progressing
discussions on new strategic agreements and joint ventures, as well
as adding new SaaS brands. Using its SaaS model, first introduced
in 2019, Playtech added over 50 new brands in H1 2021 including 888
and Kindred and has now added over 250 new brands since launching
the SaaS offering in 2019.
Playtech completed key strategic partnership product deliveries,
including a Mystery Parcel game feature with real-time bonusing
that can be used with any Playtech Casino content. Mystery Parcel
was rolled out exclusively with Entain at first, with several other
licensees now enjoying the feature.
Among various new product developments, Playtech launched its
latest online casino 'power suite' with Cash Collect(TM). The
Company launched Sahara Riches(TM) as the first game within the
Cash Collect(TM) suite, with the game's performance in its first
week since release being Playtech's second strongest game
performance in its history.
Within Live Casino, Playtech continued to roll out new products
with existing licensees, including a 'Who Wants To Be A
Millionaire' trivia game, which broke the record for the most
concurrent players on a Live table in Playtech's history. This game
was notably successful in the UK, Greece, and Italy, and continues
to attract traffic to our licensees' sites.
As a continuation of the Company's successful FireBlaze suite of
games, the Live Casino team also launched Mega Fire Blaze(TM)
Roulette. In its first month since launch, Mega Fire Blaze(TM)
Roulette significantly outperformed any previous Playtech Live
Casino product in both gross gaming revenue (GGR) and wagering
terms.
B2C Gambling
Snaitech
Italy
Snaitech revenue was down 27% in H1 2021 compared to H1 2020
while Adjusted EBITDA was up 10%, highlighting the attractiveness
of its business model and growing strength in online.
Retail shops were closed in Italy throughout H1 2021 against a
comparative in H1 2020 which saw retail open as normal in January
and February. Despite this, Snaitech continued to generate revenues
from betting and gaming online throughout H1 2021.
Although Snai's online betting business was severely impacted by
the lack of sporting events in H1 2020, in H1 2021 the business saw
sporting events continue largely as planned including around two
weeks of the UEFA Euro 2020 championships at the end of June 2021.
The continuation of sporting events helped the online business to
perform well despite the prolonged retail closures.
At the start of this year, Snaitech's expectation was that the
retail closures in Italy would ease from approximately mid-March.
However, given the continuing impact of the pandemic retail shops
were forced to remain closed for much longer and did not begin to
reopen until mid-June. The reopening towards the end of H1
positions the business well for H2.
Despite the loss of significant revenue from retail closures,
Snai's double-digit Adjusted EBITDA growth was driven by the strong
performance of online betting and gaming and supported by its
franchise operating model with a low fixed cost base, as well as
the actions taken by management to reduce costs.
On an Adjusted EBITDA level, the online business grew 118% to
EUR72.6 million (H1 2020: EUR33.3 million) during the period.
Furthermore, Snaitech achieved the number one market share
position (retail and online combined measured by GGR) across
Italian sports betting brands in H1 2021, demonstrating its
operational and brand strength.
Germany & Austria
HPYBET revenues were flat versus H1 2020, driven by retail
closures in Germany and Austria for significant parts of H1 2021.
This business is now operated by Snaitech management and during the
retail closures due to governmental lockdowns, management began
upgrading the technology infrastructure in this business with a
view to both drive retail performance and improve online
performance in the future. The Snaitech betting platform was
activated in HPYBET shops in May and the integration of HPYBET
operations into Snaitech is progressing well.
As discussed in the B2B section above, Germany's Interstate
Treaty has regulated online slots, online poker and sports betting
from 1 July 2021. Playtech is well positioned to enter this market
and was awarded one of the few available online sports betting
licenses in Germany through its B2C division HPYBET in October
2020.
Safer gambling and sustainability
During H1, Playtech continued to progress with delivering its
sustainability strategy and commitments, which were launched in
2020. The Group will publish an H1 sustainability progress update
on its corporate website shortly. Some of the highlights are listed
below.
ESG Governance and Engagement
The Board has established a new Sustainability and Public Policy
Committee, which is responsible for reviewing, monitoring, and
advising on Playtech's sustainability, responsible business, and
public policy matters. This includes oversight of a wide range of
responsible business topics including ethics, safer gambling,
diversity and inclusion, wellbeing, human rights, and the Company's
climate change strategy. The Committee will also oversee the
Company's key non-financial commitments, strategy, targets, and
reporting from Board level. In H1 Playtech established an external
stakeholder advisory panel to challenge and strengthen the
Company's approach to sustainability. The panel has met twice in
2021 and has two further meetings scheduled this year.
Enhancing Playtech Protect and Safer Gambling Standards
In H1, Playtech continued to grow its Playtech Protect offering
across research, partnerships, and innovation and expanded its
support for its licensees. Playtech is proud to have secured the
first B2B GamCare Safer Gambling Standard in the UK and Snaitech
once again secured the G4 certification at the end of 2020.
Playtech also published four research papers covering safer game
design, real time messaging, customer interaction, and the impact
of auto-play on player behaviours.
Carbon Reduction
During H1, the Company strengthened its approach to carbon
reduction. Playtech established a new environmental working group
to direct and oversee its environmental and carbon reduction
strategy. This included mapping the Company's scope 3 emissions
which make up a significant portion of overall emissions. This
mapping will also support our efforts to identify carbon reduction
opportunities and to establish a carbon target aligned with
science.
Diverse and Inclusive Culture
In H1, the Company initiated a refresh of its diversity and
inclusion objectives, targets and strategy to accelerate progress
on gender diversity in leadership levels of the organisation.
Further, Playtech is also delighted to have joined the All-In
Diversity project as a founding member. This is an industry-driven
initiative to accelerate diversity, equality and inclusion for the
global betting and gaming sector.
Mental Health Impacts of COVID-19
Recognising the significant impact of the pandemic on mental
health, Playtech launched a GBP3 million COVID Recovery and
Resilience Fund, in partnership with the Charities Aid Foundation
(CAF). The Company is pleased to have approved funding for 44
organisations in 9 countries to date. A second round of funding has
been launched in September 2021.
Group simplification
At 31 December 2020, the Group's financial trading division,
Finalto, was classified as a discontinued operation, as the Board
formally decided on its disposal in order to focus on the Group's
core B2B and B2C gambling businesses.
In May 2021, the Group announced the proposed sale of Finalto to
a consortium led by Barinboim Group and backed by Leumi Partners
Limited and Menora Mivtachim Insurance Limited, together with key
members of Finalto's management team (together "the Consortium").
The sale for up to US$210 million was subject to shareholder
approval. Prior to the shareholder vote, the Group received a
non-binding offer received for the Finalto Group from Gopher
Investments ("Gopher"). Shareholders voted against the Consortium
deal so that the Group could pursue the higher offer from
Gopher.
The Company continues to engage with Gopher on the potential
sale of Finalto.
As announced on 18 August 2021, since the resolution to approve
the disposal of Finalto to the Consortium was not passed, the
Consortium agreed with Playtech to terminate its SPA which allowed
the Company to immediately engage with Gopher to progress a
potential disposal of Finalto.
Discussions with Gopher remain ongoing and, while the Company is
pleased with the considerable progress made to date on what has
been a very concentrated timetable, there can still be no certainty
that any transaction will be forthcoming.
Although the Consortium agreed to terminate the SPA, as
announced on 18 August 2021 it indicated to Playtech that it
intended to maintain the Consortium for the next 30 days, such that
it would be in a position to re-enter into the SPA if the parties
so agree. That 30 day period has now expired, and as such there can
be no certainty that the Consortium will remain as a potential
buyer for Finalto.
The Company will provide an update in due course as
appropriate.
Chief Financial Officer's Review(1)
Overview
Group performance
The Group had a solid performance which was in line with its
Adjusted EBITDA expectations set at the start of the year, albeit
with a different contribution blend. Adjusted EBITDA from our
online business, which performed exceptionally well, driven by B2B
and in particular Caliente, as well as the Snaitech online
business, offset the impact of the longer than expected retail
closures in Italy. The online performance was further bolstered by
the sporting events during the period, compared to Q2 2020 when all
major sporting events were cancelled.
Overall, Adjusted EBITDA from continuing operations was EUR124.1
million (H1 2020: EUR109.5 million), an actual period-on-period
increase of 13% and 14% on a constant currency basis. Total
reported revenue from continuing operations was EUR457.4 million
(H1 2020: EUR476.7 million), representing only a 4% actual and on a
constant currency basis period-on-period decline.
The Group continues to present the Finalto division under
discontinued operations at 30 June 2021, as despite the Consortium
deal being rejected by the shareholders as further discussed in the
Chief Executive Officer's report, it remains the Board's intention
to dispose of this unit as part of the Group's simplification
strategy.
Reported and Adjusted Profit
Adjusted profit before tax from continuing operations increased
by 246 % to EUR27.0 million (H1 2020: EUR7.8 million), driven by
the rise in Adjusted EBITDA and a decrease in amortisation.
Reported profit before tax from continuing operations is
EUR278.1 million (H1 2020 reported loss: EUR19.2 million), mainly
due to the EUR299.9 million of unrealised fair value gains on
derivative financial assets (H1 2020: EURNil). This gain is
discussed further down in this report, and also in Note 15E of the
interim financial statements.
The Group implemented an internal restructuring in January 2021,
which resulted in Playtech plc migrating its tax residency to the
UK and the Group's key operating entity transferring its business
to a UK company. Reported tax credit from continuing operation
increased by EUR126.8 million to EUR123.8 million in H1 2021 (H1
2020: tax expense of EUR3.0 million) which mainly relates to the
EUR128.1 million increase in the deferred tax credit to EUR130.2
million (H1 2020: tax credit of EUR2.1 million). This increase
consists mainly of EUR90.3 million relating to the recognition of
the benefit of future tax deductions for goodwill and intangible
assets resulting from the Group restructuring in 2021, as well as
EUR34.0 million relating to the recognition of the benefit of tax
losses available to use against taxable profits in future
periods.
This led to a total post-tax reported profit from continuing
operations of EUR401.9 million (H1 2020: reported loss EUR22.1
million).
Balance sheet and liquidity
From the start of the global pandemic, which was declared as
such b y the World Health Organisation in March 2020, the Group t
ook decisive action to ensure the health and wellbeing of its
employees and to preserve cash flow, while also benefitting from
heightened activity in its online businesses which continued into
2021. As a precautionary measure, following the announcement of the
first lockdown in Q1 2020 and the uncertainty surrounding this, the
Group drew down EUR245.8 million against its revolving credit
facility ("RCF"). After careful consideration of the Group's cash
position and future liquidity, EUR100 million was repaid in June
2021 against the RCF with a further EUR50 million repaid in July
2021. This supports the confidence the Board has on the Group's
future performance, despite COVID-19, and whilst factoring in any
potential further lockdowns in our scenario planning.
The Group continues to maintain a strong balance sheet with
total cash and cash equivalents, excluding cash held for sale, of
EUR540.8 million at 30 June 2021 (31 December 2020: EUR683.7
million). Adjusted gross cash, which excludes the cash held on
behalf of clients, progressive jackpots and security deposits,
decreased to EUR410.5 million as at 30 June 2021 (31 December 2020:
EUR554.6 million), owing in large part to the repayment of EUR100
million of its RCF, as well as paying EUR89.6 million of gaming tax
in Italy which related to 2020 (noting it was a government-led
approved payment deferral as part of the assistance offered to
companies during the pandemic) as previously announced.
The Group's total gross debt decreased to EUR1,088.4 million at
30 June 2021 (31 December 2020: EUR1,182.0 million), with Net Debt,
after deducting adjusted gross cash, increasing to EUR677.9 million
(31 December 2020: EUR627.4 million).
In the prior period, Playtech took a prudent and disciplined
approach to its banking relationships. Despite being comfortably
within its covenants, Playtech proactively approached its lenders
and agreed to amend the covenants in its RCF for the 31 December
2020 and 30 June 2021 tests. The leverage covenant was amended to
5x Net Debt / Adjusted EBITDA for the 31 December 2020 test and
4.5x for the 30 June 2021 test. The interest cover covenant was
amended to 3x for the 31 December 2020 test and 3.5x for the 30
June 2021 test. The covenants will return to the previous levels of
3x Net Debt / Adjusted EBITDA and 4x Adjusted EBITDA / interest
from the 31 December 2021 test onwards.
Playtech's swift actions and assured navigation of the pandemic
has left the Group in strong financial health as in now looks ahead
to the rest of the financial year and beyond, which is benefitting
from the full reopening of retail shops in its main markets.
Group Summary (continuing operations) (3)
H1 2021 H1 2020
EUR'm 4
EUR'm
B2B Gambling 267.2 229.7
B2C Gambling 196.6 253.4
Intercompany (6.4) (6.4)
------------------------------------------------ -------- --------
Total Group Revenue from continuing operations 457.4 476.7
Adjusted costs (333.3) (367.2)
------------------------------------------------ -------- --------
Adjusted EBITDA from continuing operations 124.1 109.5
------------------------------------------------ -------- --------
Reconciliation from EBITDA to Adjusted EBITDA:
EBITDA 109.8 91.8
Employee stock option expenses 7.0 7.1
Professional fees 2.2 1.7
Additional consideration payable put/call
option 0.9 4.5
Movement in contingent consideration and
redemption liability - 1.2
Charitable donation 1.9 3.2
Settlement of legal matters 2.3 -
Adjusted EBITDA 124.1 109.5
------------------------------------------------ -------- --------
Adjusted EBITDA margin 27% 23%
------------------------------------------------ -------- --------
Adjusted EBITDA on a constant currency basis 124.5 109.5
------------------------------------------------ -------- --------
Adjusted EBITDA margin on a constant currency
basis 27% 23%
------------------------------------------------ -------- --------
The ongoing pandemic impacted both periods being presented,
however in different ways. Whereas during H1 2020, we had retail in
Italy fully operational for the first two months, this was severely
disrupted by both retail closures in March and in the second
quarter, as well as the lack of significant worldwide sporting
events. Due to lockdowns in Italy, there was no retail activity for
almost the entire H1 2021 period, however, all major sporting
events took place (including UEFA EURO2020 in June/July 2021) which
boosted online sports performance. Therefore, the Group's total
reported revenues from continuing operation decreased by just 4% to
EUR457.4 million (H1 2020: EUR476.7 million), driven by the
strength of its online business, where revenue increased by 40%,
offset by a 65% decrease in retail revenue, both excluding
Asia.
The Group's Adjusted EBITDA from continuing operations increased
to EUR124.1 million (H1 2020: EUR109.5 million), a period-on-period
increase of 13% and 14% on a constant currency basis. Adjusted
EBITDA increasing, which contradicts the decrease seen in revenue,
is due to the strong performance of the higher margin online
business both under B2B and B2C, which also resulted in the
period-on-period increase in the Adjusted EBITDA margin from 23% in
2020 to 27% in 2021. The Group's total reported EBITDA also
increased by 20% to EUR109.8 million (H1 2020: EUR91.8
million).
Divisional performance
B2B Gambling
B2B Gambling Revenue
H1 2021 H1 2020 Change
EUR'm EUR'm
------------------------------- -------- -------- -------
Regulated - Americas 46.4 22.9 103%
Regulated - Europe (excluding
UK) 66.5 56.1 19%
Regulated - UK 59.6 66.1 -10%
Regulated - Rest of the World 1.9 1.5 27%
------------------------------- -------- -------- -------
Total Regulated B2B revenue 174.4 146.6 19%
Unregulated excluding Asia 49.0 41.9 17%
Total Core B2B revenue 223.4 188.5 19%
Asia 43.8 41.2 6%
------------------------------- -------- -------- -------
Total B2B Gambling revenue 267.2 229.7 16%
------------------------------- -------- -------- -------
Core B2B Gambling revenues(2) increased by 19% which was driven
by the increase in regulated markets in the Americas and Europe
(excluding the UK) of 103% (106% on a constant currency basis) and
19% respectively and a 17% increase in revenues from unregulated
markets excluding Asia. This was offset by a 10% decrease in UK
revenues driven by the previously announced impact of changes to
the contract with Entain.
The biggest contributors to the increase in both the Americas
and Europe (excluding the UK) were Mexico, driven by revenue growth
in Mexico, as well as Colombia, Poland and Italy. The growth in
revenues from unregulated markets excluding Asia came from Canada
and Brazil. Asian revenue increased by 6%.
Overall, B2B Gambling revenues increased by 16% and 17% on a
constant currency basis, largely due to the increase in online
performance, which was also heightened during retail closure
periods, as well as the fact that, despite the lockdowns, major
sporting events were still taking place (including UEFA EURO2020 in
June/July 2021), as opposed to the prior period where these were
cancelled during the majority of the second quarter. Underlying
Core B2B revenue from online only and excluding sports and the
previously announced material changes to the Entain contract
increased by 30%.
B2B Gambling Costs and Margins
In order to better reflect the way we manage the business, we
have split out those costs which are charged through to licensee
with an insignificant or no margin and the related revenue.
Furthermore, the revenue and costs associated with retail hardware
sales, where the margins significantly vary with each transaction
and therefore distort the margin of the rest of the B2B business,
were also split out.
In addition to this, the underlying B2B costs were split into
categories that best reflect how these costs are managed and
specifically showing the strategic expenditure which relate to the
Latin America expansion, live operations and ongoing entry costs
into the US.
H1 2021 H1 2020 2020
EUR'm EUR'm to 2021
%
---------------------------------------- -------- -------- ---------
Revenue and costs relating to live
dedicated tables, dedicated teams,
hosting, B2B white label and hardware
sales
Revenue 44.3 40.3 10%
Costs 40.9 31.1 32%
---------------------------------------- -------- -------- ---------
Adjusted EBITDA 3.4 9.2 -63%
Margin 8% 23% NA
---------------------------------------- -------- -------- ---------
B2B Underlying Gambling Revenue
and Costs
B2B Underlying Gambling Revenue* 222.9 189.4 18%
---------------------------------------- -------- -------- ---------
Research and Development 36.1 38.5 -6%
General and Administrative 30.3 30.0 1%
Sales and marketing 5.8 9.5 -39%
Operations 28.5 27.6 3%
---------------------------------------- -------- -------- ---------
Total costs (excluding Asia and
strategic expenditure) 100.7 105.6 -5%
Asia related costs 25.2 11.1 127%
Strategic expenditure 28.3 18.7 51%
B2B Underlying Gambling Costs 154.2 135.4 14%
---------------------------------------- -------- -------- ---------
B2B Underlying Gambling Adjusted
EBITDA 68.7 54.0 27%
Margin 31% 29% NA
---------------------------------------- -------- -------- ---------
Total B2B Revenue and Costs
B2B revenue 267.2 229.7 16%
B2B Costs 195.1 166.5 17%
---------------------------------------- -------- -------- ---------
Total B2B Adjusted EBITDA 72.1 63.2 14%
Margin 27% 28% NA
---------------------------------------- -------- -------- ---------
* To reflect the underlying activity of the B2B Gambling
division, B2B revenues include the software and services charges
generated from the relevant B2C activity with fellow Group
companies, which is then eliminated to show the consolidated
gambling division revenues.
Revenue and Costs excluded from Underlying EBITDA
The costs being excluded from underlying EBITDA include costs
which are passed directly to licensee at a small margin or no
margin at all, such as live dedicated tables, dedicated teams and
hosting fees, as well as the cost of retail hardware sales, where
margins can fluctuate significantly depending on each deal.
Although revenue generated from this expenditure increased by 10%,
the respective costs increased by 32% indicating their volatile
nature and further supporting the reason for excluding these from
the underlying B2B revenue and costs. Furthermore, margins also
decreased accordingly from 23% in H1 2020, to 8% in the current
period.
B2B Underlying Gambling costs
B2B Underlying Gambling costs increased by 14%, driven by the
increase in both Asia related and strategic expenditure costs. Both
are further discussed below.
Research and Development ("R&D") costs include, among
others, employee-related costs and proportional office expenses.
Expensed R&D costs decreased by 6% to EUR36.1 million (H1 2020:
EUR38.5 million), driven by a reduction in office expenses and
travel costs. Capitalised development costs were 39% of total B2B
Underlying R&D costs in the period, compared to 38% in the
prior period.
