GVC Holdings PLC (LSE:GVC), the multinational sports betting and gaming group, today announces its Interim Results for the six months ended 30 June 2016.
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Webcast
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| Pro forma | Actual | |||||
| Half year ended 30 June | 2016 | 2015 | Change | Constant Currency | 2016 | 2015 |
| €m | €m | €m | €m | |||
| Sports wagers | 2,329.7 | 2,236.0 | 4% | 8% | 2107.4 | 823.7 |
| Net Gaming Revenue | 441.8 | 408.4 | 8% | 12% | 390.6 | 120.9 |
| Revenue | 432.0 | 401.8 | 8% | 12% | 382.1 | 120.3 |
| Clean EBITDA | 104.4 | 73.5 | 42% | 91.2 | 25.5 | |
| Adjusted profit before tax | 51.3 | 21.8 | ||||
| Adjusted basic EPS (€) | 0.198 | 0.332 | ||||
Financial highlights
- Pro forma NGR increased 8% to €441.8m, 12% in constant currency
- Clean EBITDA of €91.2m (€25.5m H1 2015), pro forma Clean EBITDA growth 42%
- Adjusted PBT of €51.3m (€21.8m H1 2015)
- Net debt as at 30 June €165.1m (€154.3m as at 24 July 2016*)
*As reported with the refinancing announcement
Operational and strategic highlights
- Strength of brands reflected by growth achieved with relatively low marketing spend (21% of NGR)
- Mobile sports wagers grew 55%, casino and games 98%
- Integration of bwin.party on target to secure €125m annualised synergies by end of 2017
- Significantly strengthened senior management
- Signed largest B2B deal to date with one of the UK’s best known sports betting brands, Betfred
- Confirmation of New Jersey gaming licence
Post period-end events
- Admitted to Premium segment of Official List 1 August (FTSE 250 inclusion 19 September)
- New €250m financing facility secured at substantially reduced cost to current facilities
Current Trading and Outlook
- Average daily NGR for the 11 weeks to 15 September up 12% on a pro forma basis (15% in constant currency)
- Organic growth opportunities from bwin.party Acquisition greater than expected; to be exploited through increased marketing investment
- Committed to resumption of dividend payments in 2017
- Confident of achieving a result at the upper end of market expectations for 2016
Kenneth Alexander, CEO said:
“I am delighted to report another period of significant growth. It is GVC’s combination of hardworking, talented people and unique proprietary technology platform that has allowed us to achieve so much in such a short period. The Group operates in a highly competitive, increasingly regulated and taxed environment, GVC has never been better placed to face these challenges. Indeed, we believe the organic growth potential of the Group is now greater than originally anticipated at the time of the bwin.party transaction acquisition.”
Presentation and live webcast
A presentation for analysts and investors will be held today at 9:30 am in the offices of Investec, 2 Gresham Street, EC2V 7QP.
The presentation will be webcast live and available at:
http://www.investis-live.com/gvc-holdings/57bc6a9f5c14c30700938e2c/fhhd
The presentation will also be accessible via a live conference call.
| Dial in no: | + 44 20 3059 8125 |
| Conference password: | GVC |
| There will also be a replay available for one week. | |
| Dial in no: | + 44 121 260 4861 |
| Conference reference number: | 4081022# |
An on demand replay will also be available on the GVC website following the presentation.
This announcement contains inside information.
For further information:
| GVC Holdings PLC | |
| Kenneth Alexander, Chief Executive | Tel: +44 (0) 1624 652 559 |
| Richard Cooper, Group Finance Director | |
| Nick Batram, Head of Investor Relations & Corporate Strategy | Tel: +44 (0) 20 7337 0110 |
| Cenkos Securities plc | Tel: +44 (0) 20 7397 8900 |
| Mark Connelly, Stephen Keys, Camilla Hume | |
| Investec Bank plc | |
| Garry Levin, Chris Treneman, Carlton Nelson | Tel: +44 (0) 20 7597 4000 |
Media enquiries:
| Bell Pottinger | |
| David Rydell, James Newman, Anna Legge, Laura Jaques | Tel: +44 (0) 20 3772 2500 |
About GVC Holdings PLC
GVC Holdings PLC is a leading e-gaming operator in both B2C and B2B markets. GVC has four main product verticals with a number of brands; Sports labels (bwin, Sportingbet, gamebookers), Games labels (partypoker, partycasino, Foxy Bingo, Gioco Digitale, CasinoClub), B2B and non-core assets. GVC acquired bwin.party digital entertainment plc on 1 February 2016. The Group is headquartered in the Isle of Man and has licences in more than 15 countries.
For more information see the Group’s website: www.gvc-plc.com
Totals may not sum as rounding and percentages have been calculated on the underlying rather than the summarised figures.
Chief Executive’s Report
The Group made significant operational and strategic progress in the first half of 2016. The transformational Acquisition of bwin.party was concluded on 1 February 2016 and we are well on target to fully integrate the business in the early part of 2017.
Strategic progress
At the time of the bwin.party Acquisition we set ourselves a number of key strategic objectives for 2016 and the Group has delivered against all of these targets, some significantly ahead of schedule:
- Both GVC and bwin labels delivered pro forma top line growth in H1.
- In H1, the New Jersey Division of Gaming Enforcement confirmed our ability to operate under the licence acquired via bwin.party.
- On 1 July we announced our intention to transfer to the Premium segment of the official List which was confirmed on 1 August.
- In August, we announced a refinancing deal, with Nomura International providing the Group with a €250m facility at significantly lower rates than our current facilities – the documentation of which has now been signed. The refinancing will also enable the Company to return to paying dividends in 2017.
In addition, in H1 the Group secured its largest B2B service agreement to date, with Betfred, one of the UK’s best known sports betting brands.
Importantly, the integration of bwin.party will be completed by the end of Q2 2017 and the annualised synergy target of €125m secured. Moreover, the ongoing capital expenditure requirement of the enlarged Group is expected to be around one third less than the €64m pro forma spent in 2015.
The vast majority of our revenues are derived through our proprietary technology platforms. Ownership of our own technology gives the Group significant flexibility and we believe this is imperative to the long-term success of the business. The underlying technology we acquired with bwin.party is excellent and presents significant opportunities for the enlarged Group.
Operational progress
Whilst the first half has been busy on the corporate front, we have remained focused on the operations of the business. This is reflected in the strong trading performance over the six month period to 30 June 2016. Sports wagers were €2,107.4m, up from €823.7m and headline NGR of €390.6m compared to €120.9m for the corresponding period in 2015, reflecting the Acquisition of bwin.party. On a pro forma basis, sports wagers grew 4% (8% in constant currency) to €2,329.7m and headline NGR was €441.8m, representing growth of 8% (12% in constant currency). We achieved this growth despite investing just 21% of NGR on marketing, this in part reflects the strength of the brands but also more efficient spend. Clean EBITDA of €91.2m (€25.5m H1 2015) was a record for the Group with bwin.party making a significant contribution. On a pro forma basis Clean EBITDA increased 42% to €104.4m.
Mobile has been a key driver of growth. Sports wagers via mobile rose 55% in H1, whilst casino and games grew 98%. With an active pipeline of new products and technology improvements we are confident that mobile can continue to grow strongly.
A positive start to the year saw an acceleration in Q2 helped by a strong performance during Euro 2016. In total wagering on Euro 2016 was €162m with a gross win margin of 18.3% – a proportion of which (35% of gross win) fell into Q3. Sports wagers per day rose 5% (9% in constant currency) in Q2 despite a significant rise in the gross win margin to 9.9% (Q2-15 7.9%). Total NGR per day increased 13% in Q2 and 17% in constant currency.
| Per day in €000s | Q2-16 | Q2-15 | Change actual |
Constant currency |
Q1-16 | Q1-15 | Q4-15 | Q3-15 |
| Sports wagers | 12,556 | 11,943 | 5% | 9% | 13,045 | 12,790 | 12,350 | 11,078 |
| Sports margin | 9.9% | 7.9% | 8.4% | 8.2% | 8.6% | 9.3% | ||
| Sports NGR | 965 | 779 | 24% | 29% | 856 | 888 | 860 | 860 |
| Gaming/other NGR | 1,520 | 1,431 | 6% | 11% | 1,514 | 1,418 | 1,479 | 1,295 |
| Total NGR per day | 2,485 | 2,209 | 13% | 17% | 2,370 | 2,305 | 2,339 | 2,155 |
| Total NGR €m | 226.1 | 201.0 | 13% | 17% | 215.7 | 207.4 | 215.2 | 198.3 |
Integration progress
GVC has a proven track record of delivering significant value to shareholders via a combination of organic growth and astute acquisitions. The purchase of bwin.party is by far our largest acquisition to date and our experience gives the Board confidence that we will once again deliver a positive return for our shareholders.
After a little under eight months of ownership:
- Sports margins – in H1 the bwin.party sports margin was 10.0% compared to 7.7% for the same period in 2015. Whilst sports results have been a factor, the actions we have taken at an operational level to improve performance have been a major contributor
- Product improvement – content deals have been signed with a number of leading suppliers including Evolution, NetEnt, PlayNGo, Microgaming and Yggdrasil, and thus far in 2016 over 500 new games over desktop and mobile have been integrated
- Cross-sell – gaming revenues from bwin sports labels increased 27% year-on-year in H1, driven by more casino product and improved marketing
- Leverage IP – in H1 a platform licensing deal was signed with Betfred, the Group’s largest B2B contract to date, the benefits are unlikely to be realised until late 2017 and beyond
- Reorganisation – a clear operating structure has been established across all parts of the Group, with detailed plans to deliver our integration goals and improve performance
- Migration – we have commenced the platform migration from Sportingbet to bwin.party with the first country successfully completed in September and full migration is expected by Q2 2017
- Disposals – a number of non-core activities have been sold or exited including Conspo and the Group’s minority interest in Betit
- Attracting talent – where appropriate we have promoted from within but we have also found we are now able to attract some of the best talent from across the industry. Areas strengthened include technology, product and marketing. We continue to seek the best people to drive our business forward
Operational overview
The Group has adopted a new segmental reporting structure reflecting the label-focused basis followed by bwin.party. As a consequence there are now five reporting segments: Sports labels, Gaming labels, B2B, Non-core and Corporate. Unless stated financial data refers to pro forma results.
Sports labels
GVC operates a number of market leading sports brands including bwin and Sportingbet. As well as sports betting, these labels also offer gaming products in most but not all markets in which they operate.
| Sports labels (€m) | Pro forma six months to | Actual | ||||
| 30 June 2016 | 30 June 2015 | Change | Constant currency | 30 June 2016 | 30 June 2015 | |
| Sports wagers | 2,298.6 | 2,197.2 | 5% | 9% | 2,082.6 | 823.7 |
| Sports win margin | 9.1% | 8.1% | 9.2% | 8.8% | ||
| Sports NGR | 163.4 | 148.9 | 10% | 14% | 146.2 | 54.8 |
| Gaming/other NGR | 157.2 | 131.5 | 20% | 23% | 141.3 | 49.2 |
| Total NGR | 320.6 | 280.4 | 14% | 18% | 287.5 | 104.0 |
| Contribution | 177.7 | 149.2 | 19% | 157.6 | 54.2 | |
| Contribution margin | 55% | 53% | 55% | 52% | ||
Sports wagers in H1 increased 153% year on year on a reported basis and 5% in pro forma terms. The growth in wagers was despite an improvement in the sports win margin to 9.1% (8.1%) and the deliberate strategy to exit some unprofitable turnover within bwin.party. Whilst sports results were a factor in the higher win margin in the first half, there was also a significant impact from improved trading and risk management practices within the bwin business.
The 2016 Euro Championships were a key highlight in the first half (and into H2), with the Group taking some €162m in wagers on the event across the whole of the tournament, with a gross win margin of 18.3% (65% of gross win fell into H1).
Throughout the first half both Sportingbet and bwin significantly increased player acquisition, while customer acquisition costs were also reduced, with a particularly notable reduction recorded by bwin, which benefitted from a greater focus on measurable acquisition.
GVC’s CRM strategy and technology have long been core attributes of its success and integrating this expertise into bwin.party was an early priority. Having begun this process in Q2, incremental improvements are now being integrated on a weekly basis. Initial results are extremely encouraging; during H1 as a whole, player reactivation was up, player cross-sell to casino increased while player churn was reduced.
Gaming NGR derived from sports labels rose 20% on the previous year, driven by this improved cross-sell as well as an improved product offer. During the first half we signed new content deals with a number of suppliers including Evolution, Play ‘n Go and Yggdrasil, with over 500 new casino games available to our sports label customers.
In terms of personnel, the restructuring of the Sportingbet and bwin marketing teams is progressing ahead of schedule, with talent from both, combined into teams which have a clear regional focus and set of objectives. This structure was fundamental to the transformation of Sportingbet and is already delivering tangible results across the enlarged group.
The cumulative effect of these improvements in Q2 saw bwin achieve its highest level of quarterly customer deposits and NGR of the last three years, while Sportingbet recorded an all-time high in player acquisition, customer deposits and NGR.