General and Administrative costs include employee-related costs,
proportion of office expenses, consulting and legal fees, and
corporate costs such as audit and tax fees and listing expenses.
These costs remained in line period-on-period at EUR30.3 million
(H1 2020: EUR30.0 million) with the small 1% increase caused by an
increase in charitable donations.
Sales and marketing costs decreased significantly to EUR5.8
million (H1 2020: EUR9.5 million), mainly due to the fact that the
ICE conference did not take place in February 2021 with the last
one taking place in February 2020, right before the onset of the
COVID-19 global pandemic.
Operations costs includes costs relating to infrastructure and
other operational projects, IT and security and generally day to
day operational costs, including employee and office apportioned
costs and branded content fees. These costs increased by just 3%
from EUR27.6 million in H1 2020 to EUR28.5 million in H1 2021,
driven by an increase in branded games fees, especially in the
territory of Poland.
Asia costs increased by 127% to EUR25.2 million (H1 2020:
EUR11.1 million) largely due to the previously announced
restructuring of the relationship with our largest distributor.
Strategic expenditure includes revenue driven costs relating to
structured agreements, US expansion costs, and all costs relating
to live operations (excluding live dedicated table costs). These
costs have increased by 51% to EUR28.3 million (H1 2020: EUR18.7
million) which is in line with the increase in revenue under our
structured agreements and in particular Caliente, as well as the
increase in employee costs within our live division. Furthermore,
we have made progress in our US entry plans, and as such these
costs have also increased period-on-period.
B2B Adjusted EBITDA
Total B2B Adjusted EBITDA increased by 14% to EUR72.1 million
(H1 2020: EUR63.2 million) with a small 1% decrease in margin
period-on-period. However, Underlying Adjusted EBITDA has increased
by 27% to EUR68.7 million (H1 2020: EUR54.0 million). The increase
was driven by the higher margin online overperformance, especially
from specific licensees such as Caliente, as well as increase in
Casino, Live and Sports (with latter driven by major sporting
events taking place during the entire period as opposed to the
prior period were there were major cancellations). Furthermore, B2B
underlying Adjusted EBITDA margins have improved, increasing to 31%
from 29% in the prior period.
B2C Gambling
H1 2021 H1 2020 Change
EUR'm EUR'm
------------------------------- -------- -------- -------
Snaitech
Gambling Revenue 157.9 215.5 -27%
Gambling Costs 106.3 168.4 -37%
Adjusted EBITDA 51.6 47.1 10%
------------------------------- -------- -------- -------
White Label (incl. Sun Bingo)
Gambling Revenue 30.2 29.4 3%
Gambling Costs 24.8 26.0 -5%
Adjusted EBITDA 5.4 3.4 59%
------------------------------- -------- -------- -------
Sports B2C
Gambling Revenue 8.5 8.5 0%
Gambling Costs 13.5 12.7 6%
Adjusted EBITDA -5.0 -4.2 -19%
------------------------------- -------- -------- -------
Total B2C
Gambling Revenue 196.6 253.4 -22%
Gambling Costs 144.6 207.1 -30%
------------------------------- -------- -------- -------
B2C Adjusted EBITDA 52.0 46.3 12%
------------------------------- -------- -------- -------
Snaitech
Snaitech revenues decreased by 27% to EUR157.9 million (H1 2020:
EUR215.5 million), owing to the effects of the COVID-19 pandemic
which resulted in the closure of retail betting shops in Italy for
almost the entire duration of H1 2021 versus last year when
closures only affected half of the period. However, Snaitech's
revenue was supported by a 95% increase in online revenues. This
increase was also due to the fact that major sporting events were
cancelled for part of H1 2020, as opposed to H1 2021 where these
were taking place as normal, including UEFA EURO 2020 taking place
in June/July 2021 after it was postponed last year.
Snaitech operating costs decreased by 37% to EUR106.3 million
(H1 2020: EUR168.4 million). Given the high variable costs in the
business, the fall in operating costs was driven by the decrease in
retail revenues and mainly consisted of a decrease in franchise
commission, gaming concession fees, platform charges, maintenance
of the retail network and costs relating to data feeds.
Snaitech's Adjusted EBITDA increased by 10%, as opposed to
revenue which overall decreased, due to its low fixed cost base,
effective cost reduction and the strong performance of its
higher-margin online business, which saw exceptional growth in
online EBITDA of 118%. As a result, Snaitech's EBITDA margin
improved to 33% (H1 2020: 22%) and its underlying margin, which
excludes the distribution costs paid to franchisees, improved to
45% (H1 2020: 41%).
White label (including Sun Bingo)
Revenue from the white label business increased by 3% in total,
driven by a 7% increase in Sun Bingo revenue to EUR30.2 million (H1
2020: EUR28.2 million). Operating costs within Sun Bingo increased
by 4% to EUR24.8 million (H1 2020: EUR23.9 million), in line with
increase in revenue, whereas Adjusted EBITDA increased by 26% to
EUR5.4 million (2020: H1 EUR4.3 million). Adjusted EBITDA includes
the unwinding of the minimum guarantee prepayment over the new
period of the contract which was renegotiated in 2019.
Other White label revenue decreased to almost nothing (H1 2020:
EUR1.2 million), as part of an ongoing effort to cease other white
label operations. Similarly other white label costs decreased by
100%, resulting in an Adjusted EBITDA of EURNil million (H1 2020:
loss of EUR0.9 million).
Sport B2C
The Sport B2C business, which has now officially moved under the
Snaitech management team, is currently at an early stage of growth,
therefore, despite the retail closures in Germany and Austria
resulting from COVID-19 which impacted both periods, revenues
remained flat at EUR8.5 million (H1 2020: EUR8.5 million), with
costs increasing by 6%. The business remains loss making, with the
Adjusted EBITDA loss increasing by 19% to EUR5.0 million (H1 2020:
loss of EUR4.2 million).
Below EBITDA items
Depreciation and amortisation
Reported and Adjusted depreciation decreased by 8 % to EUR21.8
million (H1 2020: EUR23.7 million). Adjusted amortisation, after
deducting amortisation of acquired intangibles of EUR18.9 million
(2020: EUR19.5 million) decreased by 15% to EUR34.5 million (H1
2020: EUR40.4 million). The decrease mainly relates to the fact
that the Italian betting licenses were fully amortised by December
2020 and renewal is not expected until later this year. The
remainder of the balance under depreciation and amortisation of
EUR8.8 million (H1 2020: EUR8.8 million) relates to IFRS 16 Leases,
being the right-of-use asset amortisation.
Impairment of tangible and intangible assets
The impairment of tangible and intangible assets of EUR15.1
million (H1 2020: EUR7.2 million) mainly relates to the EUR12.3
million impairment resulting from the disposal of some real estate
in Milan. The recoverable amount (being net sales proceeds as per
the binding sale agreement) was compared to the property's net book
value which led to the impairment. H1 2020 included an impairment
charge of EUR5.4 million relating to Retail B2C Sport.
Finance costs
Reported finance costs increased by just 2% to EUR33.8 million
(H1 2020: EUR33.1 million), while adjusted finance costs increased
by 8% to EUR32.5 million (H1 2020: EUR30.2 million). The latter was
driven by the increase in interest expense due to the additional
drawdown from the RCF in March 2020. The difference between
adjusted and reported finance costs is the movement of the
contingent consideration and redemption liability of EUR1.3 million
(H1 2020: EUR3.0 million).
Unrealised fair value changes on derivative financial assets
The unrealised fair value changes to derivative financial assets
of EUR299.9 million (H1 2020: EURNil) is due to the recognition of
the fair value of the various call options held by the Group in
Latin America which fall under the definition of derivates within
IFRS 9 Financial Instruments.
Given the growth in Latin America, especially in Mexico
(Caliplay) and Colombia (Wplay), the value of the options have
exponentially increased and, coupled with the changes to the
framework agreements and amendments to certain exercise conditions
discussed in Note 15, these options have been fair valued.
Playtech's valuations of each of the options is derived from a
discounted cash flow in the first instance and then contains a
number of assumptions and estimates, including the likelihood of
each of the call options being exercised, and with a number of
different scenarios as to timing of exercise and Playtech's likely
percentage shareholding, as well as taking into account the
maturity curve of each business. These are further discussed in
Note 15E. The value that could be realised should the option be
exercised in the future could be materially higher than the
resulting fair value of the options recognised as at 30 June
2021.
Taxation
In H1 2021, the Group's underlying adjusted effective tax rate
from continuing operations increased to 23% (H1 2020: 55%). The
high tax rate is mainly due to the Group generating tax losses
during the period in certain territories which cannot be offset
against taxable profits arising in different territories. The
benefit of the tax losses which are available to utilise in future
periods is not reflected in the current period adjusted effective
tax rate. The adjusted tax rate is impacted by the geographic mix
of profits and reflects a combination of higher headline rates of
tax in the various jurisdictions in which the Group operates when
compared with the United Kingdom standard rate of corporation tax
of 19%.
The total adjusted tax credit in H1 2021 is EUR27.6 million (H1
2020: tax charge of EUR4.4 million) of which EUR6.4 million (H1
2020: EUR4.4 million) relates to income tax expenses (including
prior year adjustments) and deferred tax credit of EUR34.0 million
(H1 2020: EURNil). The total adjusted deferred tax credit mainly
consists of EUR8.2 million relating to UK tax losses and EUR26.1
million relating to Snaitech tax losses arising in prior years
which were recognised in the period.
The reported tax credit in H1 2021 was EUR123.8 million (H1
2020: tax charge of EUR3.0 million), which excludes the impact of
the future tax deductions resulting from the Group restructuring
which have a tax benefit of EUR90.3 million. This amount has been
excluded from adjusted earnings in the period and in each period
after the transaction, with the benefit added to the adjusted
income tax charge as this more accurately aligns the adjusted tax
charge with the expected rate of cash tax payments.
The aforementioned restructuring, implemented by the Group in
January 2021, resulted in Playtech plc migrating its tax residency
to the UK and the Group's key operating entity transferring its
business to a UK company. This restructuring is not expected to
have a significant impact on the Group's underlying effective tax
rate.
Discontinued operations
Casual and Social Gaming segment
Following the reclassification of the Casual and Social Gaming
business in 2019 as a discontinued operation, the Group entered
into an agreement for the partial disposal of the business, namely
"FTX", for a total consideration of EUR 0.9 million on 29 June
2020. As a result of this transaction, the Group realised a profit
of EUR0.6 million.
On 11 January 2021, the Group entered into an agreement for the
disposal of the remainder of the business, namely "YoYo", for a
total consideration of $ 9.5 million resulting in a profit on
disposal of EUR7.6 million.
This business has now been fully disposed.
The Adjusted EBITDA relating to the Casual and Social Gaming
business was EURnil in the period (H1 2020: EUR0.5 million) as
operations were completely wound down in 2020. Reported profit
after tax of EUR7.6 million (H1 2020: EUR0.8 million) was simply
the aforementioned profit on disposal.
Finalto (formerly TradeTech Group)
T he assets and liabilities of the division continue to be shown
as held for sale at 30 June 2021 and the financial results of this
division in both periods being presented are included in
discontinued operations. At 31 December 2020 an impairment charge
of EUR221.3 million was recognised against this CGU as a result of
comparing its carrying value to expected proceeds from the
disposal, less expected costs. Following a review of the net assets
of the unit at 30 June 2021, when compared to the expected
proceeds, EUR2.0 million of the previously recognised impairment
was reversed in the current period.
Finalto, had an outstanding H1 2020 where the business
significantly benefitted from increased market volatility and
trading volumes, particularly in March and April 2020 as the effect
of the pandemic created large price movements in major instruments.
Market conditions normalised in H1 2021. In terms of performance,
revenues decreased by 63% to EUR31.9 million (H1 2020: EUR87.3
million). Adjusted and reported EBITDA both decreased to a loss of
EUR0.1 million (H1 2020: profit of EUR52.8 million) and EUR0.5
million (H1 2020: profit of EUR46.3 million) respectively.
Adjusted profit
H1 H1 2020
2021 EUR'm
EUR'm
--------------------------------------------------------- -------- --------
Reported profit/(loss) from continuing operations
attributable to the owners of the Company 401.9 (22.1)
Employee stock option expenses 7.0 7.1
Professional fees 2.2 1.7
Additional consideration payable for put/call
option 0.9 4.5
Movement in contingent consideration and redemption
liability 1.3 4.1
Charitable donation 1.9 3.2
Settlement of legal matters 2.3 -
Fair value change of equity investments (0.8) (0.4)
Fair value change of derivative financial assets (299.9) -
Deferred tax on acquisitions (5.9) (5.8)
Deferred tax (90.3) -
Amortisation of intangibles on acquisitions 18.9 19.5
Impairment of tangible and intangible assets 15.1 7.2
Fair value change on acquisition of associate - (6.5)
Tax on disposal of asset classified as held for
sale - 4.4
Profit on disposal of asset classified as held
for sale - (13.4)
Adjusted Profit from continuing operations attributable
to the owners of the Company 54.6 3.5
Constant currency impact 1.8 1.6
--------------------------------------------------------- -------- --------
Adjusted profit for the year attributable to owners
of the Company on constant currency 56.4 5.1
--------------------------------------------------------- -------- --------
The reconciling items in the table above are further explained
in Note 9 of the interim financial statements. Reported profit from
continuing operations increased significantly to EUR401.9 million
in H1 2021 from a loss of EUR22.1 million in the prior period, due
to the recognition of the fair value of the derivative financial
assets as explained above.
Adjusted EPS (in Euro cents)
H1 H1 2020
2021 EUR'm
EUR'm
------------------------------------------------------- ------- --------
Adjusted basic EPS from continuing operations 18.3 1.2
Adjusted diluted EPS from continuing operations 17.4 1.1
------------------------------------------------------- ------- --------
Basic EPS from profit attributable to owners of
the Company 139.3 1.8
Diluted EPS from profit attributable to owners
of the Company 132.2 1.8
------------------------------------------------------- ------- --------
Basic EPS from profit/(loss) attributable to the
owners of the Company from continuing operations 134.9 (7.4)
Diluted EPS from profit/(loss) attributable to
the owners of the Company from continuing operations 128.0 (7.4)
Basic EPS is calculated using the weighted average number of
equity shares in issue during H1 2021 of 297.9 million (H1 2020:
297.5 million). Diluted EPS also includes the dilutive impact of
share options and is calculated using the weighted average number
of shares in issue during H1 2021 of 314.0 million (H1 2020: 307.5
million).
Cashflow
Playtech continues to be cash generative and delivered operating
cash flows of EUR 38.7 million (H1 2020: EUR244.8 million). The
reason for the decline in cash generated from operations period on
period is because it includes:
-- Finalto which had an exceptional H1 2020 (refer to
discontinued operations section above) with high cash conversion;
and
-- Deferred payment of gaming tax duties of EUR89.6 million in
Italy, which was due in Q4 2020 but payment was instead made in
installments in H1 2021 (noting it was a government approved
payment deferral as part of the assistance offered to companies
during the pandemic).
Cash conversion (including Finalto and Casual)
H1 2021 H1 2020
EUR'm EUR'm
--------------------------------------------- -------- --------
Adjusted EBITDA 124.0 162.8
Net cash provided by operating activities 38.7 244.8
--------------------------------------------- -------- --------
Cash conversion 31% 150%
---------------------------------------------
Change in jackpot balances (4.7) (0.7)
Change in client deposits and client equity (6.1) (26.3)
Dividends payable - (0.2)
Professional expenses on acquisitions 2.2 3.8
ADM security deposit (10.7) (26.1)
Deferred payment of gaming duties 89.6 -
---------------------------------------------
Adjusted net cash provided by operating
activities 109.0 195.3
--------------------------------------------- -------- --------
Adjusted cash conversion 88% 120%
--------------------------------------------- -------- --------
Adjusted cash conversion at 88% (H1 2020: 120%) is shown after
adjusting for the deferred payment of gaming duties, as well as
jackpots, security deposits and client equity, dividends payable
and professional costs on acquisitions. Adjusting the above cash
fluctuations is essential in order to truly reflect the quality of
revenue and cash collection. This is because the timing of cash
inflows and outflows for jackpots, security deposits, client equity
and payable dividends only impacts the reported operating cashflow
and not EBITDA, while professional expenses and costs relating to
acquisitions are excluded from Adjusted EBITDA but impact operating
cashflow.
The adjusted net cash provided by operating activities also
excluded the security deposit repayment from Italy's online betting
and gaming regulator (ADM) for 2021 and 2020.
Cashflow statement analysis
Net cash outflows used in investing activities totaled EUR 45.7
million (H1 2020: EUR 63.6 million) of which:
-- EUR13.9 million (H1 2020: EUR19.2 million) was used in the
acquisition of property, plant and equipment;
-- EUR2.2 million (H1 2020: EUR15.7 million) was used on the acquisition of intangible assets;
-- In 2020, EUR11.3 million relates to consideration paid in
relation to acquisitions of subsidiaries in the period, net of
cash; there were no such payments in 2021;
-- EUR27.8 million (H1 2020: EUR27.8 million) was spent on capitalised development costs;
-- EUR5.8 million (H1 2020: EUR4.4million) relates to the part
payment for the call option held for Ocean 88 Holdings Ltd of
EUR1.7 million and contingent consideration paid to Wplay of EUR4.1
million. In H1 2020 the full EUR4.4 million related to cash paid to
acquire 10% of equity holding in Tenlot Guatemala (refer to Note
15D of the interim financial statements for more details); and
-- EUR10.1 million (H1 2020: EUR14.1 million) is cash received
on the disposal of assets held for sale of which EUR7.5 million
relates to final proceeds from the disposal of the casual business
in 2021 and EUR2.2 million to the disposal of investment in
associate; in 2020 EUR13.8 million relates to cash proceeds from
the disposal of Area Sud in Milan.
The remainder related to loans granted in 2021 (repaid in 2020)
and small amounts of proceeds from the disposal of property plant
and equipment in both years.
Net cash outflows from financing activities totaled EUR134.9
million (H1 2020: EUR175.6 million inflow) of which:
-- EUR100 million was due to the part repayment of the RCF (H1
2020: EUR245.8 million was drawn down);
-- EUR20.3 million (H1 2020: EUR19.6 million) relates to
interest payments on bond loans and bank borrowings;
-- EUR13.8 million (H1 2020: EUR14.1million) is principal and
interest lease liability payments;
-- EUR0.8 million (H1 2020: EUR26.2 million) are payments of
contingent consideration and redemption liability; and
-- In H1 2020 EUR10.1 million related to the repurchasing of
Playtech shares. The share buyback scheme was cancelled soon after
the pandemic begun and therefore there was no Playtech share
repurchasing in 2021.
Balance sheet, liquidity and financing
30 June 31 December
2021 2020
EUR'm EUR'm
--------------------------------------------- -------- ------------
Cash and cash equivalents 540.8 683.7
Cash held on behalf of clients, progressive
jackpots and security deposits (130.3) (129.1)
Adjusted gross cash and cash equivalents
(excluding assets and liabilities held for
sale) 410.5 554.6
--------------------------------------------- -------- ------------
Loans and borrowings (RCF) 214.3 308.9
Bonds 874.1 873.1
--------------------------------------------- -------- ------------
Gross debt (excluding liabilities held for
sale) 1,088.4 1,182.0
--------------------------------------------- -------- ------------
Net debt (excluding assets and liabilities
held for sale) 677.9 627.4
--------------------------------------------- -------- ------------
Cash
Excluding cash classified within assets held for sale, the Group
continues to maintain a strong balance sheet with cash and cash
equivalents of EUR540.8 million (31 December 2020: EUR683.7
million) and adjusted gross cash, which excludes the cash held on
behalf of clients, progressive jackpots and security deposits, of
EUR410.5 million (31 December 2020: EUR554.6 million). The decline
is due to the EUR100 million RCF repayment and the repayment of the
previously announced 2020 gaming tax liability in Italy of EUR89.6
million, both made in the six months ended 30 June 2021. After
careful consideration of the Group's current and forecasts cash
position, the Group repaid a further EUR50 million of the RCF in
July 2021. The Board keeps Playtech's capital structure under
continuous review and is cognisant of the level of cash on its
balance sheet.