Improved cross-sell has already begun to drive revenue growth and much more is expected to come through the combination of further product and marketing enhancements.
Games labels
The Group owns a number of well-established gaming brands including Foxy Bingo, partypoker, partycasino and Gioco Digitale.
| Games labels (€m) | Pro forma six months to | Actual | ||||
| 30 June 2016 | 30 June 2015 | Change | Constant currency | 30 June 2016 | 30 June 2015 | |
| Sports wagers | 31.1 | 38.8 | -20% | -18% | 24.8 | – |
| Sports win margin | 8.4% | 5.3% | 8.4% | 0.0% | ||
| Sports NGR | 2.3 | 1.9 | 24% | 28% | 1.9 | – |
| Gaming/other NGR | 101.3 | 108.8 | -7% | -4% | 86.5 | 16.9 |
| Total NGR | 103.7 | 110.7 | -6% | -3% | 88.4 | 16.9 |
| Contribution | 44.4 | 54.7 | -19% | 38.2 | 11.2 | |
| Contribution margin | 43% | 49% | 43% | 66% | ||
Currency weakness and a competitive bingo market led to an NGR decline in Games labels of 6% to €103.7m. The decline in contribution predominantly reflected increased gaming taxes in Austria and Germany.
During the period we created a long-term strategic roadmap for the acquired brands, with evaluation, product prioritisation, improved marketing and hiring new talent the first stage of this process. We have made good progress, introducing new products, improving the marketing toolset and hiring a number of highly experienced industry professionals. We began to see the benefits of this come through late in Q2, with performance accelerating in Q3. Indeed, Q3 Games Labels revenue is up 6% in constant currency in the period up to 15 September.
An important development has seen CasinoClub take ownership of its software platform, this will give us greater flexibility going forwards. CasinoClub also celebrates its 15 year anniversary in 2016, with a major player event scheduled in H2. Meanwhile, after a number of challenging years partypoker has stabilised, with revenues in constant currency ahead of H1 2015. A competitive market and sterling weakness meant a tough backdrop for Foxy Bingo. However, Adele Lawton recently joined the Group as Head of Bingo. She has considerable industry experience and reflects our ambitions to grow our bingo business as well as leverage the Foxy brand, in an improved Foxy Casino offer. Our Italian gaming business, Gioco Digitale performed well in the first half, with an improving performance through the period. We are excited about the opportunity to grow our market share in Italy through additional games, supported by increased investment in marketing.
Whilst the progress we have made in terms of product improvement and strengthening personnel is significant, the real benefits of this are yet to come through. There is much more still to come, with additional games and content to come on stream in the coming months. With a stronger product offering, focused brands and overall better customer experience, the opportunity to accelerate growth through additional marketing investment is an exciting one.
B2B
| Other (€m) | Pro forma six months to | Actual | |||
| 30 June 2016 | 30 June 2015 | Change | 30 June 2016 | 30 June 2015 | |
| Revenue | 6.5 | 7.5 | (13%) | 5.6 | – |
| Contribution | 6.4 | 7.3 | (12%) | 5.5 | – |
| Contribution margin | 98% | 97% | 98% | – | |
The Group provides a number of B2B services for well-known gaming operators such Danske Spil, Fortuna, PMU and Borgata. As well as enhancing our B2C business, the integration and restructuring of the acquired bwin.party platform is also designed to deliver a superior product and service to our B2B customers. We have already delivered new unique content to our B2B customers and we expect this to increase following changes made in the business. The strength of the technology platform was reflected in H1, with the signing of our biggest B2B contract to date. Betfred is one of the UK’s best known sports betting brands and the Group has signed a 10-year contract to provide a full turnkey online B2B solution for sports and gaming.
Non-core
| Non-core (€m) | Pro forma six months to | Actual | |||
| 30 June 2016 | 30 June 2015 | Change | 30 June 2016 | 30 June 2015 | |
| Revenue | 11.1 | 9.9 | 12% | 9.1 | – |
| Contribution | (0.4) | 1.1 | (136%) | (0.4) | – |
Included within Non-core are Kalixa and InterTrader. Kalixa revenues rose in the period reflecting the improved performance at bwin.party labels. Discussions regarding a disposal of the business are ongoing. InterTrader, our spread betting business has moved from a third-party platform provider to an in-house solution and this caused some disruption during the period. This process has now been completed and moving forwards the company now has much greater flexibility.
CFO Succession
As separately announced today Richard Cooper, Chief Financial Officer, is to step down from the Board with effect from February 2017 and will be succeeded by Paul Miles, ACA.
Regulatory update
Regulation of online gaming is evolving at different rates across the world. Our policy is to seek licences in markets where regulation is compliant with the highest court applicable to the jurisdiction and where taxation is commercially viable. In the first six months of 2016, just under 70% of our revenues were derived from markets that are regulated or in the process of becoming regulated or where we pay gaming taxes or VAT.
We were pleased to have our New Jersey licence (acquired with bwin.party) confirmed by the New Jersey Division of Gaming Enforcement in May, whilst in August we were granted a permanent licence in Romania. We expect Czech Republic, the Netherlands and Poland to regulate in 2017.
Brexit
Beyond the impact of currency movements there has been no visible impact on the business from the UK’s decision to seek an exit from the EU. The Group has greater sterling costs than revenues and therefore the impact from sterling weakness is a net positive. The detail of how the UK intends to exit the EU is yet to be decided, however, management believe GVC’s global footprint gives it significant flexibility to face any challenges that may arise.
Current trading and outlook
Q3 has started positively, helped by a strong end to Euro 2016. Average daily net revenue for the 11 weeks up to 15 September is 12% higher on a pro forma basis and 15% in constant currency. As planned we have now commenced the sportsbook migrations. We recognise the year on year comparatives get more challenging in H2. The Board is confident of achieving a result at the upper end of market expectations for 2016.
GVC operates in a highly competitive, increasingly regulated and taxed environment. The Board believes the Company has never been better placed to face these challenges. Indeed, the organic growth potential of the Group is now greater than originally anticipated. Key to securing this will be strategic investment in marketing and technology.
Kenneth Alexander
Chief Executive Officer
Group Finance Director’s Report
Continuing the theme of the CEO review, a contrast is drawn between the “pro forma” results and the “accounting” results for the period as the Acquisition of bwin.party completed on 1 February 2016 and has been accounted for as a business combination under IFRS 3.
Attention is drawn to the distinction between NGR, a figure before VAT, and Revenue, the more “statutory” number, stated after VAT.
A starting position is the bridge between the accounting and pro forma numbers for H1.