Financing
The Group holds 5-year senior secured notes to the value of
EUR530 million (3.75% coupon, maturity 2023), which were raised in
October 2018 to support the acquisition of Snaitech.
The Group also holds 7-year senior secured notes to the value of
EUR350 million (4.25% coupon, maturity 2026), which were raised in
March 2019. The net proceeds of this bond were used to fully repay
the EUR297 million convertible bond which matured in H2 2019, and
for general corporate purposes, including payment of contingent
consideration.
In November 2019 the Group signed an amendment to its previous
RCF, increasing it to EUR317.0 million and extending its term by an
additional four years, ending in November 2023. The Group has an
option to extend for an additional year. Interest payable on the
loan is based on Euro Libor and Libor rates based on the currency
of each withdrawal. Playtech acted promptly following the
announcement of the first lockdown in the first quarter of 2020 and
the uncertainty surrounding this, to secure its liquidity position
by drawing down EUR245.8 million against the RCF as a precautionary
measure during the period. In June 2021 and July 2021 the Group
repaid EUR100 million and EUR50 million of its RCF respectively.
The RCF balance at 30 June 2021 was EUR214.3 million (31 December
2020: EUR308.9 million).
The Group's total gross debt amounted to EUR1,088.4 million at
30 June 2021 (31 December 2020: EUR1,182.0 million) and Net Debt,
after deducting adjusted gross cash, amounted to EUR677.9 million
(31 December 2020: EUR627.4 million).
Contingent consideration
Contingent consideration and redemption liability decreased by
EUR2.6 million to EUR7.1 million (31 December 2020: EUR9.7 million)
mostly due to the completed payment relating to Wplay. The existing
liability as at 30 June 2021 comprised the following:
Acquisition Maximum payable Contingent consideration Payment date
earnout (per terms and redemption (based on maximum
of acquisition) liability as payable earnout)
at 30 June 2021
HPYBET Austria EUR15.0 million Nil Q3 2021
GmbH
------------------- ------------------------ ------------------
Eyecon Limited EUR23.3 million Nil Q3 2021
------------------- ------------------------ ------------------
Wplay EUR0.9 million EUR0.8 million Q1 2022
------------------- ------------------------ ------------------
EUR5.0 million
Q1 2023
EUR10.0 million
Statscore EUR15.0 million EUR5.6 million in Q1 2026
------------------- ------------------------ ------------------
Other EUR6.8 million EUR0.7 million Q3 2021
------------------- ------------------------ ------------------
Total EUR61.0 million EUR7.1 million
------------------- ------------------------ ------------------
Shareholder returns
The Board suspended shareholder distributions in March 2020
until further notice due to the uncertainty relating to COVID-19.
Playtech remains committed to returning capital to shareholders
whilst balancing the needs of the business and taking a prudent
approach to its capital structure and leverage.
Going concern
In adopting the going concern basis in the preparation of the
interim financial statements, the Group has considered the current
trading performance, financial position and liquidity of the Group,
the principal risks and uncertainties together with scenario
planning and reverse stress tests completed for a period of no less
than 12 months from the approval of these interim financial
statements. The outbreak of the COVID-19 pandemic, the measures
adopted by governments in countries worldwide to mitigate the
pandemic's spread, including the impact of the last lockdowns and
potentially another wave of lockdowns and COVID-19 vaccine
announcements, were also taken into consideration in our
assessment.
At 30 June 2021, the Group held total cash (excluding cash
included in assets held for sale) of EUR540.8 million (31 December
2020: EUR683.7 million) and adjusted gross cash, which excludes the
cash held on behalf of clients, progressive jackpots and security
deposits, of EUR410.5 million (31 December 2020: EUR554.6 million).
The decline is due to EUR100 million RCF repayment and as
previously announced the repayment of the 2020 gaming tax liability
in Italy of EUR89.6 million, both made in the six months ended 30
June 2021. Further, the Group has long-term debt facilities
totaling EUR1,088.4 million (31 December 2020: EUR1,182.0 million).
Management has secured a covenant relaxation at 31 December 2020
and 30 June 2021 relating to the RCF, as discussed in Note 19 of
the interim financial statements, and further, has considered
future projected cash flows under a number of scenarios to
stress-test any risk of covenant breaches.
Management concluded that the risk of a covenant breach over the
next twelve-month period from the date of releasing this report is
low and as such, has a reasonable expectation that the Group will
have adequate financial resources to continue in operational
existence. It has, therefore, considered it appropriate to adopt
the going concern basis of preparation for these interim financial
statements.
(1) Adjusted numbers relate to certain non-cash and one-off
items. The Board of Directors believes that the adjusted results
represent more closely the consistent trading performance of the
business. A full reconciliation between the actual and adjusted
results is provided in Note 9 of the interim financial
statements.
(2) Core B2B Gambling refers to the Company's B2B Gambling
business excluding unregulated Asia.
(3) Totals in tables throughout this statement may not exactly
equal the components of the total due to rounding.
4 Due to the classification of a discontinued operation, the
comparative information for 2020 has been restated. Please refer to
Note 7 of the financial statements for further details.
Directors' responsibilities
The Directors of Playtech plc confirm that, to the best of their
knowledge:
-- the unaudited condensed consolidated financial statements
have been prepared in accordance with IAS 34 as adopted by the
United Kingdom; and
-- the interim management report as required by rules 4.2.7 and
4.2.8 of the Disclosure Guidance and Transparency Rules, includes a
fair review of:
o important events during the six months ended 30 June 2021 and
their impact on the condensed consolidated financial
statements;
o a description of the principal risks and uncertainties for the
second half of the year; and
o related parties' transactions and changes therein.
The names and functions of the Directors of Playtech plc are
available on the Group's website:
http://www.investors.playtech.com/
INDEPENT REVIEW REPORT TO Playtech PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises the consolidated
statement of comprehensive income, the consolidated balance sheet,
the consolidated statement of changes in equity, the consolidated
statement of cash flows and the related notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group will be prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this interim financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2021 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Six months ended
30 June 2021 30 June 2020
Note Actual Adjusted* Actual Adjusted*
EUR'm EUR'm EUR'm EUR'm
Restated** Restated**
--------------------------------------------------------------- ----- -------- ---------- ----------- -----------
Continuing operations
Revenue 8 457.4 457.4 476.7 476.7
Distribution costs before depreciation and amortisation (284.9) (281.4) (318.9) (315.8)
Administrative expenses before depreciation and amortisation (56.6) (45.8) (58.9) (44.3)
Impairment of financial assets (6.1) (6.1) (7.1) (7.1)
EBITDA 9 109.8 124.1 91.8 109.5
Depreciation and amortisation (84.0) (65.1) (92.4) (72.9)
Impairment of tangible and intangible assets 10 (15.1) - (7.2) -
Finance income 11 0.4 0.4 0.7 0.7
Finance costs 11 (33.8) (32.5) (33.1) (30.2)
Share of profit from joint ventures and associates 0.1 0.1 0.7 0.7
Fair value change on acquisition of associate - - 6.5 -
Unrealised fair value changes on equity investments 15D 0.8 - 0.4 -
Unrealised fair value changes of derivative financial assets 15E 299.9 - - -
Profit on disposal of asset classified as held for sale 17A - - 13.4 -
Profit/(loss) before taxation 278.1 27.0 (19.2) 7.8
Income tax credit/(expense) 12 123.8 27.6 (3.0) (4.4)
Profit/(loss) from continuing operations 9 401.9 54.6 (22.2) 3.4
Discontinued operations
Profit from discontinued operation, net of tax 7 13.2 4.0 27.5 41.3
Profit for the period - total 9 415.1 58.6 5.3 44.7
Other comprehensive income
Items that are or may be classified subsequently to profit or
loss
Exchange loss arising on translation of foreign operations (0.5) (0.5) (0.9) (0.9)
Items that will not be classified to profit or loss
Gain/(loss) on re-measurement of employee termination
indemnities 0.2 0.2 (0.1) (0.1)
Other comprehensive loss for the period (0.3) (0.3) (1.0) (1.0)
Total comprehensive income for the period 414.8 58.3 4.3 43.7
Profit attributable to:
Owners of the Company 415.1 58.6 5.4 44.8
Non-controlling interests - - (0.1) (0.1)
415.1 58.6 5.3 44.7
Total comprehensive income attributable to:
Owners of the Company 414.8 58.3 4.4 43.8
Non-controlling interests - - (0.1) (0.1)
414.8 58.3 4.3 43.7
Earnings per share attributable to the ordinary shareholders
of the Company
Profit or loss - total
Basic (cents) 13 139.3 19.7 1.8 15.0
Diluted (cents) 13 132.2 18.6 1.8 14.6
----- -------- ---------- ----------- -----------
Profit or loss from continuing operations
Basic (cents) 13 134.9 18.3 (7.4) 1.2
Diluted (cents) 13 128.0 17.4 (7.4) 1.1
----- -------- ---------- ----------- -----------
*Adjusted numbers relate to certain non-cash and one-off items.
The Board of Directors believes that the adjusted results represent
more closely the consistent trading performance of the business. A
full reconciliation between the actual and adjusted results is
provided in Note 9.
** Comparative information has been restated due to a
discontinued operation. Refer to Note 7.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Additional Employee Retained Employee Call/Put Foreign Total Non-controlling Total
paid in termination earnings benefit options exchange attributable interests equity
capital indemnities trust reserve reserve to equity
holders of
the Company
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
----------------- ----------- ------------ --------- --------- --------- --------- ------------- ---------------- ----------
Balance at 1
January 2021 592.1 (0.4) 347.3 (14.4) (3.7) (21.3) 899.6 0.3 899.9
Total
comprehensive
income for the
period
Profit for the
period - - 415.1 - - - 415.1 - 415.1
Other
comprehensive
income/(loss)
for the period - 0.2 - - - (0.5) (0.3) - (0.3)
----------- ------------ --------- --------- --------- --------- ------------- ---------------- ----------
Total
comprehensive
income / (loss)
for the period - 0.2 415.1 - - (0.5) 414.8 - 414.8
----------- ------------ --------- --------- --------- --------- ------------- ---------------- ----------
Transactions
with the owners
of the Company
Contributions
and
distributions
Exercise of
options - - (4.7) 4.6 - - (0.1) - (0.1)
Employee stock
option scheme - - 7.4 - - - 7.4 - 7.4
Transfer from
treasury shares
to employee
benefit trust 13.9 - 6.1 (20.0) - - - - -
Total
contributions
and
distributions 13.9 - 8.8 (15.4) - - 7.3 - 7.3
----------- ------------ --------- --------- --------- --------- ------------- ---------------- ----------
Total
transactions
with owners of
the Company 13.9 - 8.8 (15.4) - - 7.3 - 7.3
----------- ------------ --------- --------- --------- --------- ------------- ---------------- ----------
Balance at 30
June 2021 606.0 (0.2) 771.2 (29.8) (3.7) (21.8) 1,321.7 0.3 1,322.0
----------- ------------ --------- --------- --------- --------- ------------- ---------------- ----------
Additional Employee Retained Employee Call/Put Foreign Total Non-controlling Total
paid in termination earnings benefit options exchange attributable interests equity
capital indemnities trust reserve reserve to equity
holders of
the Company
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
----------------- ----------- ------------ --------- --------- --------- --------- ------------- ---------------- ----------
Balance at 1
January 2020 601.0 (0.2) 659.8 (16.2) (16.4) (1.4) 1,226.6 (4.3) 1,222.3
----------- ------------ --------- --------- --------- --------- ------------- ---------------- ----------
Total
comprehensive
income for the
period
Profit/(loss)
for the period - - 5.4 - - - 5.4 (0.1) 5.3
Other
comprehensive
loss for the
period - (0.1) - - - (0.9) (1.0) - (1.0)
----------- ------------ --------- --------- --------- --------- ------------- ---------------- ----------
Total
comprehensive
income / (loss)
for the period - (0.1) 5.4 - - (0.9) 4.4 (0.1) 4.3
----------- ------------ --------- --------- --------- --------- ------------- ---------------- ----------
Transactions
with the owners
of the Company
Contributions
and
distributions
Exercise of
options - - (1.0) 1.0 - - - - -
Employee stock
option scheme - - (1.6) - - - (1.6) - (1.6)
Share buyback (8.9) - (1.3) - - - (10.2) - (10.2)
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Total
contributions
and
distributions (8.9) - (3.9) 1.0 - - (11.8) - (11.8)
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Acquisition of
non-controlling
interests
without change
in control - - (20.7) - 16.4 - (4.3) 4.4 0.1
Acquisition of
subsidiary with
non-controlling
interest - - - - (3.7) - (3.7) 0.4 (3.3)
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Total changes in
ownership
interests - - (20.7) - 12.7 - (8.0) 4.8 (3.2)
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Total
transactions
with owners of
the Company (8.9) - (24.6) 1.0 12.7 - (19.8) 4.8 (15.0)
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Balance at 30
June 2020 592.1 (0.3) 640.6 (15.2) (3.7) (2.3) 1,211.2 0.4 1,211.6
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
UNAUDITED CONSOLIDATED BALANCE SHEET
At 30 June 2021 At 30 June 2020 At 31 December 2020
Note EUR'm EUR'm EUR'm
(Audited)
----------------------------------------------------- ----- ---------------- ---------------- --------------------
ASSETS
Property, plant and equipment 316.1 370.4 357.1
Right of use of assets 59.8 72.8 66.7
Intangible assets 14 1,068.0 1,485.8 1,097.2
Investments 15 12.1 58.8 50.4
Derivative financial assets 15 343.4 - -
Trade receivables 11.0 11.7 18.4
Deferred tax asset 16 102.4 1.8 3.3
Other non-current assets 96.8 53.9 67.2
----------------------------------------------------- ----- ---------------- ---------------- --------------------
Non-current assets 2,009.6 2,055.2 1,660.3
----------------------------------------------------- ----- ---------------- ---------------- --------------------
Trade receivables 166.7 155.1 153.2
Other receivables 74.6 93.6 93.7
([1]) Inventories 5.5 14.6 4.7
Cash and cash equivalents 540.8 1,023.0 683.7
----------------------------------------------------- ----- ---------------- ---------------- --------------------
787.6 1,286.3 935.3
Assets classified as held for sale 17 500.1 29.8 468.9
----------------------------------------------------- ----- ---------------- ---------------- --------------------
Current assets 1,287.7 1,316.1 1,404.2
----------------------------------------------------- ----- ---------------- ---------------- --------------------
TOTAL ASSETS 3,297.3 3,371.3 3,064.5
EQUITY
Additional paid in capital 606.0 592.1 592.1
Employee termination indemnities (0.2) (0.3) (0.4)
Employee benefit trust (29.8) (15.2) (14.4)
Put/Call options reserve (3.7) (3.7) (3.7)
Foreign exchange reserve (21.8) (2.3) (21.3)
Retained earnings 771.2 640.6 347.3
Equity attributable to equity holders of the Company 1,321.7 1,211.2 899.6
Non-controlling interests 0.3 0.4 0.3
TOTAL EQUITY 18 1,322.0 1,211.6 899.9
----------------------------------------------------- ----- ---------------- ---------------- --------------------
LIABILITIES
Loans and borrowings 19 214.3 307.3 308.9
Bonds 20 874.1 872.2 873.1
Lease liability 58.1 68.1 61.5
Deferred revenues 2.1 2.3 2.1
Deferred tax liability 16 43.3 75.9 75.2
Contingent consideration and redemption liability 21 5.6 8.5 8.5
Other non-current liabilities 12.2 13.3 12.5
----------------------------------------------------- ----- ---------------- ---------------- --------------------
Non-current liabilities 1,209.7 1,347.6 1,341.8
----------------------------------------------------- ----- ---------------- ---------------- --------------------
Trade payables 38.4 70.8 47.7
Lease liability 17.7 17.5 21.0
Progressive operators' jackpots, security deposits 104.9 98.9 100.2
Client deposits - 104.3 -
Client funds 25.4 162.9 28.9
Income tax payable 7.8 11.9 12.0
Gaming and other taxes payable 95.9 124.8 126.9
Deferred revenues 6.3 4.5 9.7
Contingent consideration and redemption liability 21 1.5 38.8 1.2
Provisions for risks and charges 22 17.6 16.7 18.1
Other payables 132.2 158.6 147.9
---------------- ---------------- --------------------
447.7 809.7 513.6
Liabilities directly associated with assets
classified as held for sale 17C 317.9 2.4 309.2
----------------------------------------------------- ----- ---------------- ---------------- --------------------
Current liabilities 765.6 812.1 822.8
----------------------------------------------------- ----- ---------------- ---------------- --------------------
Total liabilities 1,975.3 2,159.7 2,164.6
TOTAL EQUITY AND LIABILITIES 3,297.3 3,371.3 3,064.5
The condensed consolidated interim financial statements were
approved by the Board and authorised for issue on 23 September
2021.
Mor Weizer Andrew Smith
Chief Executive Officer Chief Financial Officer
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Note Six months ended 30 June 2021 Six months ended 30 June 2020
EUR'm EUR'm
--------------------------------------------- ----- ------------------------------ ------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period 415.1 5.3
Adjustment to reconcile net income to net
cash provided by operating activities (see
below) (361.4) 254.2
Net taxes paid (15.0) (14.7)
Net cash from operating activities 38.7 244.8
--------------------------------------------- ----- ------------------------------ ------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans (granted)/repaid (6.3) 0.5
Acquisition of property, plant and equipment (13.9) (19.2)
Dividends received - 0.1
Acquisition of intangible assets (2.2) (15.7)
Acquisition of subsidiaries (see below) - (19.8)
Cash of subsidiaries on acquisition (see
below) - 8.5
Capitalised development costs (27.8) (27.8)
Investment in other investments and
derivative assets 15 (5.8) (4.4)
Proceeds from sale of property, plant and
equipment 0.2 0.1
Proceeds from sale of discontinued
operations and assets held for sale, net of
cash disposed 17 10.1 14.1
Net cash used in investing activities (45.7) (63.6)
--------------------------------------------- ----- ------------------------------ ------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Share buyback - (10.1)
Interest paid on bonds and loans and
borrowings (20.3) (19.6)
Proceeds from loans and borrowings - 245.8
Repayment of loans and borrowings (100.0) (0.2)
Payment of contingent consideration and
redemption liability (see below) (0.8) (26.2)
Principal paid on lease liability (11.1) (11.1)
Interest paid on lease liability (2.7) (3.0)
Net cash (used in)/from financing activities (134.9) 175.6
--------------------------------------------- ----- ------------------------------ ------------------------------
NET (DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS (141.9) 356.8
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 1,060.6 674.2
Exchange gain/(loss) on cash and cash
equivalents 2.7 (5.9)
--------------------------------------------- ----- ------------------------------ ------------------------------
CASH AND CASH EQUIVALENTS AT OF PERIOD 921.4 1,025.1
--------------------------------------------- ----- ------------------------------ ------------------------------
Cash and cash equivalent consist of:
Cash and cash equivalent - continuing
operations 540.8 1,023.0
Cash and cash equivalent treated as held for
sale 17C 380.6 2.1
--------------------------------------------- ----- ------------------------------ ------------------------------
921.4 1,025.1
--------------------------------------------- ----- ------------------------------ ------------------------------
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH FROM OPERATING ACTIVITIES
Six months ended 30 June 2021 Six months ended 30 June 2020
EUR'm EUR'm
Income and expenses not affecting operating
cash flows:
Depreciation of property, plant and
equipment 21.8 24.3
Amortisation of intangible assets 54.4 73.3
Amortisation of right of use assets 8.3 9.7
Gain on early termination of lease contracts (0.5) -
Impairment of property, plant and equipment 10 12.5 0.6
Impairment of intangible assets 10 2.6 6.6
Reversal of impairment of asset held for
sale 17C (2.0) -
Reversal of impairment of loans receivable - (1.5)
Profit on disposal of discontinued
operations 17B (7.6) (0.6)
Profit on disposal of asset classified as
held for sale 17A - (13.4)
Share of profit from joint ventures and
associates (0.1) (0.7)
Fair value change on acquisition of
associate 15B - (6.5)
Changes in fair value change of equity
investments 15D (0.8) (0.4)
Changes in fair value change of derivative
financial assets 15E (299.9) -
Interest on bonds and loans and borrowings 20.0 20.5
Interest on lease liability 2.7 3.0
Income tax (credit)/expense (122.4) 6.1
Employee stock option plan expenses 7.4 10.6
Movement in contingent consideration and
redemption liability 2.2 7.4
Exchange (gain)/loss on cash and cash
equivalents (2.7) 5.9
Unrealised exchange loss/(gain) 7.2 (6.2)
Other 0.2 0.3
Changes in operating assets and liabilities:
Change in trade receivables (4.6) 40.1
Change in other receivables (4.7) 26.8
Change in inventories (0.8) (11.7)
Change in trade payables (9.0) 8.0
Change in progressive, operators jackpot and
security deposits 4.7 0.7
Change in client funds 6.1 26.3
Change in other payables (52.5) 30.1
Change in provisions (0.5) (2.8)
Change in deferred revenues (3.4) (2.3)
(361.4) 254.2
--------------------------------------------- ----- ------------------------------ ------------------------------
Acquisition of subsidiaries in period
Six months ended 30 June 2021 Six months ended 30 June 2020
Note EUR'm EUR'm
---------------------------------------- ----- ------------------------------ ------------------------------
Acquisitions in previous period
A. Acquisition of Statscore SP Z.O.O. 23A - 6.5
B. Acquisition of Best In Game SRL 23B - 13.3
- 19.8
---------------------------------------- ----- ------------------------------ ------------------------------
Payment of redemption liabilities and contingent
consideration on previous acquisitions
Six months ended 30 June 2021 Six months ended 30 June 2020
EUR'm EUR'm
--------------------------------------------------- ------------------------------ ------------------------------
Acquisitions in previous periods
A. Acquisition of Rarestone Gaming PTY Limited - 4.1
B. Acquisition of Playtech BGT Sports Limited - 20.8
C. Other acquisitions 0.8 1.3
---------------------------------------------------- ------------------------------ ------------------------------
0.8 26.2
--------------------------------------------------- ------------------------------ ------------------------------
NOTE 1 - REPORTING ENTITY
Playtech plc (the "Company") is a company domiciled in the Isle
of Man. The Company was incorporated in British Virgin Islands as
an offshore company with limited liability. The registered office
is located at St George's Court, Upper Church Street, Douglas, Isle
of Man, IM1 1EE. The Group implemented a restructuring in January
2021, which resulted in Playtech plc migrating its tax residency to
the United Kingdom.