Bridge between Accounting and Pro forma results
Table 1
| Actual H1-2016 |
bwin.party, pre- Acquisition |
Pro forma H1-2016 |
Pro forma H1-2015 |
Actual H1-2015 |
|
| €000’s | €000’s | €000’s | €000’s | €000’s | |
| A | B | C = (A+B) | |||
| NGR | 390.6 | 51.2 | 441.8 | 408.4 | 120.9 |
| Revenue | 382.1 | 49.9 | 432.0 | 401.8 | 120.3 |
| Contribution | 200.9 | 27.2 | 228.1 | 212.3 | 65.4 |
| Contribution %* | 51.4% | 53.1% | 51.6% | 52.0% | 54.0% |
| Expenditure | (109.7) | (14.0) | (123.7) | (138.8) | (39.9) |
| Clean EBITDA | 91.2 | 13.2 | 104.4 | 73.5 | 25.5 |
*contribution divided by NGR
A summary of revenue, contribution and expenditure by reporting segment is shown below:
Table 2
| PRO FORMA BASIS Six months to: |
ACTUAL BASIS Period to: |
||||
| 30 June 2015 €m |
30 June 2016 €m |
30 June 2015 €m |
30 June 2016 €m |
||
| Sports labels | 2,197.2 | 2,298.6 | 823.7 | 2,082.6 | |
| Games labels | 38.8 | 31.1 | – | 24.8 | |
| B2B | – | – | – | – | |
| Non-Core | – | – | – | – | |
| Corporate | – | – | – | – | |
| Sports wagers | 2,236.0 | 2,329.7 | 823.7 | 2,107.4 | |
| Sports Margin % | 8.1% | 9.1% | 8.8% | 9.2% | |
| Sports labels | 275.4 | 312.4 | 103.8 | 280.4 | |
| Games labels | 109.0 | 102.0 | 16.5 | 87.0 | |
| B2B | 7.5 | 6.5 | – | 5.6 | |
| Total, Core | 391.7 | 420.9 | 120.3 | 373.0 | |
| Non-core | 9.9 | 11.1 | – | 9.1 | |
| Corporate | – | – | – | – | |
| Total Revenue | 401.8 | 432.0 | 120.3 | 382.1 | |
| Sports labels | 149.2 | 177.7 | 54.2 | 157.6 | |
| Games labels | 54.7 | 44.4 | 11.2 | 38.2 | |
| B2B | 7.3 | 6.4 | 0.0 | 5.5 | |
| Total, core | 211.2 | 228.5 | 65.4 | 201.3 | |
| Non-core | 1.1 | (0.4) | 0.0 | (0.4) | |
| Corporate | 0.0 | 0.0 | 0.0 | 0.0 | |
| Contribution | 212.3 | 228.1 | 65.4 | 200.9 | |
| Sports labels | 54% | 57% | 52% | 56% | |
| Games labels | 50% | 42% | 68% | 43% | |
| B2B | 97% | 99% | – | 98% | |
| Total, core | 54% | 54% | 54% | 54% | |
| Non-core | 11% | (4%) | – | (4%) | |
| Contribution % | 53% | 53% | 54% | 53% | |
| Core | (98.6) | (94.6) | (31.6) | (84.2) | |
| Non-core | (10.5) | (8.5) | – | (7.1) | |
| Corporate | (29.7) | (20.6) | (8.3) | (18.4) | |
| Expenditure | (138.8) | (123.7) | (39.8) | (109.7) | |
| Core | 112.6 | 133.9 | 33.8 | 117.1 | |
| Non-core | (9.4) | (8.9) | 0.0 | (7.5) | |
| Corporate | (29.7) | (20.6) | (8.3) | (18.4) | |
| Clean EBITDA | 73.5 | 104.4 | 25.5 | 91.2 | |
NGR
NGR grew 223% to €390.6 million in the six month period, whilst on a pro forma basis it grew to €441.8 million or by 8%. Growth was achieved through a combination of more focused management, stronger sports margins and better product cross-sell. As the group operates in a large number of markets yet reports in Euro, it is inevitable that currency fluctuations have an impact on the underlying trading. On a constant currency basis, pro forma NGR grew by 12% over the six months to 30 June 2015.
Revenues
Revenues grew by 218% to €382.1 million in the reported period, whilst on a pro forma basis they grew by 8%. VAT has been imposed since January 2015 in a number of countries, the most significant of which are Germany and France. VAT at the rate of 21% has now been introduced in Belgium, a market in which GVC operates through a locally licensed partner. The financial impact is not considered to be material to the Group.
Both NGR and Revenues are net of customer bonuses which averaged 23% in the period (H1-2015: 21%) on a pro forma basis.
Variable costs and Contribution
The key components of variable costs remain: betting taxes and duties, payment processing costs, software royalties, affiliate commissions, partner shares, and marketing costs.
Whilst there was an inevitable increase in both the quantum and percentage of betting taxes, the contribution margin (being Revenues less variable costs) was 51.4% on an actual basis and 51.6% on a pro forma basis.
Contribution, in absolute terms was €200.9 million on an actual basis and €228.1 million on a pro forma basis, an increase of 207% and 7% respectively over H1-2015.
Expenditure
The prime components of expenditure are personnel (representing around 55% of the cost base) and technology (representing around 30% of the cost base). Other significant costs comprise real-estate (with over 20 offices), travel and professional fees.
On a pro forma basis, there was a 11% reduction in expenditure from €138.8 million to €123.7 million. On an actual basis, owing to the Acquisition, expenditure naturally increased, from €39.8 million in H1-2015 to €109.7 million in H1-2016.
The “run-rate” of expenditure has been steadily decreasing in H1-2016 following the synergy program launched by GVC, although the more significant savings will be seen in H1-2017 and beyond following platform migrations.
Clean EBITDA
On an accounting basis, Clean EBITDA rose 257% from €25.5 million to €91.2 million, whilst on a pro forma basis it rose 42% from €73.5 million to €104.4 million.
Share Option Charges
Share option charges reflect the accounting cost of the directors’ LTIP approved by shareholders on 15 December 2015, and granted on 3 February 2016, together with the legacy scheme for non-directors, and the dissolution of the legacy scheme for directors.
The charge for H1-2016 was €6.5 million (H1-2015: €0.2 million) with a further €18.4 million included within exceptional items for the legacy option plan rolled into the placing of new shares.
Depreciation and Amortisation
To draw the distinction between assets acquired in the Acquisition and those acquired in the normal course of business the components are tabulated below:
| Table 3 | Value of non-current assets acquired in the period |
| €million | |
| Property, Plant and Equipment | |
| – Acquired as part of the Acquisition | 44.5 |
| – Acquired in the normal course of business | 4.4 |
| 48.9 | |
| Intangible assets | |
| – Acquired as part of the Acquisition | |
| – Goodwill | 960.1 |
| – Other | 608.0 |
| – Acquired in the normal course of business | 5.9 |
| – Software capitalised in the period | 6.7 |
| 1,580.7 | |
| Total value of non-current assets | |
| – Acquired as part of the Acquisition | 1,612.6 |
| – Acquired/capitalised in the normal course of business | 17.0 |
| 1,629.6 |
The total of depreciation and amortisation was €65.5 million of which €52.2 million was the amortisation charge associated with intangible assets recognised on Acquisition for the five month period from 1 February 2016 to 30 June 2016. These assets are being amortised over periods ranging from 3 to 12 years.
The amortisation on assets acquired in the normal course of business amounted to €2.9 million, whilst the depreciation of property plant and equipment was €10.4 million.
The Group renegotiated its existing contract with a leading IT supplier which has led to a significant reduction in licencing costs from H2-2016 onwards. One non-cash consequence of this action is an acceleration of the depreciation charge in the period. The net impact of this, €12.5 million, has been shown within exceptional items.
Financing Charges
These comprise: interest of indebtedness (principally loans); an accounting charge for debt fee amortisation, other debt administration fees, and foreign exchange movements. Debt fees were payable on the draw-down of the loan from Cerberus and, subsequent to the period-end, payable on the mandatory repayment of a portion of the loan triggered by the receipt of proceeds on the sale of certain assets. The total charge in the period was €29.4 million.
Adjusted Profit Before Taxation
Table 4
| 6 months to 30 June 2016* |
6 months to 30 June 2015 |
||
| €millions | €millions | ||
| (Loss)/profit before taxation | (86.1) | 17.1 | |
| Fair value of derivative instruments | (14.1) | – | |
| Change in value in asset held for sale | 4.8 | – | |
| Amortisation of acquired intangibles | 52.2 | – | |
| Exceptional items | 89.3 | 4.7 | |
| Dividend received from associate | (3.1) | – | |
| Amortisation of early repayment option on loan | (1.9) | – | |
| Amortisation of loan fees | 10.2 | – | |
| 51.3 | 21.8 |
*the five months of ownership of bwin.party, together with the six months of GVC
Excluding the impact of exceptional items (see Table 5 below) and other non-trading related costs, the Adjusted profit before taxation was €51.3 million on an accounting basis against €21.8m in the same period last year.
A bridge, showing the principal movements is shown below:
Exceptional items
The bulk of the exceptional items have arisen on the Acquisition itself and subsequent restructuring charges. Additionally, translation charges arising from foreign exchange movements on both the pre-Acquisition cash-confirmation obligations and GBP cash held for restructuring charges are also reflected. The principal items are shown below:
Table 5 – exceptional items
| Accounting €m |
|
| Total Acquisition related expenditure* | 61.1 |
| Less: amount taken to share premium account | (6.4) |
| Acquisition related expenditure within the Income statement | 54.7 |
| Acceleration of amortisation on onerous IT contract | 12.5 |
| Progressive jackpot provision | 7.6 |
| Costs associated with the Premium listing | 4.4 |
| Restructuring charges | 5.1 |
| Foreign exchange movement on placing funds | 5.0 |
| 89.3 |
The Acquisition took around seven months and thus considerable fees were incurred both before and after the Acquisition, and in both 2015 and 2016. Across both GVC and bwin and both 2016 and 2016, the combined transaction and fund raising costs excluding debt fees has amounted to €102 million.
Taxation
Whilst the Group is currently headquartered in the Isle of Man, and with key operating subsidiaries in Gibraltar (where the headline rate of corporate tax is 10%) and Malta (5%), it operates in a number of other jurisdictions with higher tax rates which would increase the underlying tax charge although there are also tax losses available in a number of jurisdictions. This has resulted in the tax credit for the period of €1.9 million (H1-2015: tax charge, €0.3 million).
The total taxation expense for the group for H1-2016 (pro forma), including VAT, Betting taxes, employment taxes and corporation taxes was €72.1 million, representing 16.3% of NGR.
Earnings per share
EPS is clearly affected by both the quantum of the exceptional items and debt fees and the mildly dilutive effect of the share options schemes. The table below summarises the various ways of looking at EPS.
Table 6 – earnings per share
| Accounting 6 months to 30 June 2016 (€) |
Accounting 6 months to 30 June 2015 (€) |
|
| Basic EPS | (0.334) | 0.273 |
| Basic, fully diluted EPS | (0.334) | 0.260 |
| Adjusted EPS | 0.199 | 0.349 |
| Adjusted, fully diluted EPS | 0.198 | 0.332 |
REVIEW OF BALANCE SHEET
A bridge between the opening and closing balance sheets is shown in the table below:
Table 7
| Non-current assets/ AHFS €m |
Cash and cash equiv’s incl STI €m |
Cerberus debt principal €m |
Customer liabilities €m |
Other net debt €m |
All other assets and liabilities €m |
Total net assets €m |
|
| GVC at 31.12.15 | 159.1 | 28.2 | (20.0) | (14.8) | (3.5) | (20.9) | 128.1 |
| Movements in H1-2016: | |||||||
| To bwin shareholders and option-holders | 1,506.6 | (302.6) | – | – | – | – | 1,204.0 |
| Loan finance and Placing | – | 578.1 | (380.0) | – | – | – | 198.1 |
| Acquisition Balance Sheet | 669.3 | 131.8 | – | (118.0) | (39.4) | (97.2) | 546.5 |
| Goodwill on Acquisition | 960.1 | – | – | – | – | – | 960.1 |
| Consolidation entries | (1,506.6) | – | – | – | – | (1.2) | (1,507.8) |
| Acquisition closure fees & similar | – | (121.6) | – | – | 39.4 | 21.1 | (61.1) |
| Post Acquisition close exceptional items | (17.6) | (14.1) | – | (7.6) | – | 4.7 | (34.6) |
| Business disposals | (6.6) | 6.6 | – | – | – | – | – |
| General trading | (36.6) | 2.2 | – | 14.2 | (4.8) | 30.9 | 5.9 |
| Enlarged Group at 30.6.16 | 1,727.7 | 308.6 | (400.0) | (126.2) | (8.3) | (62.6) | 1,439.2 |
Acquisition of bwin.party
The Acquisition of bwin.party which completed on 1 February 2016 was struck at 25p per bwin share plus 0.231 GVC shares in exchange for each bwin share, and accounted for at a currency rate of £1: €1.3205.