Playtech is the gambling industry's leading technology company
delivering business intelligence driven gambling software,
services, content and platform technology across the industry's
most popular product verticals, including, casino, live casino,
sports betting, virtual sports, bingo and poker. It is the pioneer
of omni-channel gambling technology through its integrated platform
technology, Playtech ONE. Playtech ONE delivers data driven
marketing expertise, single wallet functionality, CRM and
responsible gambling solutions across one single platform across
product verticals and across retail and online.
Playtech partners with and invests in the leading brands in
regulated and newly regulated markets to deliver its data driven
gambling technology across the retail and online value chain.
Playtech provides its technology on a B2B basis to the industry's
leading retail and online operators, land-based casino groups and
government sponsored entities such as lotteries. Playtech directly
owns and operates Snaitech, the leading sports betting and gaming
company in online and retail in Italy.
The Group's financial trading division, which is treated as a
discontinued operation in these interim financial statements (Notes
7 and 17), has four primary business models, being:
-- B2C retail Contracts for difference ("CFD"), through
www.markets.com where the Group acts as the execution venue and the
market-maker on a variety of instruments which fall under the
general categories of Foreign exchanges, Commodities, Equities and
indices;
-- B2B clearing and execution services for other retail brokers
and professional clients, through CFH, where the Group acts as a
matched-principal liquidity provider and straight through processes
("STPs") the trades to prime brokers and clearing houses such as
BNP, Jeffries, UBS, Citi etc;
-- B2B clearing and execution for other retail brokers, where
the Group acts as the execution venue and market-maker; and
-- B2B technology and risk management services, where the Group
provides platform, CRM, reporting and risk-management technology to
the retail broker market.
Where the Group acts as the execution venue, or provides
execution services, these activities are undertaken in entities
regulated by the UK's Financial Conduct Authority ("FCA"), the
Australian Securities & Investments Commission ("ASIC"), the
Cyprus Securities and Exchange Commission ("CySEC"), the British
Virgin Islands' Financial Services Commission ("FSC"), and the
South African Financial Sector Conduct Authority ("FSCA").
These are the condensed consolidated interim financial
statements ('interim financial statements") for the six months
ended 30 June 2021 comprising the Company and its subsidiaries
(together referred as "the Group").
NOTE 2 - BASIS OF PREPARATION
These interim financial statements for the six months ended 30
June 2021 have been prepared in accordance with UK adopted IAS
34,"Interim Financial Reporting", and should be read in conjunction
with the Group's last annual consolidated financial statements for
the year ended 31 December 2020 ("last annual financial
statements"). They do not include all the information required for
a complete set of IFRS financial statements. However, selected
explanatory notes are included to explain events and transactions
that are significant to the understanding of the changes in the
Group's financial position and performance since the last annual
financial statements.
The last annual financial statements of the Group were prepared
in accordance with the International Financial Reporting Standards
(IFRS) adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union (EU).
Subsequent to the United Kingdom's exit from the European Union
on 31 December 2020 the Group has transitioned from International
Financial Reporting Standards (IFRS) as adopted by the European
Union (EU) to UK adopted international accounting standards. The
transition has had no material impact on previously reported
numbers.
These interim financial statements were authorised for issue by
the Company's Board of Directors on 23 September 2021.
Coronavirus (COVID-19) impact
Background
COVID-19, which is a respiratory illness caused by a new virus,
was declared a global pandemic by the World Health Organisation in
March 2020 and since then has had a significant impact on global
economies and equity, debt and commodity markets. The Group has
considered the impact of COVID-19 and other market volatility in
preparing its interim financial statements.
In taking into account the most recent lockdowns in countries
where the Group operates, as well as the ongoing vaccine rollout
and the possibility of a further wave of lockdowns as Europe goes
into winter, management considered the possible impact to the
estimates and outcomes in the measurement of the Group's assets and
liabilities. In making these considerations, management have also
taken into account the different financial and economic impact the
pandemic has had to the Group's online and retail gambling results
since March 2020. This is further discussed in Note 5.
Process applied
The Group is closely monitoring developments in, and the effects
of COVID-19 on the global economy. On the basis of currently
available information, the Group's actual results since the
pandemic began and the latest updates on the lockdowns and vaccine
announcements, the Group is now in a better position to assess the
magnitude of the impact of COVID-19 on the Group's operations and
future financial results.
As a consequence of COVID-19 and in preparing these interim
financial statements, management:
-- re-evaluated whether there were any additional areas of
judgement or estimation uncertainty;
-- reviewed external market communications to identify other COVID-19 related impacts;
-- reviewed public forecasts and experience from previous downturns;
-- conducted several internal processes to ensure consistency in
the application of the expected impact of COVID-19 across all asset
classes; and public forecasts and experience from previous
downturns;
-- assessed the carrying values of its assets and liabilities
and determined the impact thereon as a result of market inputs and
variables impacted by COVID-19.
Going concern basis
In adopting the going concern basis in the preparation of the
interim financial statements, the Directors have considered the
current trading performance, financial position and liquidity of
the Group, the principal risks and uncertainties together with
scenario planning and reverse stress tests completed for a period
of no less than 12 months from the approval of these interim
financial statements. The outbreak of the COVID-19 pandemic, the
measures adopted by governments in countries worldwide to mitigate
the pandemic's spread, including the impact of the latest and any
potential future lockdowns and COVID-19 vaccine announcements, were
also taken into consideration in the Directors' assessment.
Despite the impact on cash flows of COVID-19, the Group
continues to hold a strong liquidity position with adjusted gross
cash excluding assets held for sale of EUR410.5 million (31
December 2020: EUR554.6 million), with the decline explained by the
EUR100.0 million RCF repayment and the repayment of the 2020 gaming
tax liability in Italy of EUR89.6 million, both made in the six
months ended 30 June 2021. Whilst there is a probability that we
could go into another wave of lockdowns in major markets in which
we operate (such as Italy) which would pose several risks to the
Group's future trading performance, the Directors are confident of
its ability to continue as a going concern, due to its strong
performance in its online business.
The Directors have reviewed liquidity and covenant forecasts for
the Group, which have been updated for the expected impact of
COVID-19 on trading. The Directors have also considered
sensitivities in respect of potential downside scenarios, reverse
stress tests and the mitigating actions available to
management.
The modelling of downside scenarios assessed if there was a
significant risk to the Group's liquidity and covenant compliance
position. This includes the risk of future lockdowns, and
consideration of the recovery period in the Groups' key markets and
licensees' operations.
The Group's principal financing arrangements are a revolving
credit facility ("RCF") up to EUR317.0 million which expires in
November 2023 and where the Group has an option of extending for
one year, the 2018 Bond amounting to EUR530.0 million and the 2019
Bond amounting to EUR350.0 million which are repayable in October
2023 and March 2026 respectively. These financing arrangements are
subject to certain financial covenants which are tested every six
months on a rolling 12-month basis, as set out in Notes 19 and 20.
The RCF covenants have been relaxed as follows:
-- Leverage: Net Debt/Adjusted EBITDA revised to 4.5:1 for the
twelve months ended 30 June 2021 (31 December 2020: revised to
5:1). This will return to normal level of 3:1 at 31 December 2021
and beyond; and
-- Interest cover: Adjusted EBITDA/Interest revised to 3.5:1 for
the twelve months ended 30 June 2021 (31 December 2020: revised to
3:1). This will return to normal level of 4:1 at 31 December 2021
and beyond.
The Bonds only have one financial covenant, being the Fixed
Charge Coverage Ratio (same as the Interest cover ratio for the
RCF), which should equal or be greater than 2:1.
If the Group's results are in line with its base case
projections as approved by the Board (both including and excluding
the impact of Finalto being disposed) it would not be in breach of
the financial covenants for a period of no less than 12 months from
approval of these interim financial statements ("the relevant going
concern period"). There can be no assurance that a downside
scenario will be avoided if the COVID-19 vaccine is not effective
in decreasing the severity of the virus and/or we go into another
wave of lockdowns and which would impact the future performance of
the Group.
However, the Directors have concluded that the Group is well
placed to manage foreseeable downside and severe downside scenarios
after also considering mitigating actions that would be available
to the Directors and are within their control. In making this
conclusion, the Directors have considered a stress test and a
reverse test as explained below.
Stress test
The stress test assumes a worst-case scenario for the entire
Group (both including and excluding the impact of Finalto being
disposed) which includes further impacts caused by another wave of
lockdowns, together with additional sensitivities around Italy and
Asia, but with mitigations similar to the ones taken in 2020
(including salary and capital expenditure reductions and continued
suspension of distributions and share buybacks). Under this
scenario EBITDA would fall on average by 17% per month compared to
the base case over the relevant going concern period, but the Group
would not breach its covenants and have any liquidity issues. The
biggest impact on this stress test scenario was caused by the
implications of another potential wave of lockdowns to the Group's
retail network in Italy. However, based on the actual performance
of the rest of the business during the previous lockdowns and the
transition to online, the Directors are confident that any downturn
will be partially mitigated.
Reverse stress test
The reverse stress test was used to identify the reduction in
EBITDA required that would result in either a liquidity event or
breach of covenant. Based on the modelling completed the Group
would have sufficient liquidity to repay the RCF on a breach of the
leverage covenant and have therefore considered the point at which
the bond covenants would be breached as the Group would not have
sufficient liquidity.
As a result of completing this assessment, without considering
further mitigating actions, management considered the likelihood of
the reverse stress test scenario arising to be remote. In reaching
this conclusion management considered the following:
-- Current trading is performing above the base case;
-- EBITDA would have to fall by 126% and 78% in the second half
of 2021 and the 12 months ending June 2022 respectively compared to
the base case;
-- In the event that revenues decline to this point to drive the
decrease in EBITDA, additional mitigating actions are available to
management which have not been factored into the reverse stress
test scenario.
As such, the Directors have a reasonable expectation that the
Group will have adequate financial resources to continue in
operational existence over the relevant going concern period and
have therefore considered it appropriate to adopt the going concern
basis of preparation in the interim financial statements.
NOTE 3 - NEW STANDARDS, INTERPRETATIONS AND AMMENTS ADOPTED BY
THE GROUP
The accounting policies adopted in the preparation of the
interim financial statements are consistent with those followed in
the preparation of the Group's consolidated financial statements
for the year ended 31 December 2020.The Group has not early adopted
any standard, interpretation or amendment that has been issued but
is not yet effective.
Several amendments and interpretations apply for the first time
in 2021, but do not have a material impact on the interim financial
statements of the Group.
NOTE 4 - FUNCTIONAL AND PRESENTATION CURRENCY
These interim financial statements are presented in Euro, which
is the Company's functional currency. The functional currency for
subsidiaries includes Euro, United States Dollar and British
Pounds. All amounts have been rounded to the nearest million,
unless otherwise indicated.
NOTE 5 - CRITICAL JUDGEMENTS AND ESTIMATES
In preparing these interim financial statements, management has
made judgements and estimates that affect the application of the
Group's accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual events may differ for
these estimates.
As a result of the uncertainty associated with the unpredictable
nature of the COVID-19 pandemic, management faces challenges
relating to selecting appropriate assumptions and developing
reliable estimates. The use of forecast information is pervasive in
the Group's assessment for impairment of financial and
non-financial assets and the entity's ability to continue as a
going concern. The complexities associated with preparing forecasts
as a result of the pandemic and the economic downturn include the
following:
-- Wide range of possible outcomes, resulting in a high degree
of uncertainty about the ultimate trajectory of the pandemic and
the path and time needed for a return to a "steady state".
-- The associated economic impact of the pandemic being highly
dependent on variables that are difficult to predict.
-- The effect of these macro-economic conditions on the
estimated future cash flows of the Group.
The significant judgements made by management in applying the
Group's accounting policies and key sources of estimation and
uncertainty were the same as those in the last annual financial
statements, except as described below.
Judgments
Classification as held for sale
The definition of asset held for sale involves a significant
degree of judgement given that in order for an asset to be
classified as held for sale, it must be available for immediate
sale in its present condition and its sale must be highly probable.
The meaning of 'highly probable' is judgmental and therefore IFRS5
sets out the criteria for the sale to be considered as a highly
probable as follows:
-- Management must be committed to a plan to sell the asset;
-- An active program to find a buyer must be initiated;
-- The asset must be actively marketed for sale at a price that
is reasonable to its current fair value;
-- The sale must be completed within one year from the date of
classification;
-- Significant changes to be made to the plan must be
unlikely.
The Board of Directors made a decision to dispose of the
Financial segment during 2020. As disclosed in Note 17, the Group
entered into a sale and purchase agreement for the disposal of the
Financial segment. The transaction is conditional on the approval
of the disposal by the shareholders at the annual general meeting
and the approval of certain regulatory authorities in respect of
the change of control. The fair value of the Financial segment
determined based on the signed sale and purchase agreement that was
announced on 26 May 2021. Refer to Note 17C for further
information.
Estimates and assumptions
-- Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash
generating unit ("CGU") exceeds its recoverable amount, which is
the higher of its fair value less costs of disposal and its value
in use. The fair value less costs of disposal calculation is based
on available data from binding and non-binding sale agreements,
conducted at arm's length, for similar assets or observable market
prices less incremental costs of disposing the asset. The value in
use calculation is based on a discounted cash flow model ("DCF").
The cash flows are derived from the budget for the next five years
and do not include restructuring activities that the Group is not
yet committed to or significant future investments that will
enhance the performance of the assets of the CGU being tested. The
recoverable amount is sensitive to the discount rate used for the
DCF model as well as the expected future cash-inflows and the
growth rate used for extrapolation purposes. These estimates are
most relevant to goodwill and other intangibles with indefinite
useful lives recognised by the Group. The key assumptions used to
determine the recoverable amount of the GCUs with lower headroom,
including a sensitivity analysis, are disclosed and further
explained in Note 14.
-- Impairment of financial assets
The Group undertook a review of trade receivables and other
financial assets, as applicable, and their Expected Credit Losses
("ECL"). The review considered the macroeconomic outlook, customer
credit quality, exposure at default, and the effect of payment
deferral options as at the reporting date. The ECL methodology and
definition of default remained consistent with prior periods. The
model inputs, including forward-looking information, scenarios and
associated weightings, together with the determination of the
staging of exposures were revised. The Group's financial assets
consist of trade receivables and cash and cash equivalents. ECL on
cash balances was considered and calculated by reference to Moody's
credit rating for each financial institution, while ECL on trade
receivables was based on past default experience and an assessment
of the future economic environment. ECL and specific provisions are
considered and calculated with reference to the ageing and risk
profile of the balances. In addition, where customers within the
financial trading division have not passed the necessary ongoing
regulatory requirements, consideration is given as to whether
financial assets relating to that customer should be impaired. A
reasonable movement in the inputs to the ECL calculation does not
materially change the ECL to be recognised.
-- Income taxes
The Group's income tax expense, deferred tax assets and
liabilities reflect management's best estimate of current and
future taxes to be paid.
The Group is subject to income tax in several jurisdictions and
significant judgments and estimates are required in the
determination of the income tax expense. Significant judgement is
required in determining the provision for income taxes. During the
ordinary course of business, there are transactions and
calculations for which the ultimate tax determination is uncertain.
As a result, the Group recognises tax liabilities based on
estimates of whether additional taxes and interest will be due.
These tax liabilities are recognised when, despite the Group's
belief that its tax return positions are supportable, the Group
believes it is more likely than not that a taxation authority would
not accept its filing position. In these cases, the Group records
its tax balances based on either the most likely amount or the
expected value, which weights multiple potential scenarios. The
Group believes that its accruals for tax liabilities are adequate
for all open audit years based on its assessment of many factors
including past experience and interpretations of tax law.
-- Deferred tax asset
In evaluating the Group's ability to recover our deferred tax
assets in the jurisdiction from which they arise, management
considers all available positive and negative evidence, projected
future taxable income, tax-planning strategies and results of
recent operations.
Deferred tax asset is recognised to the extent that it is
probable that future taxable profit will be available against which
the temporary differences can be utilised. Judgement is required in
determining the initial recognition and the subsequent carrying
value of the deferred tax assets. Deferred tax asset is only able
to be recognised to the extent that utilisation is considered
probable. It is possible that a change in profit forecasts or risk
factors could result in a material change to the income tax expense
and deferred tax assets in future periods.
Deferred tax asset in the UK
The Group's internal restructuring in January 2021 resulted in
the Group being entitled to tax deductible goodwill and intangible
assets. A deferred tax asset amounting to EUR90.3 million is
recognised in respect of future tax deductions for goodwill and
intangible assets due to a change in the tax base of the Group's
intangible assets resulting from the restructuring. This deferred
tax asset has been recognised as it is conclude that it is probable
for the UK entities to continue to generate taxable profits in the
future against which we can utilise the tax deductions for goodwill
and intangible assets will be utilised giving a tax benefit of
EUR90.3 million. This represents the benefit of the deductions for
the next 5 years. In addition, of a total of EUR78.3 million of
deferred tax asset that has not been recognised in respect of the
benefit of future tax deductions expected to arise after the next 5
years for the remaining useful economic life of the goodwill and
intangible assets.
The Group reviewed the latest forecasts for the UK companies for
the next 5 years, including their ability to continue to generate
income beyond the forecast period under the tax laws substantively
enacted at the balance sheet date. Based on this, the Group's
management concludes that it is probable that the UK companies will
continue to generate taxable income in the future. Any future
changes in the tax law or the structure of the Group could have a
significant effect on the use of the tax deductions, including the
period over which the deductions can be utilised.
The Group has recognised a deferred tax asset of EUR8.2 million
in respect of tax losses in the UK which are available to offset
against the future profits of the UK Group companies. Based on the
current forecasts, these losses will be fully utilised over the
next 5 years.
Deferred tax liabilities in the UK
A deferred tax liability may arise for the UK tax resident Group
companies which are holders of options to acquire shares in
businesses (as included in Note 15E). In this respect, where the
option holder has exercised its option to acquire shares and has
the intention to sell the shares received, a deferred tax liability
should be recognised reflecting the tax that will be due on
disposal of the shares acquired under the option. As the Group has
not exercised its options (as outlined at Note 15E) at the balance
sheet date, no deferred tax liability has been in recognised as at
30 June 2021.
Deferred tax assets in Italy
The Group has recognised a deferred tax asset of EUR110.9
million in respect of tax losses in the Italy which are available
to offset against the future profits of the Italian Group
companies. Based on the current forecasts, these losses will be
fully utilised over the next 5 years.
The Group reviewed the latest forecasts for the Italian
companies for the next 5 years, including their ability to continue
to generate income beyond the forecast period under the tax laws
substantively enacted at the balance sheet date. Based on this,
Group management concludes that it is probable that the Italian
Group companies will continue to generate taxable income in the
future against which the losses can be utilised. Any future changes
in the tax law or the structure of the Group could have a
significant effect on the use of the tax deductions, including the
period over which the deductions can be utilised.
-- Determining the lease term of contracts with renewal and
termination options
The lease term is the non-cancellable period of the lease plus
periods covered by an extension or termination option if it is
reasonably certain that the lessee will or will not exercise the
option, respectively.
Upon the occurrence of a significant event or a significant
change in circumstances that is under the control of the Group and
had an effect on the decision whether it is reasonably certain that
the Group will exercise an option, which was not included before in
the lease term, or will not exercise an option, which was included
before in the lease term, the Group re-measures the lease liability
according to the revised leased payments using a new discount rate.
The change in the carrying amount of the liability is recognised
against the right of use asset or recognised in the consolidated
statement of comprehensive income if the carrying amount of the
right of use asset was reduced to zero.
-- Sun Bingo agreement
Following the amendment of the News UK contract in February
2019, which included a 15 year contract extension, the minimum
guarantee ("MG") which is payable to 30 June 2021 is recognised as
an asset and released over the remaining term of the contract in
line with the level of profitability. Management is required to
make reliable estimates on the expected future profitability of the
contract and therefore the expected schedule of release of the
asset over the contract period. In making this assessment
management applies reasonable assumptions based on known factors,
but sometimes and outside of management's control, these factors
may vary. This is reviewed on a regular basis to ensure that the MG
asset is still recoverable over the remaining term of the contract
and if not, an adjustment is made to the value of the MG in line
with the profile of the expected future profits.
-- Measurement of fair values
A number of the Group's accounting policies require the fair
value measurement of the Group's investments and derivative
financial assets. The Group has an established control framework
with respect to the measurement of fair value.
When measuring the fair value of an asset or a liability, the
Group uses market observable data as much as possible. Fair values
are categorised into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques as
follows:
- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The following table shows the carrying amount and fair value of
financial assets and financial liabilities measured at fair value,
including their levels in the fair value hierarchy.
Carrying Fair value
amount
------------------------------ ------------- ----------------------------
30 June Level 1 Level 2 Level 3
2021
------------------------------ ------------- -------- -------- --------
EUR'000 EUR'000 EUR'000 EUR'000
------------------------------ ------------- -------- -------- --------
Non current assets
Equity securities (Note
15) 12.1 4.0 - 8.1
Derivative financial assets
(Note 15) 343.4 - - 343.4
------------- -------- -------- --------
355.5 4.0 - 351.5
------------- -------- -------- --------
Non current liabilities
Contingent consideration
and redemption liability
(Note 21) 5.6 - - 5.6
------------- -------- -------- --------
Current liabilities
Contingent consideration
and redemption liability
(Note 21) 1.5 - - 1.5
------------- -------- -------- --------
Further information about the assumptions made in measuring the
fair value of derivative financial assets is included in Note
15E.
NOTE 6 - SEGMENT INFORMATION
The Group's reportable segments are strategic business units
that offer different products and services.
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker has been identified as the
management team including the Chief Executive Officer and the Chief
Financial Officer.
The operating segments identified are:
-- Gaming B2B: including Casino, Services, Sport, Bingo, Poker
and Other
-- Gaming B2C: Snaitech, Sun Bingo and Casual and Social
Business (discontinued operations) and Other B2C
-- Financial: including B2C and B2B CFD (discontinued
operations)
The Group-wide profit measures are Adjusted EBITDA and Adjusted
Profit (see Note 9).
There is no allocation of operating expenses, profit measures,
assets and liabilities to individual products within the gaming
segments, as allocation would be arbitrary.
Six months ended 30 June 2021
Total
B2C - Gaming - Financial - B2C - Total
Core Asia Total continuing continuing Discontinued discontinued discontinued
B2B B2B B2B operations Intercompany operations operations operations operations Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Revenue 223.4 43.8 267.2 196.6 (6.4) 457.4 31.9 - 31.9 489.3
Adjusted
EBITDA 72.1 52.0 - 124.1 (0.1) - (0.1) 124.0
Adjusted
Profit
attributable
to the
owners of
the Company 14.7 39.9 - 54.6 4.0 - 4.0 58.6
Total assets 1,675.7 1,141.5 2,817.2 480.1 - 480.1 3,297.3
Total
liabilities 838.7 818.7 1,657.4 317.9 - 317.9 1,975.3
Six months ended 30 June 2020
Total
B2C - Gaming - B2C - Total
Core Asia Total continuing continuing discontinued discontinued
B2B B2B B2B operations Intercompany operations Financial operations operations Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Revenue 188.5 41.2 229.7 253.4 (6.4) 476.7 87.3 6.6 93.9 570.6
Adjusted
EBITDA 63.2 46.3 - 109.5 52.8 0.5 53.3 162.8
Adjusted
Profit/(loss)
attributable
to the owners
of the
Company 6.0 (2.6) - 3.4 40.9 0.4 41.3 44.7
Total assets 1,299.9 1,307.5 - 2,607.4 761.1 2.8 763.9 3,371.3
Total
liabilities 979.3 878.2 - 1,857.5 299.8 2.4 302.2 2,159.7
NOTE 7 - DISCONTINUED OPERATION
As explained in Note 17, the Group has classified its Casual and
Social Gaming Business and Financial segment as assets held for
sale with their results shown under discontinued operations in the
consolidated statement of comprehensive income. As a result, the
comparative financial information for the Financial segment have
been transferred to discontinued operations.
The results of the Casual and Social Gaming Business for the
period are presented below:
Six months ended 30 June 2021 Six months ended 30 June 2020
Actual Adjusted Actual Adjusted
EUR'm EUR'm EUR'm EUR'm
------------------------------------ ------- ------------------------------ ------- ------------------------------
Revenue - - 6.6 6.6
Distribution costs before
depreciation and amortisation - - (6.1) (6.1)
Administrative expenses before - - (0.2) -
depreciation and amortisation
------- ------------------------------ ------- ------------------------------
EBITDA - - 0.3 0.5
Depreciation and amortisation - - (0.1) (0.1)
Finance income - - 0.1 0.1
Profit on disposal of discontinued
operations (Note 17B) 7.6 - 0.6 -
Profit before taxation 7.6 - 0.9 0.5
Income tax expense - - (0.1) (0.1)
------- ------------------------------ ------- ------------------------------
Profit from discontinued
operations, net of tax 7.6 - 0.8 0.4
------- ------------------------------ ------- ------------------------------
The results of the Financial segment for the period are
presented below:
Six months ended 30 June 2021 Six months ended 30 June 2020
Actual Adjusted Actual Adjusted
EUR'm EUR'm EUR'm EUR'm
------------------------------------ ------- ------------------------------ ------- ------------------------------
Revenue 31.9 31.9 87.3 87.3
Distribution costs before
depreciation and amortisation (25.5) (25.4) (25.0) (24.6)
Administrative expenses before
depreciation and amortisation (4.6) (4.3) (15.9) (9.8)
Impairment of financial assets (2.3) (2.3) (0.1) (0.1)
------- ------------------------------ ------- ------------------------------
EBITDA (0.5) (0.1) 46.3 52.8
Depreciation and amortisation - - (14.7) (6.2)
Reversal of impairment of asset 2.0 - - -
held for sale
Finance income 5.9 5.9 0.2 0.2
Finance costs (0.4) (0.4) (2.1) (2.1)
Profit before taxation 7.0 5.4 29.7 44.7
Income tax expense (1.4) (1.4) (3.0) (3.8)
------- ------------------------------ ------- ------------------------------
Profit from discontinued
operations, net of tax 5.6 4.0 26.7 40.9
------- ------------------------------ ------- ------------------------------
Total profit from discontinued
operations, net of tax 13.2 4.0 27.5 41.3
------- ------------------------------ ------- ------------------------------
Earnings per share from discontinued operations
Basic (cents) 4.4 1.4 9.3 13.9
Diluted (cents) 4.2 1.2 9.0 13.4
The net cash flows incurred by the Financial segment in the
period, are as follows:
Six months ended 30 June 2021 Six months ended 30 June 2020
EUR'm EUR'm
Operating (25.2) 94.8
Investing (2.8) (3.4)
Financing (1.5) (1.1)
------------------------------ ------------------------------
Net cash (outflow)/inflow (29.5) 90.3
------------------------------ ------------------------------
The net cash flows incurred by the Casual and Social Gaming
Business in both periods presented are not significant.
NOTE 8 - REVENUE FROM CONTRACTS WITH CUSTOMERS
The Group has disaggregated revenue into various categories in
the following table which is intended to:
-- Depict how the nature, amount, timing and uncertainty of
revenue and cash flows are affected by recognition date; and
-- Enable users to understand the relationship with revenue
segmental information provided in the segmental information
note.
Set out below is the disaggregation of the Group's revenue:
Revenue analysis by geographical location of licensee, product
type and timing of transfer of performance obligations
The revenues from B2B (consisting of royalty income, fixed-fee
income, revenue received from the sale of hardware and cost based
revenue), B2C and Financials are described in Note 5D in the last
annual financial statements.
Six months ended 30 June 2021
Total
Gaming Financial - B2C - Total
- continuing discontinued discontinued discontinued
B2B B2C Intercompany operations operations operations operations Total
Primary
Geographic
Markets EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
--------------- ------ ------ ------------- -------------- -------------- -------------- -------------- ------
Italy 15.8 157.9 (3.5) 170.2 0.4 - 0.4 170.6
United Kingdom 59.8 30.1 (1.9) 88.0 11.6 - 11.6 99.6
Mexico 40.9 - - 40.9 0.1 - 0.1 41.0
Philippines 38.0 - - 38.0 - - - 38.0
Malta 27.6 - - 27.6 0.2 - 0.2 27.8
Gibraltar 13.2 - - 13.2 - - - 13.2
Spain 10.7 - - 10.7 0.4 - 0.4 11.1
Germany 0.8 8.3 (0.8) 8.3 2.4 - 2.4 10.7
Greece 8.0 - - 8.0 0.7 - 0.7 8.7
Poland 6.3 - - 6.3 0.1 - 0.1 6.4
Curacao 5.7 - - 5.7 0.1 - 0.1 5.8
Colombia 4.3 - - 4.3 - - - 4.3
Switzerland 2.8 - - 2.8 0.2 - 0.2 3.0
Norway 2.8 - - 2.8 0.2 - 0.2 3.0
Romania 2.8 - - 2.8 - - - 2.8
Other 27.7 0.3 (0.2) 27.8 15.5 - 15.5 43.3
267.2 196.6 (6.4) 457.4 31.9 - 31.9 489.3
------ ------ ------------- -------------- -------------- -------------- -------------- ------
Financial
Total Gaming - B2C - Total
- continuing discontinued discontinued discontinued
B2B B2C Intercompany operations operations operations operations Total
Product type EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
-------------- ------ ------ ------------- -------------- -------------- ------------- -------------- ------
B2B 267.2 - (6.4) 260.8 - - - 260.8
------ ------ ------------- -------------- -------------- ------------- -------------- ------
Snaitech - 157.9 - 157.9 - - - 157.9
Sun Bingo - 30.2 - 30.2 - - - 30.2
B2C Sport
and other
B2C - 8.5 - 8.5 - - - 8.5
------ ------ ------------- -------------- -------------- ------------- -------------- ------
Total B2C - 196.6 - 196.6 - - - 196.6
------ ------ ------------- -------------- -------------- ------------- -------------- ------
Financial - - - - 31.9 - 31.9 31.9
------ ------ ------------- -------------- -------------- ------------- -------------- ------
267.2 196.6 (6.4) 457.4 31.9 - 31.9 489.3
------ ------ ------------- -------------- -------------- ------------- -------------- ------
Total Financial
Gaming - B2C - Total
- continuing discontinued discontinued discontinued
B2B B2C Intercompany operations operations operations operations Total
Timing of
transfer of
performance
obligations EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
--------------- ------ ------ ------------- -------------- -------------- -------------- -------------- ------
At the
satisfaction
of the
performance
obligation 264.4 196.6 (6.4) 454.6 31.9 - 31.9 486.5
Hardware sale
(at the point
of
transaction) 2.4 - - 2.4 - - - 2.4
Over time 0.4 - - 0.4 - - - 0.4
------ ------ ------------- -------------- -------------- -------------- -------------- ------
267.2 196.6 (6.4) 457.4 31.9 - 31.9 489.3
------ ------ ------------- -------------- -------------- -------------- -------------- ------
Six months ended 30 June 2020
Total
Gaming Financial - B2C - Total
- continuing discontinued discontinued discontinued
B2B B2C Intercompany operations operations operations operations Total
Primary
Geographic
Markets EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
--------------- ------ ------ ------------- -------------- -------------- -------------- -------------- ------
Italy 12.5 216.1 (3.1) 225.5 1.8 - 1.8 227.3
United Kingdom 66.3 28.8 (1.9) 93.2 55.4 - 55.4 148.6
Philippines 35.6 - - 35.6 - - - 35.6
Malta 26.8 - - 26.8 0.5 - 0.5 27.3
Mexico 20.9 - - 20.9 0.3 - 0.3 21.2
Spain 11.5 - - 11.5 0.7 - 0.7 12.2
Germany 1.0 7.0 (1.0) 7.0 1.7 - 1.7 8.7
Gibraltar 7.0 - - 7.0 - - - 7.0
Greece 6.4 - - 6.4 0.5 - 0.5 6.9
Cyprus 0.5 - - 0.5 5.7 - 5.7 6.2
United Arab
Emirates - - - - 6.0 - 6.0 6.0
Curacao 5.2 - - 5.2 - - - 5.2
Finland 3.4 - - 3.4 - - - 3.4
Norway 2.9 - - 2.9 0.1 - 0.1 3.0
Austria 1.4 1.5 (0.4) 2.5 0.1 - 0.1 2.6
Others 28.3 - - 28.3 14.5 6.6 21.1 49.4
229.7 253.4 (6.4) 476.7 87.3 6.6 93.9 570.6
------ ------ ------------- -------------- -------------- -------------- -------------- ------
Total
Gaming Financial - B2C - Total
- continuing discontinued discontinued discontinued
B2B B2C Intercompany operations operations operations operations Total
Product type EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
-------------- ------ ------ ------------- -------------- -------------- -------------- --------------- ------
B2B 229.7 - (6.4) 223.3 - - - 223.3
------ ------ ------------- -------------- -------------- -------------- --------------- ------
Snaitech - 215.5 - 215.5 - - - 215.5
Sun Bingo - 28.1 - 28.1 - - - 28.1
B2C Sport
and other
B2C - 9.8 - 9.8 - 6.6 6.6 16.4
------ ------ ------------- -------------- -------------- -------------- --------------- ------
Total B2C - 253.4 - 253.4 - 6.6 6.6 260.0
------ ------ ------------- -------------- -------------- -------------- --------------- ------
Financial - - - - 87.3 - 87.3 87.3
------ ------ ------------- -------------- -------------- -------------- --------------- ------
229.7 253.4 (6.4) 476.7 87.3 6.6 93.9 570.6
------ ------ ------------- -------------- -------------- -------------- --------------- ------
Total Financial
Gaming - B2C - Total
- continuing discontinued discontinued discontinued
B2B B2C Intercompany operations operations operations operations Total
Timing of
transfer of
performance
obligations EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
--------------- ------ ------ ------------- -------------- -------------- -------------- -------------- ------
At the
satisfaction
of the
performance
obligation 228.4 253.4 (6.4) 475.4 87.3 6.6 93.9 569.3
Hardware sale
(at the point
of
transaction) 0.3 - - 0.3 - - - 0.3
Over time 1.0 - - 1.0 - - - 1.0
------ ------ ------------- -------------- -------------- -------------- -------------- ------
229.7 253.4 (6.4) 476.7 87.3 6.6 93.9 570.6
------ ------ ------------- -------------- -------------- -------------- -------------- ------
There were no changes in the Group's valuation processes and the
vast majority of the Group's B2B contracts are for the delivery of
services within the next 12 months.
The Group's contract liabilities, in other words deferred
income, primarily include advance payment for hardware and
services, which are typically used in 12 months, and also include
the set-up fees paid by the licensee at the beginning of the
contract. The fees cover the whole period of the contract, with an
average period of 36 months. The revenue is recognised monthly
until the end of the contract. These are included in deferred
income and total EUR8.4 million (30 June 2020: EUR6.8 million, 31
December 2020: EUR11.8 million).
NOTE 9 - ADJUSTED ITEMS
Management regularly uses adjusted financial measures internally
to understand, manage and evaluate the business and make operating
decisions. These adjusted measures are among the primary factors
management uses in planning for and forecasting future periods. The
primary adjusted financial measures are Adjusted EBITDA and
Adjusted Profit (Adjusted post-tax profit), which management
considers, are relevant in understanding the Group's financial
performance.
As these are not a defined performance measure in IFRS and are
not intended as a substitute for those measures, the Group's
definition of adjusted items may not be comparable with similarly
titled performance measures or disclosures by other entities.
The following tables give a full reconciliation between adjusted
and actual results:
Six months ended 30 June 2021
Profit
from continuing
Administrative operations
and distribution attributable
expenses to the Total profit
and impairment EBITDA owners attributable
of financial from continuing of the to the owners
Note Revenue assets operations Company of the Company
EUR'm EUR'm EUR'm EUR'm EUR'm
------------------------- ----- -------- ------------------ ----------------- ----------------- ----------------
Reported as actual 457.4 347.6 109.8 401.9 415.1
Employee stock option
expenses
([2]) - (7.0) 7.0 7.0 7.4
Professional fees ([3]) - (2.2) 2.2 2.2 2.2
Additional consideration
for
put/call option ([4]) - (0.9) 0.9 0.9 0.9
Movement in contingent
consideration
and redemption
liability (finance
costs row) ([5]) - - - 1.3 1.3
Charitable donation
([6]) - (1.9) 1.9 1.9 1.9
Settlement of legal
matters ([7]) (2.3) 2.3 2.3 2.3
Fair value change of
equity investments
([8]) 15D - - - (0.8) (0.8)
Fair value change of
derivative
financial assets ([9]) 15E - - - (299.9) (299.9)
Amortisation of
intangible assets
on acquisitions - - - 18.9 18.9
Impairment of tangible
and intangible
assets 10 - - - 15.1 15.1
Reversal of impairment
of asset
held for sale 17C - - - - (2.0)
Deferred tax on
acquisitions
(tax expense row) - - - (5.9) (5.9)
Deferred tax ([10]) (tax
expense
row) 12 - - - (90.3) (90.3)
Profit on disposal of
discontinued
operations 17B - - - - (7.6)
Adjusted measure 457.4 333.3 124.1 54.6 58.6
Constant currency impact 0.4 - 0.4 1.8 (7.0)
-------- ------------------ ----------------- ----------------- ----------------
Adjusted result on
constant currency
basis 457.8 333.3 124.5 56.4 51.6
Adjusted result related
to acquisitions
on constant currency
basis (1.2) (1.4) 0.2 0.3 0.3
-------- ------------------ ----------------- ----------------- ----------------
Underlying adjusted
result on
constant currency basis 456.6 331.9 124.7 56.7 51.9
-------- ------------------ ----------------- ----------------- ----------------
Six months ended 30 June 2020
Profit
from continuing
Administrative operations
and distribution attributable
expenses to the Total profit
and impairment EBITDA from owners attributable
of financial continuing of the to the owners
Note Revenue assets operations Company of the Company
EUR'm EUR'm EUR'm EUR'm EUR'm
------------------------------ ----- -------- ------------------ ------------ ----------------- ----------------
Reported as actual 476.7 384.9 91.8 (22.1) 5.3
Employee stock option
expenses ([11]) - (7.1) 7.1 7.1 10.7
Professional fees ([12]) - (1.7) 1.7 1.7 3.6
Additional consideration for
put/call
option ([13]) - (4.5) 4.5 4.5 4.5
Movement in contingent
consideration
and redemption liability
([14]) - (1.2) 1.2 4.1 4.1
Charitable donation ([15]) (3.2) 3.2 3.2 3.2
Provision of other
receivables ([16]) - - - - 1.2
Fair value change of equity
investments
([17]) 15D - - - (0.4) (0.4)
Amortisation of intangible
assets on
acquisitions ([18]) - - 19.5 28.0
Impairment of property, plant
and equipment
and intangible assets - - 7.2 7.2
Fair value change on
acquisition of
associate 15B - - (6.5) (6.5)
Deferred tax on acquisitions - - - (5.8) (6.6)
Tax on disposal of asset
classified
as held for sale - - - 4.4 4.4
Profit on disposal of asset
classified
as held for sale 17A - - - (13.4) (13.4)
Profit on disposal of
discontinued
operations 17B - - - - (0.6)
-------- ------------------ ------------ ----------------- ----------------
Adjusted measure 476.7 367.2 109.5 3.5 44.7
Constant currency impact - - - 1.6 3.1
-------- ------------------ ------------ ----------------- ----------------
Adjusted result on constant
currency
basis 476.7 367.2 109.5 5.1 47.8
Adjusted result related to
acquisitions
on constant currency basis (0.8) (1.0) 0.2 0.3 0.3
-------- ------------------ ------------ ----------------- ----------------
Underlying adjusted result on
constant
currency basis 475.9 366.2 109.7 5.4 48.1
-------- ------------------ ------------ ----------------- ----------------
NOTE 10 - IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS
Six months Six months
ended ended
30 June 2021 30 June 2020
EUR'm EUR'm
--------------------------------- ------------- -------------
Impairment of tangible assets 12.5 0.6
Impairment of intangible assets 2.6 6.6
------------- -------------
15.1 7.2
------------- -------------
Of the total impairment of tangible assets of EUR 12.5 million,
an amount of EUR12.3 million relates to land classified as held for
sale. Refer to Note 17A.