Table 8 – Acquisition purchase allocations
| €millions | |
| Amount paid by GVC: | |
| – Value of stock issued | 1,201.5 |
| – Cash component | 302.6 |
| – Options settled post Acquisition | 2.5 |
| Value of offer (£1.14 billion) | 1,506.6 |
| Assets at Fair value | (546.5) |
| Goodwill recognised | 960.1 |
The key cashflows incurred in 2016 associated with the Acquisition are shown in the table below:
Table 9 – Acquisition cashflows
| Prior to Acquisition | “at” Acquisition | Post Acquisition | Total | |
| Debt raised | – | 380.0 | – | 380.0 |
| Equity issuance | – | 198.1 | – | 198.1 |
| Funds raised | – | 578.1 | – | 578.1 |
| Debt repaid | (16.0) | (38.6) | (3.0) | (57.6) |
| Debt fees paid on draw-down (table 11) | (8.3) | (7.6) | – | (15.9) |
| Paid to Bwin share and option holders | – | (302.6) | – | (302.6) |
| Acquisition costs (table 7) | (41.0) | (45.7) | (15.4) | (102.1) |
| Funds discharged | (65.3) | (394.5) | (18.4) | (478.2) |
| Net fund-raising | (65.3) | 183.6 | (18.4) | 99.9 |
| Cashflow in the period (see table 13) | – | 183.6 | (18.4) | 165.2 |
Other non-current assets
The group purchased €4.4 million of Property, Plant and Equipment with an average useful life of three years.
The group capitalised €6.7 million relating to software developed internally, and purchased €5.9 million of externally developed software.
Investments and Available for Sale Financial Assets
During the period these consisted of various modest investments inherited from the bwin.party Acquisition, along with GVC’s investment in Betit which was disposed of during the period for €nil consideration as the performance was disappointing and the Group wished to avoid the forced purchase which might have been trigged in H2-2017.
Assets in Disposal Groups Held for Sale
The principal asset here is the acquired payments processing business (“Kalixa”). GVC is in advanced discussions with a number of parties in this regard. The net current asset value of Kalixa at 30 June 2016 was €21.2m comprising €36.8million of cash and short term investments and €15.6 million (net) of other current liabilities.
The Conspo asset was disposed of after 30 June for a gross value of €15.3 million of which €13.5 million was received (and subsequently paid-on to Cerberus to reduce the debt principal), with a further €1.8 million due in two equal instalments, in April and December 2017.
Trade and Other Receivables
These principally consist of balances with credit card processors and other payment intermediaries and the balances held generally move up and down with both business activity and the start/end of the football season.
The amounts represented 24.5 debtor days.
Derivative Financial Assets
These now consist of two main components:
- The WinUnited option, €2.8 million
- An option value attributed to the ability of GVC to terminate the Cerberus loan by 1 February 2017 (“The Cerberus early repayment option”). This has been valued at €22.5 million. See table 10 below on indebtedness for more detail.
Table 10 – components of derivative financial assets
| In €millions | Total | Winunited | Early repayment option |
| Balance at 1.1.2016 | 3.8 | 3.8 | – |
| Recognition of fair value of early repayment option | 7.4 | – | 7.4 |
| Change in fair values credited/(charged) to income statement | 14.1 | (1.0) | 15.1 |
| Balance at 30 June 2016 | 25.3 | 2.8 | 22.5 |
Whilst the intention of GVC was always to re-finance the Cerberus facility by 1 February 2017 and therefore avoid future fees, and securing financing at a significantly cheaper cost, for accounting purposes the combination of these two factors is treated as an “embedded derivative.” This was initially recognised at €7.4m, but during the period it became clear to GVC that re-financing could be achieved at an even more advantageous rate. This led to the fair value of the option increasing by €15.1 million to €22.5 million. The credit of this €15.1 million has been taken to the income statement.
Short term investments
These are cash balances categorised as short term investments owing to the restrictions placed upon them by regulators and similar.
Cash and cash equivalents
The figure of €302.9 million, excludes €34.6 million held within Kalixa. The combined value is €337.5 million. Of this amount, €189.9 million was denominated in currencies other than the Euro, of which €135.8 million was held in GBP.
Customer liabilities
Customer balances generally move up and down with both business activity and the start/end of the football season.
The amounts represented 45 creditor days. The Group’s Poker business has a distorting effect as poker players tend to hold their balances for a considerable length of time.
Progressive Prize pools
Both GVC and bwin.party have progressive prize pools on casino games. Following the Acquisition, GVC evaluated that a change in accounting judgement was required and recognised a charge of €7.6 million as an exceptional item, with the liability being recorded in the balance sheet.
Deferred and Contingent Consideration
The principal liability is in relation to the prior sale of World Poker Tour and becomes payable in tranches based on whether certain US states regulate.
| €million | |
| Current liabilities | (3.6) |
| Non-current liabilities | (1.8) |
| (5.4) |
Non current liability – Indebtedness
The debt on the balance sheet is a composite of the principal outstanding, the fees due over the life of the loan, and an option valuation of the fees which can be avoided if the loan is repaid at 1 February 2017 together with an accrued interest component.
The Group drew-down €20 million from its Cerberus facility on 4 September 2015 and a further €380 million on 1 February 2016 (see column 1 in Table 11 below).
The term “effective interest” comprises a composite of both simple interest and fee amortisation (see column 2 in table 11 below).
There is an ability for GVC to avoid paying certain fees and, should GVC re-finance its debt, (as it indicated it would do in its announcement of 2 August 2016 referring to the commitment made to the Company by Nomura), at a significantly reduced rate of interest, then the economic impact of this is treated in accounting terms as an “early repayment option.” (See column 3 in table 11 below)
Table 11- loan balance
| Dr / (Cr) | Col 1 | Col 2 | Col 3 | |
| Total | Principal | Effective interest | Cerberus early repayment option | |
| €million | €million | €million | €million | |
| Balance at 1.1.2016 | (19.8) | (20.0) | 0.2 | – |
| Loan drawn-down | (380.0) | (380.0) | – | – |
| (399.8) | (400.0) | 0.2 | – | |
| Fees paid during prior period | 7.6 | – | 7.6 | – |
| Fees paid during period | 7.6 | – | 7.6 | – |
| Interest paid in period | 13.3 | – | 13.3 | – |
| Amount charged to income statement | (31.3) | – | (31.3) | – |
| Recognition of early repayment option (table 13) | (7.4) | – | – | (7.4) |
| Amortisation of early repayment option | 1.9 | – | – | 1.9 |
| Balance at 30 June 2016 | (408.1) | (400.0) | (2.6) | (5.5) |
There are a number of components to the debt fees which are shown below, together with the periods in which they are effectively chargeable to the income statement.