Impairment of intangible assets for H1 2021 relates to the
impairment of capitalised development costs. Based on the
assessment performed at the reporting date, several projects will
not be recoverable.
Of the total impairment of intangible assets for H1 2020 of EUR
6.6 million, an amount of EUR 5.4 million relates to the impairment
of the Sports B2C CGU.
NOTE 11 - FINANCING INCOME AND COSTS
Six months Six months
ended ended
30 June 2021 30 June 2020
EUR'm EUR'm
A. Finance income
Interest received 0.4 0.7
0.4 0.7
------------- -------------
B. Finance costs
Interest on bonds (18.2) (18.3)
Interest expense on lease liability (2.6) (2.8)
Interest on loans and borrowings and other (3.2) (2.2)
Bank facility fees (0.7) (1.2)
Bank charges (6.1) (4.1)
Movement in contingent consideration and
redemption liability (1.3) (3.0)
Net foreign exchange loss (1.7) (1.5)
(33.8) (33.1)
------------- -------------
Net financing costs (33.4) (32.4)
------------- -------------
NOTE 12 - INCOME TAX (CREDIT)/EXPENSE
Six months Six months
ended ended
30 June 2021 30 June 2020
EUR'm EUR'm
Income tax expense for the current period 4.2 4.9
Income tax relating to prior periods 2.1 0.1
Withholding tax 0.1 0.1
Deferred tax (130.2) (2.1)
------------- -------------
(123.8) 3.0
------------- -------------
The Group implemented an internal restructuring in January 2021,
which resulted in Playtech plc migrating its tax residency to the
United Kingdom and the Group's key operating entity transferring
its business to a company resident in the UK where the headline
rate is currently 19%.
The Group's adjusted current effective tax rate for H1 2021 is
23% (H1 2020:55%). The current period's tax charge on Adjusted
Profit from continuing operations was higher than the UK statutory
rate of 19% due to the Group generating tax losses during the
period. Whilst a deferred tax asset has been recognised in respect
of losses in certain territories, the tax credit is not reflected
in the cash tax effective tax rate. The H1 2020 tax charge on
Adjusted Profit from continuing operations is higher than H1 2021
due to the Group generating tax losses during the period in certain
territories which cannot be offset against taxable profits arising
in different territories. The benefit of the tax losses which are
available to utilise in future periods is not reflected in the cash
tax effective tax rate.
The reported current effective tax rate for H1 is 2021 is 2% (H1
2020: 0%) as this reflects fair value movements of EUR299.9 million
on derivative assets which are not taxable. A deferred tax charge
may arise for some option holder to acquire shares in businesses
but only to the extent that the option has been exercised and the
Group has the intention to sell the shares received (as included at
Note 5 and 15E). As the Group has not exercised its options at the
balance sheet date, no deferred tax liability has been
recognised.
The Group's internal restructuring resulted in the Group being
entitled to tax deductible goodwill and intangible assets. A
deferred tax asset amounting to EUR90.3 million was recognised in
respect of future tax deductions due to a change in the tax base of
the Group's intangible assets resulting from the restructuring
(this has no impact on the Group's intangible assets). This amount
has been excluded from Adjusted Profit in the period and in each
period after the transaction, with the benefit added to the
adjusted income tax charge as this more accurately aligns the
adjusted tax charge with the expected rate of cash tax payments. As
such, this restructuring is not expected to have a significant
impact on the Group's adjusted effective tax rate.
In addition, there is a deferred tax credit of EUR39.9 million
of which EUR34.0 million relates to the recognition of a deferred
tax asset on the recognition of the benefit of tax losses arising
in Italy and the UK available to use against taxable profits in
future periods and EUR5.9 million which relates to the reversal of
deferred tax liabilities in respect of acquisitions.
The deferred tax asset and liability are measured at the tax
rates of the respective territories which are expected to apply to
the year in which the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted
or substantively enacted at the balance sheet date. The UK Budget
2021 announced on 3 March 2021 an increase in the UK's main
corporation tax rate from 19% to 25% from 1 April 2023. This was
enacted as part of Finance Bill 2021 on 10 June 2021. As these
changes were substantively enacted before the balance sheet date,
they have been reflected in the deferred tax balances within these
financial statements.
NOTE 13 - EARNINGS PER SHARE
The calculation of basic earnings per share ("EPS") has been
based on the following profit/(loss) attributable to the owners of
the Company shareholders and weighted-average number of ordinary
shares outstanding.
Six months ended Six months ended
30 June 2021 30 June 2020
Actual Adjusted Actual Adjusted
EUR'm EUR'm EUR'm EUR'm
---------------------------------------------- ------- ----------------- ------- -----------------
Profit attributable to owners of the Company 415.1 58.6 5.4 44.8
Basic (cents) 139.3 19.7 1.8 15.0
Diluted (cents) 132.2 18.6 1.8 14.6
Six months ended Six months ended
30 June 2021 30 June 2020
Actual Adjusted Actual Adjusted
EUR'm EUR'm EUR'm EUR'm
------------------------------------------- ------------- ----------------- ------------ -----------------
Profit/(Loss) attributable to owners of
the Company from continuing operations 401.9 54.6 (22.1) 3.5
Basic (cents) 134.9 18.3 (7.4) 1.2
Diluted (cents) 128.0 17.4 (7.4) 1.1
Six months ended Six months ended
30 June 2021 30 June 2020
Actual Adjusted Actual Adjusted
Number Number Number Number
Denominator - basic
Weighted average number of equity shares 297,920,422 297,920,422 297,458,669 297,458,669
------------- ----------------- ------------ -----------------
Denominator - diluted
Weighted average number of equity shares 297,920,422 297,920,422 297,458,669 297,458,669
Weighted average number of share options 16,086,406 16,086,406 10,043,676 10,043,676
Weighted average number of shares 314,006,828 314,006,828 307,502,345 307,502,345
------------- ----------------- ------------ -----------------
The calculation of diluted EPS has been based on the above
profit attributable to the owners of the Company and
weighted-average number of ordinary shares outstanding after
adjusting for the effects of all dilutive potential ordinary
shares. The effects of the anti-dilutive potential ordinary shares
are ignored in calculating diluted EPS.
EPS for discontinued operations is disclosed in Note 7.
NOTE 14 - INTANGIBLE ASSETS
At 30 June 2021 At 30 June 2020
EUR'm EUR'm
-------------------------------------------------- ---------------- ----------------
Net book value of intangible assets at 1 January 1,097.2 1,499.3
Additions 27.8 45.8
Additions through business combinations - 21.4
Impairment (Note 10) (2.6) (6.6)
Amortisation charge for the period (54.4) (73.9)
Foreign exchange movements - (0.2)
Net book value of intangible assets at 30 June 1,068.0 1,485.8
In accordance with IAS 36, the Group regularly monitors the
carrying value of its intangible assets, including goodwill.
Goodwill is allocated to fifteen cash generating units ("CGU") (30
June 2020: sixteen, 31 December 2020: fifteen).
Management reviews CGUs for impairment bi-annually, or on the
occurrence of an impairment indicator. As a consequence of the
COVID-19 pandemic, some revenue streams have experienced
significant reductions due to closure of the retail betting shops.
Even though partial recovery has been achieved, the effects of the
virus and the constant COVID-19 waves has extended the closures
with intermittent lockdowns during the first half of 2021. With the
exception of the Financial segment, which is included in held for
sale, the recoverable amount of each CGU has been determined from
value in use calculations based on cash flow projections covering 5
years plus a terminal value which have been updated for COVID-19
impact on future periods.
Management has considered the ongoing economic uncertainty
caused by the global pandemic, and the higher level of judgement
and uncertainty in forecasts. A potential risk for future
impairment exists should there be a significant change in the
economic outlook, versus those trends management anticipate in its
forecasts due to COVID-19.
Certain CGUs which are referred to below are considered
sensitive to changes in assumptions used for the calculation of
value in use.
The Bingo Retail CGU, with net assets of EUR19.1 million, has
been significantly impacted by COVID-19. The recoverable amount of
the Bingo Retail CGU has been determined using a cashflow forecast
that includes annual revenue growth rates between 1% to 31% over
the 2-5 year forecast period, 2% long term growth rate and a post
tax discount rate of 14.8%. The recoverable amount would equal the
carrying amount of the CGU if the discount rate applied was higher
by 68.5% i.e., reaching a post-tax discount rate of 24.9%. Same
case applies, if the revenue growth was lower by 15.8% when
compared to the forecasted average 5-year growth.
The recoverable amount of the Eyecon CGU, with net assets of
EUR30.2 million, has been determined using a cashflow forecast that
includes annual revenue growth rates between 4% to 8% over the 2-5
year forecast period, 2% long term growth rate and a post tax
discount rate of 12.8%. The recoverable amount would equal the
carrying amount of the CGU if the discount rate applied was higher
by 64.4% i.e., reaching a post-tax discount rate of 21%. Same case
applies, if the revenue growth was lower by 6.8% when compared to
the forecasted average 5-year growth.
The recoverable amount of the Quickspin CGU, with net assets of
EUR61.3 million, has been determined using a cashflow forecast that
includes annual revenue growth rates between 5% to 6.9% over the
2-5 year forecast period, 2% long term growth rate and a post tax
discount rate of 10.8%. The recoverable amount would equal the
carrying amount of the CGU if the discount rate applied was higher
by 30.6% i.e., reaching a post-tax discount rate of 14.2%. Same
case applies, if the revenue growth was lower by 3.5% when compared
to the forecasted average 5-year growth.
The Statscore CGU with net assets of EUR13.4 million has been
deemed as a sensitive CGU due to the startup activities of the unit
and first year performance as part of the Group. The recoverable
amount of the Statscore CGU has been determined using cashflow
forecast that includes annual revenue growth rates between 18% to
56% over the 2-5 year forecast period, 2% long term growth rate and
a post tax discount rate of 18.2%. The recoverable amount would
equal the carrying amount of the CGU if the discount rate applied
was higher by 32.7% i.e., reaching a post-tax discount rate of
24.2%. Same case applies, if the revenue growth was lower by 2.8%
when compared to the forecasted average 5-year growth.
NOTE 15 - INVESTMENTS AND DERIVATIVE FINANCIAL ASSETS
Introduction
As at 31 December 2020 and 30 June 2020 the Group had four
different investment categories, being investments in joint
ventures, investment in associates, investment in structured
agreements and other investments (A-D in the below table
respectively).
As at 30 June 2021, the Group only had investments in associates
and other investments, with the investments in structured
agreements being transferred entirely to a new category called
derivative financial assets (E in the table below). The reasons for
this transfer are further explained in Note 15E.
The derivative financial assets category includes a number of
call options which are embedded in certain agreements in Latin
America that have been fair valued in the period ended 30 June 2021
and therefore reclassified following a change in the underlying
conditions and renegotiation of terms or those requiring upward
adjustment. External, independent valuers performed the valuations
of the call options.
30 June 30 June 30 December
2021 2020 2020
EUR'm EUR'm EUR'm
A. Investment in joint ventures - 22.4 -
B. Investment in associates 1.6 12.2 1.5
C. Investment in structured agreements - 16.8 39.2
D. Other investments 10.5 7.4 9.7
Total investments 12.1 58.8 50.4
E. Derivative financial assets 343.4 - -
355.5 58.8 50.4
The tables below summarise the movement from 31 December 2020 to
30 June 2021 for both investments and derivative financial assets.
The recognition and valuation methodologies for each category are
then explained in each of the relevant sections below:
Investments
EUR'm
Total investment value at 31 December
2020 50.4
B. Movement in investment in associate:
Share of profit ( Alfea S.p.a) 0.1
C. Movement in investment in structured
agreements
Wplay reclassification to derivative
financial assets (22.4)
Caliplay reclassification to derivative
financial assets (16.8)
D. Movement in other investments
Change in fair value of listed securities 0.8
Total investment value at 30 June
2021 12.1
Derivative financial assets
EUR'm EUR'm
Total derivative financial asset value
at 31 December 2020 -
Caliplay call option
Fair value of call option 285.0
Total Caliplay call option 285.0
Wplay call option
Reclassification of Wplay from investments
in structured agreements 22.4
Increase to fair value 26.7
Total Wplay call option 49.1
Other call options
Tenbet (Costa Rica) 3.2
Onjoc (Panama) 1.8
Galera/Ocean 88 Holdings (Brazil) 4.3
Total other call options 9.3
Total derivative financial assets value
at 30 June 2021 343.4
A. Investment in joint ventures
The agreement with Wplay was accounted for as a joint venture at
inception ($25.0 million ( EUR 22.4 million)) due to the terms in
place giving the Group joint control. During 2020, the contract was
renegotiated resulting in Playtech's control being reassessed as
significant influence and the interest was reclassified as an
investment in structured agreements as at 31 December 2020. Refer
to Note 15C.
B. Investment in equity accounted associates
Investment in BGO
In August 2014, the Group acquired 33.33% of the shares of BGO
Limited, a company incorporated in Alderney, for a total
consideration of GBP10.0 million (EUR12.5 million). In 2015, the
Group invested an additional GBP0.7 million (EUR0.9 million).
During H2 2020, the Group disposed of the shares in BGO for a total
consideration of EUR1. The Group does not consider any additional
consideration will be payable, as part of an exit sale event to a
third party investor prior to 30 September 2025. As a result of
this transaction the Group realised a loss on disposal of EUR8.9
million, recognised in the consolidated statement of comprehensive
income for the year ended 31 December 2020.
Investment in Statscore
During H1 2020, the Group acquired an additional 40% of
Statscore SP Z.O.O ("Statscore"). Prior to the acquisition the
Group held 45% of Statscore and was accounted for as an investment
in associate. This transaction resulted in a total fair value gain
on acquisition of EUR6.5 million, which was the difference between
the total carrying value of the investment in associate of EUR1.5
million and its fair value of EUR8.0 million at the point of
acquisition. The gain was recognised in the consolidated statement
of comprehensive income for the period ended 30 June 2020.
Investment in Alfea S.p.a
At 30 June 2021 the Group's value of the Investment in Alfea
S.p.a was EUR1.6 million (31 December 2020: EUR1.5 million). The
Group has equity shares in Alfae S.p.a since June 2018. Share of
profit of EUR0.1 million is recognised in the consolidated
statement of comprehensive income for the six months ended 30 June
2021.
Movements in the carrying value of the investment during the
period are as follows:
EUR'm
Investment in associates at 1 January 2020 13.1
Share of profit 0.6
Fair value change on step-acquisition of associate 6.5
Subsidiary acquired in steps (8.0)
Investment in associates at 30 June 2020 12.2
Disposal during the year (8.9)
Share of profit 0.4
Transfer to asset classified as held for sale (Note
17D) (2.2)
Investment in associates at 31 December 2020 1.5
Share of profit 0.1
Investment in associates at 30 June 2021 1.6
C. Investment in structured agreements
Wplay
In 2019, the Group entered into long term agreements with Aquila
Global Group SAS ("Wplay"), which is a leading gaming and betting
brand in Colombia (the "Wplay structured/framework agreement").
The agreement with Wplay was accounted for as a joint venture at
inception due to the terms in place giving the Group joint control.
During 2020, the contract was renegotiated resulting in Playtech's
control being reassessed as significant influence and the interest
was reclassified as an investment in structured agreements. The
Group has a call option to acquire a 49.9% equity holding in the
Wplay business and, in 2021 , the parties agreed to defer the
Group's ability to exercise this option until on or after August
2022 (previously August 2021). If the call option is exercised by
Playtech, the Group would no longer provide certain services and as
such will no longer be entitled to the profit share received for
such services.
The payments made to Wplay in 2019 were considered as payments
advanced under the terms of the original framework agreement. The
amendments to the framework in 2021 confirmed that these are the
full and final payments for the option. The amount of EUR22.4
million paid to date for the option was transferred to derivative
financial assets and formed part of the call option fair value in
the current period. Refer to Note 15E.
Caliplay
During 2014 the Group entered into an agreement with Turística
Akalli, S. A. de C.V which has since changed its name to
Corporacion Caliente SAPI ("Akalli"), the owner of Tecnologia en
Entretenimiento Caliplay, S. de R.L. de C.V ("Caliplay"), which is
a leading betting and gaming operator which operates the "Caliente"
brand in Mexico (the "Caliplay Structured Agreement").
Playtech has no equity holding in Caliplay or Akalli and is
currently providing services to Caliplay including technical and
general strategic support services for which it receives
remuneration (including a profit share related fee). Playtech has
an option to acquire a 49% equity holding in Caliplay upon exercise
of the option. If the call option is exercised by Playtech, the
Group would no longer provide such services and as such would no
longer be entitled to receive the profit share related fee received
for such services. For 45 days after the finalisation of Caliplay's
2021 accounts, Caliente also has an option to redeem Playtech's
profit share related fee or buy the 49% stake in Caliplay back from
Playtech (if the Playtech call option has been exercised at that
time). There is no additional exercise price payable above the
cumulative payments already made by Playtech.
The agreement with Caliplay was accounted for as a structured
agreement at inception due to the call option in place which was
considered as a protective right and not as part of the assessment
of control and significant influence up until 2020. In 2021, an
amended agreement was signed with Caliplay which included a number
of principally technical amendments. R efer to Note 15E.
Movements in the carrying value of the investment during the
period are as follows:
EUR'm
Investment in structured agreements at 1 January
2020/30 June 2020 16.8
Reclassification from joint ventures (Note 15A) 22.4
Investment in structured agreements at 31 December
2020 39.2
Transfer to derivative financial assets (Note 15E) (39.2)
Investment in structured agreements at 30 June 2021 -
D. Other investments
Listed investments
The Group has shares in listed securities and the fair values of
these equity shares are determined by reference to published price
quotations in an active market. For the period ended 30 June 2021,
the fair value of listed securities increased by EUR0.8 million.
The fair value of the shareholding in the listed investments as at
30 June 2021 is EUR4.0 million (31 December 2020: EUR3.2
million).