Based on the loan running to its full term, the income statement profile of the debt fees would be:
| H2-2015 | 0.4 |
| H1-2016* | 10.2 |
| H2-2016 | 13.1 |
| 2017 | 18.2 |
| 41.9 |
Of which €12m are exit fees and €14 million are fees which can be avoided with an early repayment.
Net debt
| Table 12 – GVC view of net debt at 30 June 2016 €millions |
|||
| Cash and cash equivalents | 302.9 | ||
| Short term investments | 5.3 | ||
| Customer liabilities | (107.8) | ||
| Debt principal outstanding | (400.0) | ||
| Kalixa cash and cash equivalents | 36.8 | ||
| Less Kalixa customer liabilities | (2.3) | ||
| 34.5 | |||
| NET DEBT | (165.1) |
Since 30 June 2016, following the receipt of sale proceeds from Conspo, and in accordance with the debt facility, a total of €13.5 of the loan principal has been repaid.
Share Option Liability
There is an accrual for the cash-component of the LTIP in relation to the Chairman whose option arrangements, by virtue of him being a citizen of the USA, are structured slightly differently but with no commercial advantage or disadvantage over other option holders.
Forward Contract Liability
The forward foreign exchange contract obliged to be taken out by the Group as part of the cash confirmation exercise for the Acquisition was extinguished during the period.
Provisions
€1.3 million was set aside as a fair value adjustment in relation to an onerous contract inherited on the Acquisition. €7.6m relates to other provisions in the normal course of business.
Betit Option liability
The group disposed of its investment (and its associated option liability) in the period for €nil owing to the disappointing performance of this investment.
Deferred tax
Deferred taxation has arisen on the intangible assets recognised on the Acquisition of bwin.party.
Share capital
At 1 January 2016 there were 61,276,480 shares in issue. At 30 June 2016 there were 291,980,780 shares in issue. The Company issued 230,704,300 shares in the period under review as follows:
- 156,947 shares were issued to a third party warrant holder on 12 February 2016.
- 230,547,353 shares were issued in pursuance of the Acquisition
- 32,964,034 placing and subscription to third parties
- 2,580,990 placed with directors in compensation of their share options
- 195,002,329 issued to bwin.party share and option holders
After the period end the Company subsequently issued a further 296,724 shares, also in connection with the Acquisition, so the total number of (clean) shares in issue at the date of this release is 292,277,504, and thus the total number of shares issued pursuant to the Acquisition was 230,844,077 of which 195,299,053 were issued to bwin.party share and option holders and 35,545,024 were issued via a placing or subscription.
CASHFLOW
The table below shows a simplified version of the cashflow during the six month period to 30 June 2016.
Table 13 – summary of the Cashflow
| Pro forma* | Accounting | ||
| €millions | €millions | ||
| Acquisition cashflows (Table 9) | 138.3 | 165.2 | |
| Clean EBITDA* | 104.4 | 91.2 | |
| Disposal proceeds, interest and dividends received | 10.7 | 10.6 | |
| Capitalisation of internally developed software* | (6.7) | (6.7) | |
| Purchase of intangible assets* | (6.7) | (5.9) | |
| Purchase of PPE* | (10.0) | (4.4) | |
| Corporate taxation paid* | (6.9) | (5.2) | |
| Interest paid | (13.5) | (13.3) | |
| Working capital movement | (40.7) | (31.8) | |
| Change in short term investments | 8.3 | 8.1 | |
| Earn-outs | (1.2) | (1.2) | |
| Other exceptional items | (14.5) | (14.5) | |
| Foreign exchange translation differences on cash* | (2.5) | 1.0 | |
| Net cashflows | 159.0 | 193.1 | |
| Cash acquired at Acquisition | – | 116.2 | |
| Cash at 1.1.2016 | 178.5 | 28.2 | |
| Cash** at 30.06.2016 | 337.5 | 337.5 |
* other than working capital movements which should be considered to be distorted by significant accruals and deferred payments at 31 December 2015, the “operational” cashflows on a pro forma basis for the six months ended 30 June 2016 were €71.6 million.
**includes Kalixa
The principal items within working capital movement related to 2015 bonus schemes (across both GVC and bwin.party), and the settlement of trade creditors.
Richard Cooper
Group Finance Director
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties are those disclosed on pages 26 to 27 of the Group’s 2015 Annual Report. The principal risks and uncertainties which could impact the Group for the remainder of the year are set out below:
TECHNOLOGY
- The Group may be threatened by Denial of Service attacks or similar.
- Natural or man-made disasters may affect continuity of operations, undermining player confidence.
- With technological advances and continuous shifts in how consumers access our services, maintaining and improving technology may become more complex.
- Following the Acquisition of bwin.party, the Group is undertaking a significant technology platform migration, which carries a project risk.
REGULATORY
- Conflict between jurisdictions in which the customer resides and where the service is provided; risk of enforcement action.
- In some markets regulation is not clearly defined or adopted; there may be changes in regulation in all markets.
TAXATION
- Imposition of additional gaming or other indirect taxes.
- Transfer pricing between group entities could be challenged by the tax authorities.
- Changes in VAT rules within the EU impacting the digital economy.
ECONOMIC
- Conditions in the Eurozone remain challenging and this may erode customer base confidence and spending power.
- Foreign exchange movements; risk of certain countries exiting the Euro.
- Brexit: following the outcome of the June referendum, the volatility of global currency and financial markets has increased. Future changes as a result of the referendum may reduce the Group’s ability to operate in certain EU markets without a change in domicile, which could carry a higher tax burden.
FINANCIAL
- Increases in EURIBOR will increase the interest cost for the Group. The loan arrangements contain covenants which, if breached, would trigger early repayment of the facility.
OPERATIONAL
- The market place becomes more competitive via new entrants or more attractive products available from those new entrants or existing competitors.
- Withdrawal of payment processing facilities.
- Reliance on third party payment and multi-currency processing systems.
- Dependence on third party software.
- Dependence on key personnel.
- Loss of major introducer of business.
- Loss of major customer.
- Poor sports results.
- Abnormal jackpot wins.
- Business integration process following the Acquisition : risk of business disruption and the impact on staff; risk of unexpected costs or constraints on delivering expected synergies.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors confirm that to the best of their knowledge:
- The unaudited condensed consolidated set of financial information has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’; and
- The interim management report includes a fair review of the information required by:
- DTR 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year;
- DTR 4.2.8R, being material related party transactions that have taken place in the first six months of the current financial year and any material changes in the related party transactions described in the Annual Report for the year ended 31 December 2015.
The Directors of GVC Holdings PLC are listed on the GVC website: www.gvc-plc.com.