LATAM Equity holding Investments
Guatemala
In 2020, the Group entered into an agreement with Tenlot
Guatemala, a member of the Tenlot Group. Tenlot Guatemala commenced
its activity in 2018 and it is currently growing its lottery
business in Guatemala, expanding its distribution network and game
offering. Tenlot Guatemala's betting and gaming business will be
operated by its subsidiary ("Super Sports S.A.").
The Group has acquired a 10% equity holding in Tenlot Guatemala
for a total consideration of $5.0 million (EUR4.4 million) in 2020.
In addition, the Group was granted a 10% equity holding in Super
Sports S.A. at no additional cost. The Group also has an option to
acquire an additional 80% equity holding in Super Sports S.A.. If
the option is exercised, the Group would no longer provide certain
services and, as such, would no longer be entitled to the profit
share received for such services. There are no conditions attached
to the exercise of the option and therefore with a resulting 90%
shareholding, this constitutes control. As such, the Group has
consolidated Super Sports S.A.. Refer to Note 15E for the Tenlot
Guatemala call option details.
The 10% equity holding in Tenlot Guatemala is accounted at fair
value through profit and loss under IFRS9.
The fair value of the equity holding as at 30 June 2021 is $5.2
million (EUR4.4 million) with no movement in fair value in the
period.
Costa Rica
In 2020, the Group entered into an agreement in Costa Rica with
the Tenlot Group. The Group acquired a 6% equity holding in Tentech
CR S.A., a member of the Tenlot Group, for a total consideration of
$2.5 million (EUR2.1 million). Tentech CR S.A. sells printed bingo
cards in accordance with article 29 of the Law of Raffles and
Lotteries of Costa Rica ("CRC- Costa Rican Red Cross
Association").
Tenbet, another member of the Tenlot Group, operates online
bingo games and casino side games. The Group has no equity holding
in Tenbet but has an option to acquire 81% equity holding in Tenbet
upon exercise of the option. If the option is exercised, the Group
would no longer provide certain services and, as such, would no
longer be entitled to the profit share received for such services.
The option can be exercised at any time from the end of 18 months
of Tenbet going live . The option is not yet exercisable. Playtech
also holds a put option to sell its equity holding to Tenlot Group
at nominal value at any time. Under the existing agreements, the
Group has provided Tenbet with a credit facility of EUR1.0 million
out of which EUR0.4 million had been drawn down as at 30 June 2021
(31 December 2020: EUR0.1 million). Refer to Note 15E for the
Tenbet call option details.
The 6% equity holding in Tentech CR S.A is accounted at fair
value through profit and loss under IFRS 9.
The fair value of the equity holding as at 30 June 2021 is $2.5
million (EUR2.1 million).
Valuation details of LATAM Equity holding investments
There were no significant fair value movements in the period
ended 30 June 2021 for Tentech CR S.A. and Tenlot Guatemala equity
investments. The fair value of Tentech CR S.A. is therefore
estimated at $2.5 million and Tenlot Guatemala at $5.2 million
(EUR2.1 million and EUR4.4 million respectively) as at 30 June
2021. Refer to Note 15E for the valuation of the LATAM Call
options.
Movements in the carrying value of the investment during the
period are as follows:
EUR'm
Other investments at 1 January 2020 1.1
Additions during the year 5.9
Fair value change 0.4
Other investments as at 30 June 2020 7.4
Fair value change 0.2
Additions during the year 2.1
Other investments as at 31 December 2020 9.7
Fair value change 0.8
Other investments as at 30 June 2021 10.5
E. Derivatives
The Group has certain call options over equity in companies in
Latin America and these have been fair valued as at 30 June 2021.
These include the following:
1. Caliplay (Mexico)
2. Wplay (Colombia)
3. LATAM Call options (Panama, Guatemala, Costa Rica)
4. Galera/Ocean 88 Holdings (Brazil)
As mentioned above, the framework agreements with Caliplay and
Wplay were previously accounted as investments in structured
agreements (EUR16.8 million being the initial payments made to
Caliplay through September Holdings B.V., the holder of 49% of
equity in Caliplay and the payments of EUR22.4 million made to
Wplay).
Given the growth in Latin America, especially in Mexico
(Caliplay) and Colombia (Wplay), the value of the options has
exponentially increased and, coupled with the aforementioned
changes to the framework agreements and amendments to certain
exercise conditions, these options have been fair valued.
Playtech's valuations of each of the options is derived from a
discounted cash flow in the first instance and then contains a
number of assumptions and estimates, including the likelihood of
each of the call options being exercised, and with a number of
different scenarios as to timing of exercise and Playtech's likely
percentage shareholding, as well as taking into account the
maturity curve of each business. The value that could be realised
should the option be exercised in the future could be materially
higher than the resulting fair value of the options recognised as
at 30 June 2021.
1. Caliplay
Playtech is currently providing services to Caliplay including
technical and general strategic support services for which it
receives remuneration (including a profit share related fee).
Playtech has an option to acquire a 49% equity holding in Caliplay
upon exercise of the option. If the call option is exercised by
Playtech, the Group would no longer be entitled to receive the
profit share related fee or be required to provide the related
services. For 45 days after the finalisation of Caliplay's 2021
accounts, Caliente also has an option to redeem Playtech's profit
share related fee or buy the 49% stake in Caliplay back from
Playtech (if the Playtech call option has been exercised at that
time). In 2021, an amended agreement was signed with Caliplay which
included a number of principally technical amendments. This
included an additional right for Playtech whereby if Caliplay
changes its ownership structure, the Group can elect to exercise
its option directly into a 49% equity stake in the new structure
(subject to any dilution as part of any change). As with the call
option, if this right is exercised, the Group would no longer be
entitled to receive the profit share related fee or be required to
provide the related services.
September Holdings B.V.
September Holdings B.V. is a fully owned subsidiary of Caliente
that also has 49% shareholding in Caliplay and a loan payable of
EUR16.8 million to a Playtech subsidiary.
In the event of exercising the option, Playtech granted Caliente
a put option to sell to Playtech all of Caliente's shares in
September Holdings B.V. (constituting 100% of September's share
capital) for the par value of the shares. Prior to the exercise of
the put option by Caliente, Caliente will buy back all of September
Holdings B.V.'s shares in Caliplay resulting in September Holdings
B.V. losing all access to value in the company.
Playtech has therefore fully offset the balance of EUR16.8
million in September Holdings B.V. against the overall fair value
movement of the call option.
Valuation of the call option
The Group has assessed the fair value of the call option as at
30 June 2021. The fair value of the call option in the non-listed
equity investment has been estimated using a DCF approach with a
market exit multiple assumption . The valuation required management
to make certain assumptions about the model inputs, including
forecast cash flows, the discount rate, timing of a potential exit,
level of shareholding received on exercise, credit risk and
volatility. The probabilities of the various estimates within the
range can be reasonably assessed and are used in management's
estimate of fair value.
To arrive at the fair value estimate of the call option, the
Group has applied an appropriate discount rate given the nature of
the business and variables apparent, as well as different scenario
probabilities on the future holding period of the call option
between 1-8 years.
The fair value of the call option on the above basis amounts to
$338.5 million ( EUR285.0 million) as at 30 June 2021. Management
has also applied an estimated equity holding in Caliplay after any
potential dilution.
The difference of EUR285.0 million and the previous carrying
value of the structured agreement totaling EUR16.8 million has been
recognised in the consolidated statement of comprehensive income at
30 June 2021.
Sensitivity analysis
The assumptions and judgements made in the valuation of the call
option as at 30 June 2021 include the following sensitivities,
noting that factors and circumstances may arise that are outside
the Group's control which could impact the option value:
-- A different discount rate within the range of 20% to 35% will
result to a fair value of the option within the range of $279.0
million - $512.6 million;
-- In applying a range of exercise dates of the option with
various probabilities over the 1-8 year exercise period, the fair
value would be within the range of $268.5 million - $387.9 million;
and
-- If the equity holding is diluted within the range of 35% and
49% the fair value of the option would be in the range of $303.0
million - $424.2 million.
2. Wplay
The Group has no equity holding in Wplay but has an option to
acquire 49.9% equity holding in the Wplay business upon exercise of
the option. If the option is exercised, the Group would no longer
provide certain services and, as such, would no longer be entitled
to the profit share received for such services.
The option was originally exercisable on or after August 2021,
and in July 2021, it was extended for one more year (i.e., it is
exercisable at any time from 22 August 2022). The amendments to the
framework in 2021 also confirmed that the advanced payments made of
EUR22.4 million were full and final payments for the option. The
amount of EUR22.4 million paid to date for the option was
transferred to derivative financial assets and formed part of the
call option fair value in the current period.
There is therefore no additional exercise price payable above
the cumulative payments already made by Playtech as part of the
agreement. Under the existing agreements with Wplay, the Group had
contingent commitments totaling $6.0 million, of which $5.0 million
was paid in June 2021 and $1 million is payable on certain
performance milestones in future periods. No other financial
support has been provided and no further commitment to provide
financial support exists.
The assessed fair value of the call option at 30 June 2021 is
$58.3 million ( EUR49.1 million). The Group valued the call option
using a DCF approach with a market exit multiple assumption. The
Group has then applied an appropriate discount rate and different
scenario probabilities on the future holding period of the option
over a 1-8 year period.
The difference between the value at 31 December 2020 (EUR22.4
million) and the value at 30 June 2021 (EUR49.1 million) of EUR26.7
million has been recognised in the consolidated statement of
comprehensive income.
Sensitivity analysis
A different discount rate within the range of 20% to 30% will
result in a fair value of the option within the range of
$58.3million - $86.8 million. In applying the different scenario
probabilities on the exercise date of the option between 1-8 years
period, the fair value of the option is within the range of $47.5
million - $58.3 million.
3. LATAM Call options (Panama, Guatemala, Costa Rica)
Panama
In June 2020, the Group entered into an agreement with Onjoc in
Panama. The Group has no equity holding in Onjoc but has an option
to acquire a 50% equity holding in Onjoc. Playtech provides
services to Onjoc and receives remuneration (including 50% profit
share). If the option is exercised, the Group would no longer
provide certain services and, as such, would no longer be entitled
to the profit share received for such services. The option can be
exercised any time subject to Onjoc having $15 million of GGR over
a consecutive 12 month period.
On the basis that this option is not currently exercisable,
Playtech does not consider it to be a current substantive right and
therefore does not currently have joint control over Onjoc.
The call option is accounted for as a derivative held at fair
value under IFRS 9. Playtech assessed the fair value of the call
option by taking into consideration the likelihood of the option
becoming exercisable and any timing restrictions that could impact
its fair value.
The fair value of the call option as at 30 June 2021 is $ 2.2
million (EUR 1.8 million).
Guatemala
In addition to the 10% equity holding in Tenlot Guatemala and
the 10% equity holding in Super Sports S.A.; the Group has an
option to acquire an additional 80% equity holding in Super Sports
S.A. Playtech provides certain services to Super Sports S.A. in
return for 85% of Super Sports S.A. profit share. If the option is
exercised, the Group would no longer provide those services and, as
such, would no longer be entitled to the profit share received for
such services. The option can be exercised any time by
Playtech.
The right of exercising the call option at any time and the
acquisition of the additional 80% in Super Sports S.A., gives
Playtech:
-- exposure, or rights, to variable returns from its involvement with the investee; and
-- the ability to use its power over the investee to affect the
amount of the investor's returns and would therefore satisfy IFRS
10 criteria of control.
Playtech assessed the fair value of the call option by
considering the likelihood of the option becoming exercisable and
any timing restrictions that could impact its fair value. The fair
value of the call option as at 30 June 2021 is $1.1 million (EUR0.9
million). Upon consolidation of Super Sport S.A., the 10% equity
holding in Super Sport S.A. and the call option to acquire 80% of
the investee are eliminated on the Group consolidated balance
sheet.
Costa Rica
In addition to the 6% equity holding in Tentech CR S.A, the
Group has an option to acquire 81% equity holding in Tenbet.
Playtech provides certain services to Tenbet in return for 91% of
Tenbet's profit share. If the option is exercised, the Group would
no longer provide those services and, as such, would no longer be
entitled to the profit share received for such services. The option
can be exercised at any time from the end of 18 months of Tenbet
going live.
The call option is accounted as a derivative held at fair value
under IFRS 9. Playtech assessed the fair value of the call option,
by considering the likelihood of the option becoming exercisable
and any timing restrictions that could impact its fair value.
The fair value of the call option in Tentech CR S.A as at 30
June 2021 is $3.9 million (EUR3.2 million).
Valuation of LATAM Call options (Panama, Guatemala, Costa
Rica)
The Group valued the call options using a Monte Carlo
simulation. The expected value of the call options has been
discounted based on an estimated required return which is a typical
target return for an early-stage business. The Group also adjusted
the total expected value to reflect the timing, price and execution
risk.
The fair value of the call options in Onjoc, Super Sports S.A
and Tenbet as at 30 June 2021 are $ 2.2 million (EUR 1.8 million) ,
$1.1 million ( EUR0.9 million ) and $3.9 million (EUR3.2 million)
respectively . As a result, EUR 5.0 million has been recognised in
the consolidated statement of comprehensive income at 30 June 2021
as the call option in Super Sports S.A is eliminated on
consolidation.
Sensitivity analysis
In order to fair value the call options in Onjoc, Super Sports
S.A and Tenbet, management has determined and applied an
appropriate discount rate and different scenario probabilities on
the future holding period of option over a 1-8 year period.
For Onjoc, a discount rate within the range of 30% to 50% will
result in a fair value of the option in the range of $1.2million -
$3.2 million. In applying a range of exercise dates of the option
with various probabilities being considered over the 1-8 year
period, the fair value would be within the range of $2.2 million -
$6.0 million.
For Super Sports S.A., a discount rate within the range of 30%
to 50% will result in a fair value of the option in the range of
$0.4 million - $2.0 million. In applying a range of exercise dates
of the option with various probabilities being considered over the
1-8 year period, the fair value would be within the range of $1.1
million - $4.1 million.
For Tenbet, a discount rate within the range of 30% to 50% will
result in a fair value of the option in the range of $3.0 million -
$4.5 million. In applying a range of exercise dates of the option
with various probabilities being considered over the 1-8 year
period, the fair value would be within the range of $3.9 million -
$6.6 million.
4. Galera/Ocean 88 Holdings (Brazil)
On 4 June 2021, the Group entered into an agreement with Ocean
88 Holdings Ltd (Galera Group) which is the sole holder of Galera
Gaming Group, a company registered in Brazil. Galera will launch,
offer and operate online and mobile sports betting and gaming
(poker, casino etc.) in Brazil under a foreign regulatory license
and then under the local regulatory license, when it will become
available, to expand the offering to other gaming and gambling
products and services as may be covered at any future time by the
applicable regulatory license.
The Group's total investment in Galera is $5.0 million (EUR4.3
million) as at 30 June 2021, which was the consideration for the
option to subscribe and purchase from Galera Group an amount of
shares equal 40% in Galera Group at nominal price. Of this, $2.0
million (EUR1.7million) was paid as at 30 June 2021 and $3.0
million (EUR2.6 million) was paid post period end. In addition to
the investment amount paid, Playtech made available to the Galera
Group a line of credit up to $20.0 million. As at 30 June 2021,
Galera Group utilised $1.8 million (EUR1.5 million). The option can
be exercised at any time, but only after obtaining regulatory
consent to have shares in the company. The option cannot yet be
exercised.
The call option is accounted for as a derivative held at fair
value under IFRS 9. Playtech assessed the fair value of the
financial asset to be the same as the amount paid for the option,
being EUR4.3 million as at 30 June 2021.
Gameco LLC
In 2021, the Group entered into an agreement with Gameco LLC
('Gameco') and as at 30 June 2021, the Group has given an interest
bearing loan of $4.0 million (EUR3.3 million) to Gameco, which is
convertible to warrants. Gameco is a video game gambling platform
approved by the regulator in the United States. GameCo's patented
video game gambling proprietary arcade-style cabinets allows a
player's skills to affect the payout and winnings, while
maintaining the same casino-based economics as slots.
The Group can convert the loan instrument into warrants at any
time upon the consent of US Regulators. The Group in return will
receive warrants from Gameco that can be exchanged into Class B
shares in the company. Upon exercise of warrants, the Group would
hold 10.51% of the shares of Gameco.
The Group recorded the loan and the warrant as a single
financial asset included in other non-current assets as at 30 June
2021 and assessed its fair value to be the same as the amount given
to Gameco, $4.0 million (EUR3.3 million).
Movements in the carrying value of the derivatives during the
period are as follows:
EUR'm
Derivative financial assets as at 31 December
2020 -
Transfer from structured agreements (Note
15C) 39.2
Additions during the year 4.3
Fair value change 299.9
Derivative financial assets as at 30 June
2021 343.4
NOTE 16 - DEFERRED TAX
The movement on the deferred tax is as shown below:
EUR'm
As at 1 January 2021 (71.9)
Origination and reversal of temporary differences
(Note 12) 130.2
Foreign exchange movements 0.8
As at 30 June 2021 59.1
Split as:
Deferred tax liability on acquisitions 65.6
Deferred tax liability 6.7
Deferred tax asset (set off with deferred tax
liability) (29.0)
Deferred tax liability 43.3
Deferred tax asset 102.4
Deferred tax assets and liabilities are offset only when there
is a legal enforceable right of offset, in accordance with IAS
12.
On 30 June 2021, the Directors continued to recognise deferred
tax assets arising from temporary differences and tax losses
carried-forward with the latter only to the extent that it is
probable that future taxable profit will be available against which
the unused tax losses can be utilised. Please refer to Note 5 for
the assesment performed on the recogniton of deferred tax in the
period.
NOTE 17 - ASSETS CLASSIFIED AS HELD FOR SALE
30 June 2021 30 June 2020 30 December 2020
EUR'm EUR'm EUR'm
A. Property, plant and equipment 20.0 27.0 -
B. Casuals CGU - 2.8 0.9
C. Financial CGU 480.1 - 465.8
D. Investment in associates - - 2.2
500.1 29.8 468.9
A. On 21 April 2020, the sale and purchase agreement of Area Sud
in Milan was finalised for a total consideration of EUR18.8
million, out of which EUR5 million was received on the sign off of
the preliminary agreement in 2019. As a result of this transaction,
the Group realised a profit of EUR13.4 million in the consolidated
statement of comprehensive income for the period ended 30 June
2020.
Furthermore, on 21 July 2020, the sale and purchase agreement of
Area Nord in Milan was finalised for total consideration of EUR35.7
million. As a result of this transaction, the Group realised a
profit of EUR8.7 million in the consolidated statement of
comprehensive income for the year ended 31 December 2020.
During the period ended 30 June 2021, the Group entered into a
binding agreement for the disposal of a real estate area in Milan.
Accordingly, the real estate has been classified as held for sale.
At the date of the transfer to asset held for sale, an impairment
review has been performed against the fair value less expected
selling costs. The carrying value of the land is higher than the
fair value less expected selling costs and therefore an impairment
of EUR12.3 million has been recognised in the consolidated
statement of comprehensive income. The Group decided to sell the
asset and the prospective buyer was interested in the land and not
the buildings which lead to this impairment.
B. Following the decision made by the Group in 2019 to dispose
the Casual and Social Gaming Businesses, the value of the divisions
were classified as held for sale and the results included in the
discontinued operations.
On 29 June 2020, the Group entered into an agreement for the
partial disposal of "FTX" included in this division, for a total
consideration of $1.0 million. As a result of this transaction, the
Group realised a profit of EUR0.6 million in the consolidated
statement of comprehensive income for the period ended 30 June
2020, included within the total profit from discontinued operations
(refer to Note 7).
Furthermore, on 11 January 2021, the Group entered into an
agreement for the disposal of "Yoyo", also included in this
division, for a total consideration of $9.5 million. As a result of
this transaction, the Group realised a profit of EUR7.6 million in
the consolidated statement of comprehensive income for the period
ended 30 June 2021, included within the total profit from
discontinued operations (refer to Note 7).
As a result of the above transactions, the Social and Casual
Gaming CGU is now fully disposed.
C. Following the decision made by the Board of Directors in 2020
to dispose the Financial segment, the value of the division was
classified as held for sale and its results included in
discontinued operations.
On 26 May 2021, the Group entered into an agreement for the
disposal of its Financial segment for a cash consideration up to
US$210.0 million, comprising an initial US$185.0 million of which
US$15.0 million is deferred up to two years from the completion of
the transaction, together with a further US$15 million contingent
on certain cash flow or other criteria being met by the business
carried on by the Financial segment. In addition, the Group will
retain the movement of the working capital which already has been
transferred from Finalto to Playtech amounting to $48.7 million in
May 2021. Expected selling costs amount to $4.7 million.
As at 30 June 2021, the carrying value is lower than the fair
value less expected selling costs, based on this transaction. In
this respect, a reversal of impairment loss in respect of
intangible assets of $2.4 million ( EUR2.0 million) was recognised
in the statement of comprehensive income, included in discontinued
operations (Note 7). The impairment loss allocated against goodwill
cannot be reversed.
The major class of assets and liabilities of the disposal group
classified as held for sale as at 30 June 2021, are as follows:
EUR'm
Assets
Property, plant and equipment 3.1
Right of use assets 4.9
Intangible assets 79.8
Trade and other receivables 11.7
Cash and cash equivalents 380.6
Assets classified as held for sale 480.1
Liabilities
Deferred tax liability 6.4
Trade payables 2.1
Client deposits 132.2
Client funds 162.0
Income tax payable 3.2
Lease liability 5.5
Other payables 6.5
Liabilities directly associated with the asset
classified as held for sale 317.9
D. In H2 2020, the Board of Directors made a decision to dispose
of its shareholding in two associates and as such their value of
EUR2.2 million was transferred to assets held for sale. During
2021, the Group entered into an agreement for the disposal of these
associates for a total consideration of EUR2.2 million.
NOTE 18 - SHAREHOLDERS' EQUITY
A. Share Capital
Share capital is comprised of no par value shares as
follows:
Number of Shares
30 June 2021 30 June 2020
Authorised N/A* N/A*
Issued and paid up 309,294,243 309,294,243
* The Company has no authorised share capital but it is
authorised to issue up to 1,000,000,000 shares of no par value.
As at 1 January 2021, the Company's total number of ordinary
shares in issue was 299,328,354 (excluding treasury shares), and
the Company held a total of 9,965,889 ordinary shares in
treasury.
On 25 February 2021, the Company transferred 7,028,339 shares
held by the Company in treasury to the Employee Benefit Trust. As a
result of this transaction, the total number of shares held in
Treasury is 2,937,550, the total number of ordinary shares in issue
remains the same at 309,294,243.
B. Employee Benefit Trust
During 2013 the Group established an Employee Benefit Trust by
acquiring 5,517,241 shares for a total of EUR48.5 million. During
the period ended 30 June 2021, 545,406 shares (six months to 30
June 2020: 113,992 shares) were issued to executive management
after meeting the performance/service conditions at a cost of
EUR4.6 million (Six months to 30 June 2020: EUR1.0 million).
As noted above, the Company transferred 7,028,339 shares held by
the Company in treasury to the Employee Benefit Trust for a total
of EUR20.0 million.
As at 30 June 2021, a balance of 8,207,472 shares (30 June 2020:
1,841,444 shares) remains in the Trust with a cost of EUR29.8
million (30 June 2020: EUR15.2 million).
C. Share options
During the period, 577,028 share options were exercised (Six
months to 30 June 2020: 121,970).
D. Distribution of dividend
During 2021, the Group did not pay any dividends.
E. Reserves
The following describes the nature and purpose of each reserve
within owner's equity:
Reserve Description and purpose
Additional paid Share premium (i.e. amount subscribed for
in capital share capital in excess of nominal value)
Employee Benefit Cost of own shares held in treasury by the
Trust Trust
Put/Call options Fair value of put/call options as part of
reserve business acquisition
Foreign exchange Gains/losses arising on re-translating the
reserve net assets of overseas operations
Employee termination Gains/losses arising from the actuarial re-measurement
indemnities of the employee termination indemnities
Non-controlling The portion of equity ownership in a subsidiary
interests not attributable to the owners of the Company
Retained earnings Cumulative net gains and losses recognised
in the consolidated statement of comprehensive
income
NOTE 19 - LOANS AND BORROWINGS
The main credit facility of the Group is a revolving credit
facility ("RCF") up to EUR317.0 million available until November
2023 which the Group has an option to extend for an additional
year. Interest payable on the loan is based on a Euro Libor and
Libor rates based on the currency of each withdrawal.
As at the reporting date the credit facility drawn amounted to
EUR214.3 million (30 June 2020: EUR307.3 million, 31 December 2020:
EUR308.9 million).
The Group took a prudent and disciplined approach to its banking
relationships and proactively approached its lenders and agreed to
relax the covenants on its RCF for the 31 December 2020 and 30 June
2021 tests as follows:
-- Leverage: Net Debt/Adjusted EBITDA revised to 5:1 for the
year ended 31 December 2020 and 4.5:1 for the last twelve months to
30 June 2021
-- Interest cover: Adjusted EBITDA/Interest revised to 3:1 for
the year ended 31 December 2020 and 3.5:1 for the last twelve
months to 30 June 2021
The covenants will return to previous levels of 3x Net
Debt/Adjusted EBITDA and 4x Adjusted EBITDA/Interest from the 31
December 2021 test onwards.
As at 31 June 2021, the Group met these financial covenants. The
covenants are monitored on a regular basis by the finance
department, including modelling future projected cash flows under a
number of scenarios to stress-test any risk of covenant breaches,
the results of which are reported to management and the Board of
Directors.
NOTE 20 - BONDS
2018 Bond 2019 Bond Total
EUR'm EUR'm EUR'm
As at 1 January 2020 525.0 346.2 871.2
Notional interest on bonds 0.7 0.3 1.0
As at 30 June 2020 525.7 346.5 872.2
Notional interest on bonds 0.6 0.3 0.9
As at 31 December 2020 526.3 346.8 873.1
Notional interest on bonds 0.7 0.3 1.0
As at 30 June 2021 527.0 347.1 874.1
2018 Bond
On 12 October 2018, the Group issued EUR530 million of senior
secured notes ('2018 Bond') due in October 2023. The net proceeds
of issuing the 2018 Bond after deducting commissions and other
direct costs of issue, totalled EUR523.4 million. Commissions and
other direct costs of issue have been offset against the principal
balance and are amortised over the period of the bond.
The issue price was 100% of its principal amount and bears
interest from 12 October 2018 at the rate of 3.75% per annum
payable semi-annually, in arrears, on 12 April and 12 October
commencing on 12 April 2019.
The fair value of the liability component of the bond at 30 June
2021 was EUR538.3 million (30 June 2020: EUR525.0 million, 31
December 2020: EUR539.0 million).
2019 Bond
On 7 March 2019, the Group issued EUR350 million of senior
secured notes ('2019 Bond') due in March 2026. The net proceeds of
issuing the 2019 Bond after deducting commissions and other direct
costs of issue, totalled EUR345.7 million. Commissions and other
direct costs of issue have been offset against the principal
balance and are amortised over the period of the bond.
The issue price is 100% of its principal amount and bears
interest from 7 March 2019 at a rate of 4.25% per annum payable
semi-annually, in arrears, on 7 September and 7 March commencing on
7 September 2019.
The fair value of the liability component of the bond at 30 June
2021 was EUR360.3 million (30 June 2020: EUR347.0 million, 31
December 2021: EUR363.0 million).
As at 30 June 2021, the Group met the required interest cover
financial covenant of 2:1 Adjusted EBITDA/Interest ratio, for the
combined 2018 and 2019 Bonds.
NOTE 21 -CONTINGENT CONSIDERATION AND REDEMPTION LIABILITY
30 June 2021 30 June 2020
EUR'm EUR'm
Non-current contingent consideration
consists:
Interest in Aquila Global Group SAS ("Wplay") - 4.0
Other acquisitions - 0.8
- 4.8
Non-current redemption liability consists:
Acquisition of Statscore SP Z.O.O. 5.6 3.7
5.6 3.7
Total non-current contingent consideration
and redemption liability 5.6 8.5
Current contingent consideration consists:
Acquisition of Playtech BGT Sports Limited - 20.8
Interest in Aquila Global Group SAS ("Wplay") 0.8 16.0
Other acquisitions 0.7 2.0
1.5 38.8
Total current contingent consideration
and redemption liability 1.5 38.8
During 2020, the Group exercised its option to acquire the
remaining 10% of Playtech BGT Sports Limited for a total
consideration of EUR41.6 million all settled by 31 December 2020.
This included settlement of previous contingent consideration
liabilities and other contractual amounts due.
The maximum contingent consideration and redemption liability
payable is as follows:
30 June 2021 30 June 2020
EUR'm EUR'm
Acquisition of Eyecon Limited 23.3 24.7
Acquisition of HPYBET Austria GmbH 15.0 15.0
Acquisition of Statscore SP Z.O.O 15.0 15.0
Interest in Aquila Global Group SAS ("Wplay") 0.9 21.3
Other acquisitions 6.8 8.3
61.0 84.3
NOTE 22 - PROVISIONS FOR RISKS AND CHARGES
Legal and
regulatory Contractual Other Total
EUR'm EUR'm EUR'm EUR'm
Balance at 1 January
2020 11.1 2.4 6.0 19.5
Provisions made during
the period 0.1 - 0.4 0.5
Provisions used during
the period (1.1) - (1.0) (2.1)
Provisions reversed during
the period (0.5) - (0.7) (1.2)
Balance at 30 June 2020 9.6 2.4 4.7 16.7
Provisions made during
the period 1.4 2.0 0.3 3.7
Provisions used during
the period (0.3) - (0.2) (0.5)
Provisions reversed during
the period (0.4) - (1.4) (1.8)
Balance at 31 December
2020 10.3 4.4 3.4 18.1
Provisions made during
the period 0.1 - 0.2 0.3
Provisions used during
the period (0.5) - - (0.5)
Provisions reversed during
the period (0.3) - - (0.3)
Balance at 30 June 2021 9.6 4.4 3.6 17.6
Provision for legal and regulatory issues
The Group is subject to proceedings and potential claims
regarding complex legal matters (including those related to
previous acquisitions), which are subject to a differing degree of
uncertainty. Provisions are held for various legal and regulatory
issues that relate to matters arising in the normal course of
business, including in particular various disputes that arise in
relation to the operation of the various licenses held by the
Group's subsidiary Snaitech. The uncertainty is due to complex
legislative and licensing frameworks in the various territories in
which the Group operates. The Group also operates in certain
jurisdictions where legal and regulatory matters can take
considerable time for the required local processes to be completed
and the matters resolved.
Contractual claims
The Group is subject to historic claims relating to contractual
matters that arise with customers in the normal course of business.
The Group believes they have a robust defense to the claims raised,
and have provided for the likely settlement where an outflow of
funds is probable. The uncertainty relates to complex contractual
dealings with a wide range of customers in various jurisdictions,
and because as noted above, the Group operates in certain
jurisdictions where contractual disputes can take considerable time
to be resolved in the local legal system. A potential legal claim
has arisen in respect of a previous acquisition which may result in
a settlement. As a result, an immaterial provision has been
recorded. The amount has not been separately disclosed as to do so
is considered to be prejudicial to the position of the Group.
All provisions have been reviewed and estimated by the Group's
Board of Directors on the basis of the information available at the
date of preparation of these financial statements and, if
considered required, supported by updated legal opinions from
independent professionals.
Given the uncertainties inherent, it is difficult to predict
with certainty the outlay (or the timing thereof) which will derive
from these matters. It is therefore possible that the value of the
provisions may vary further to future developments. The Group
monitors the status of these matters and consults with its advisors
and experts on legal and tax-related matters in arriving at the
provisions recorded. The provisions included represent the
Directors' best estimate of the potential outlay and none of the
matters provided for are individually material to the financial
statements.
NOTE 23 - ACQUISITIONS IN PREVIOUS PERIOD
A. Acquisition of Statscore SP Z.O.O
On 13 January 2020, the Group acquired an additional 40% of
Statscore SP Z.O.O. ("Statscore") for a total cash consideration of
EUR6.5 million. Prior to the acquisition, the Group held 45% of
Statscore which was accounted for as an associate (refer to Note
15). The book value of the investment in associate (net of share of
losses) was EUR1.5 million at the point of acquisition and the
equivalent fair value was EUR8.0 million, resulting in a fair value
gain of EUR6.5 million recognised in the consolidated statement of
comprehensive income for the period ended 30 June 2020. The
remaining 15% of the shares are held by the founder. The Group
holds a call option to purchase the remaining 15% and the founder
has an irrecoverable put option to require the Group to purchase
the 15% subject to certain conditions.
B. Acquisition of Best In Game S.r.l
On 17 June 2020, the Group acquired 100% of Best In Game
S.r.l.("Best In Game"), an Italian gaming company active in the
online segment. The Group paid a total cash consideration of
EUR13.3 million.
NOTE 24 - RELATED PARTIES
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the other party's making of financial or operational
decisions, or if both parties are controlled by the same third
party. Also, a party is considered to be related if a member of the
key management personnel has the ability to control the other
party.
The joint ventures, structured agreements and associates are
related parties of the Group by virtue of the Group's significant
influence over those arrangements.
During the six months ended 30 June, the Group companies entered
into the following transactions with related parties who are not
members of the Group:
Six months ended Six months ended
30 June 2021 30 June 2020
EUR'm EUR'm
Revenue
Associates and joint ventures - 2.1
Structured agreements/derivative investments 43.7 22.3
43.7 24.4
Share of profit from joint ventures - 0.1
Share of profit from associates 0.1 0.6
The following are the balances with related parties at period
end:
30 June 2021 30 June 2020
EUR'm EUR'm
Associates - 3.3
Total non-current related parties receivable - 3.3
Associates and joint ventures - 1.3
Structured agreements/derivative investments 10.8 6.1
Total current related parties receivable 10.8 7.4
NOTE 25 - CHANGES IN LIABILITIES ARISING FROM FINANCING
ACTIVITIES
Non-cash items
Financing liabilities At 1 January Financing Acquisition Other At 30
including accrued interest 2021 cash flows of subsidiary changes June 2021
EUR'm EUR'm EUR'm EUR'm EUR'm
Loans and borrowings
(Note 19) 309.2 (103.0) - 8.3 214.5
2018 Bond (Note 20) 530.8 (9.9) - 10.5 531.4
2019 Bond (Note 20) 351.5 (7.4) - 7.7 351.8
Contingent consideration
and redemption liability
(Note 21) 9.7 (4.9) - 2.3 7.1
Lease liability 88.3 (13.8) - 6.7 81.2
Total 1,289.5 (139.0) - 35.5 1,186.0
Non-cash items
Financing liabilities At 1 January Financing Acquisition Other At 30
including accrued interest 2020 cash flows of subsidiary changes June 2020
EUR'm EUR'm EUR'm EUR'm EUR'm
Loans and borrowings
(Note 19) 65.1 243.3 - (0.9) 307.5
2018 Bond (Note 20) 529.4 (9.9) - 10.6 530.1
2019 Bond (Note 20) 350.9 (7.4) - 7.7 351.2
Contingent consideration
and redemption liability
(Note 21) 61.1 (26.2) 4.8 7.6 47.3
Lease liability 90.8 (14.1) 0.2 8.6 85.5
Total 1,097.3 185.7 5.0 33.6 1,321.6
Loans and borrowings and bonds include the principal and
interest payable which is part of other payables.
NOTE 26 - CONTINGENT LIABILITIES
As part of the Board's ongoing compliance processes, it
continues to monitor legal and regulatory developments and their
potential impact on the Group, i ncluding, where appropriate,
taking specific expert advice.
The Group is involved in proceedings before civil and
administrative courts, and other legal or potential legal actions
relating to its business, including certain matters relating to
previous acquisitions. Based on the information currently
available, and taking into consideration the existing provisions
for risks, the Group currently considers that such proceedings and
potential actions will not result in an adverse effect upon the
financial statements; however where this is not considered to be
remote, they have been disclosed as contingent liabilities.
All matters were subject to review and estimate by the Board of
Directors based on the information available at the date of
preparation of these financial statements and, where appropriate,
supported by updated legal opinions from independent
professionals.
For a certain potential claim relating to a previous acquisition
where no proceedings have commenced, the Group has a reasonable
expectation based on the facts and circumstances (including having
considered independent legal advice) that no liability will arise;
should a liability arise (which may be offset by a reimbursement)
it is currently not possible to accurately estimate this. In
addition there can be no certainty as to the timing of any such
liability arising, and this has therefore been disclosed as a
contingent liability. The potential reimbursement has not been
recognised as a contingent asset.
The Group is subject to corporate income tax in jurisdictions in
which its companies are incorporated and registered, as well as
gaming taxes in certain licensed territories. Judgment is required
to interpret international tax laws relating to ecommerce in order
to identify and value provisions in relation to corporate income
taxes. The principal risks relating to the Group's tax liabilities,
and the sustainability of the underlying effective tax rate, arise
from domestic and international tax laws and practices in the
e-commerce environment which continues to evolve, including the
corporate tax rates in jurisdictions where the Group has
significant assets or people presence.
The Group is basing its tax provisions and gaming taxes on
current (and enacted but not yet implemented) tax rules and
practices, together with advice received, where necessary, from
professional advisers, and believes that its accruals for tax
liabilities are adequate for all open enquiry years based on its
assessment of many factors including past experience and
interpretations of tax law. The Group constantly monitors changes
in legislation and updates its tax liabilities accordingly.
However, due to different interpretations and evolving practice
there is a risk that additional liabilities could arise.
Management is not aware of any other contingencies that may have
a significant impact on the financial position of the Group.
[1] In prior periods, inventories presented as part of other
receivables. In this respect, the comparative information
re-represented.
[2] Employee stock option expenses relate to non cash expenses
of the Group.
[3] Professional fees related to acquisition, asset held for
sale and internal reorganisations are not considered ongoing costs
of operations and therefore have been added back to Adjusted
EBITDA.
[4] Fair value change in the put/call option for the acquisition
of Statscore. Costs which directly related to acquisitions are not
considered ongoing costs of operations and therefore have been
added back to Adjusted EBITDA.
[5] Finance costs on contingent consideration and redemption
liability and changes in the fair value of contingent consideration
payable related to prior year acquisitions. Costs which directly
related to acquisitions are outside the normal course of business
and therefore have been added back to Adjusted EBITDA.
[6] In 2020 the Board approved a GBP3 million COVID-19 Recovery
and Resilience Fund. On this, GBP1.9 million was spent in the
period ended 30 June 2021.
[7] Settlement of one off legal disputes which is not considered
a recurring cost.
7 Fair value change of equity instruments which are traded in
active markets. These are excluded from the results as they relate
to unrealised profit/loss.
[9] Fair value change of derivative financial assets are
excluded from the results as they relate to unrealised
profit/loss.
[10] The recognition of EUR90.3 million of deferred tax asset
relates to the special project the Group completed on 1 January to
move the tax residency of a number of companies from the Isle of
Man to the UK. Please refer to Note 12 for further detail.
[11] Employee stock option expenses relate to non cash expenses
of the Group.
[12] Professional fees related to acquisition, asset held for
sale and internal reorganisations are not considered ongoing costs
of operations and therefore have been added back to Adjusted
EBITDA.
[13] Fair value change in the put/call option for the
acquisition of Playtech BGT Sports. Costs which directly related to
acquisitions are not considered ongoing costs of operations and
therefore have been added back to Adjusted EBITDA.
[14] Finance costs on contingent consideration and redemption
liability and changes in the fair value of contingent consideration
payable related to prior year acquisitions. Costs which directly
related to acquisitions are outside the normal course of business
and therefore have been added back to Adjusted EBITDA.
[15] Following the conclusion of the UKGC investigation, the
Board of Directors agreed to make charitable contribution to the
value of GBP3.5 million, in lieu of regulatory settlement. On this
pledge, EUR3.2 million was paid in the current financial
period.
[16] Provision against loans receivable that do not relate to
the ordinary operations of the Group.
[17] Fair value change of equity instruments which are traded in
active markets. These are excluded from the results as they relate
to unrealised profit/loss.
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