By order of the Board
Robert Hoskin
Company Secertary
19 September 2016
GLOSSARY AND TERMS
| Acquisition | The purchase of bwin.party digital entertainment plc by the Company |
| B2B | Business-to-business |
| B2C | Business-to-consumer |
| bwin.party | bwin.party digital entertainment plc |
| Clean EBITDA | Earnings before interest, taxation, depreciation, amortisation, impairment charges, changes in the fair value of derivative financial instruments, share option charges and exceptional items |
| Clean Net operating Cashflow (‘CNOC’) | Clean EBITDA less: capitalised development costs, net corporate taxes paid, finance lease payments, net working capital movements and exceptional items of a cash nature |
| Contribution Constant currency basis | Total Revenue less betting taxes, payment service provider fees, software royalties, commissions, revenue share and marketing costs Each month in the prior period re-translated at the current periods exchange rate |
| Enlarged Group | GVC Holdings plc incorporating bwin.party |
| IAS | International Accounting Standards |
| IFRS | International Financial Reporting Standards |
| InterTrader | The Group’s financial markets services |
| Kalixa | The Group’s payments business |
| KPIs Net debt | Key Performance Indicators Cash and cash equivalents, short term investments, less customer liabilities (all including amounts recorded as assets in disposal groups classified as held for sale), less interest bearing loans and borrowings. |
| Revenue | Net Gaming Revenue less VAT (imposed by certain EU jurisdictions on either sports or gaming revenue) |
| Sports Gross Margin | Sports wagers less payouts |
| Sports Gross Margin % | Sports Gross Margin divided by Sports wagers |
| Sports Net Gaming Revenue (‘Sports NGR’) | Sports Gross Margin less free bets and promotional bonuses |
| Total Net Gaming Revenue (‘Total NGR’) | Sports NGR + Net gaming stakes less payout winnings less customer bonuses + Other revenues |
| WPT | The business and substantially all the assets of The World Poker Tour that was disposed of by bwin in June 2015 |
Totals may not sum as rounding and percentages have been calculated on the underlying rather than the summarised figures.
Independent Review Report to GVC Holdings plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report of GVC Holdings PLC for the six months ended 30 June 2016 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Statement of Financial Position, the Condensed Consolidated Statement of Changes in Equity, the Condensed 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.
This report is made solely to the company, 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 Auditing Practices Board. Our review work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusion we have formed.
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 and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union.
Our responsibility
Our responsibility is to express 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 Auditing Practices Board 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 Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
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 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
19 September 2016
CONDENSED CONSOLIDATED INCOME STATEMENT
for the period ended 30 June 2016
| Period Ended 30 June 2016 (Unaudited) |
Period Ended 30 June 2015 (Unaudited) |
||
| Notes | €m | €m | |
| Net Gaming Revenue (memorandum) | 390.6 | 120.9 | |
| Revenue | 2 | 382.1 | 120.3 |
| Cost of sales | (181.2) | (54.9) | |
| Contribution | 2 | 200.9 | 65.4 |
| Administrative costs | 3 | (109.7) | (39.9) |
| Clean EBITDA | 91.2 | 25.5 | |
| Share option charges | (6.5) | (0.2) | |
| Exceptional items | 3 | (89.3) | (4.7) |
| Depreciation and amortisation | 3 | (65.5) | (2.2) |
| Change in value of available for sale asset | (4.8) | – | |
| Changes in the fair value of derivative financial instruments | 8 | 14.1 | – |
| Operating (loss)/profit | (60.8) | 18.4 | |
| Financial income | 0.9 | – | |
| Financial expense | 4 | (29.4) | (1.3) |
| Dividend income | 3.1 | – | |
| Share of profit/(loss) of associate | 0.1 | – | |
| (Loss)/profit before tax | (86.1) | 17.1 | |
| Taxation income/(expense) | 5 | 1.9 | (0.3) |
| (Loss)/profit after tax | (84.2) | 16.8 | |
| Attributable to: | |||
| Owners of the parent | (84.0) | 16.8 | |
| Non-controlling interests | (0.2) | – | |
| Earnings per share | € | € | |
| Basic | 6 | (0.334) | 0.273 |
| Diluted | 6 | (0.334) | 0.260 |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period ended 30 June 2016
| 30 June 2016 (Unaudited) |
30 June 2015 (Unaudited) |
|
| €m | €m | |
| (Loss)/profit for the period | (84.2) | 16.8 |
| Other comprehensive income | ||
| Items that may subsequently be recycled to profit or loss: | ||
| Change in fair value of available for sale assets | – | – |
| Exchange differences on translation of foreign operations | (3.1) | – |
| Total comprehensive income for the period | (87.3) | 16.8 |
| Total comprehensive income attributable to: | ||
| Owners of the parent | (87.1) | 16.8 |
| Non-controlling interests | (0.2) | – |
| (87.3) | 16.8 |
The notes form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2016
| 30 June 2016 (Unaudited) |
30 June 2015 (Unaudited) |
31 December 2015 (Audited) |
||
| Notes | €m | €m | €m | |
| Assets | ||||
| Property, plant and equipment | 20.0 | 1.6 | 1.4 | |
| Intangible assets | 7 | 1,660.8 | 155.2 | 155.1 |
| Trade and other receivables | – | – | – | |
| Investments and available for sale financial assets | 1.4 | 3.8 | 2.6 | |
| Deferred tax | 0.8 | – | – | |
| Total non-current assets | 1,683.0 | 160.6 | 159.1 | |
| Trade and other receivables | 116.3 | 22.9 | 34.6 | |
| Derivative financial assets | 8 | 25.3 | – | 3.8 |
| Income and other taxes reclaimable | 8.6 | 5.5 | 6.0 | |
| Short term investments | 5.3 | – | – | |
| Cash and cash equivalents | 302.9 | 21.4 | 28.2 | |
| Assets in disposal groups classified as held for sale | 9 | 75.3 | – | – |
| Total current assets | 533.7 | 49.8 | 72.6 | |
| Total assets | 2,216.7 | 210.4 | 231.7 | |
| Current liabilities | ||||
| Trade and other payables | (71.9) | (28.3) | (32.0) | |
| Balances with customers | (107.8) | (12.1) | (14.8) | |
| Progressive prize pools | (18.4) | – | – | |
| Amounts due under finance leases | (0.2) | (1.4) | (0.7) | |
| Non-interest bearing loans and borrowings | 10 | – | (6.2) | (3.0) |
| Deferred and contingent consideration | (3.6) | (2.4) | (1.6) | |
| Share option liability | 13 | (0.4) | (6.8) | (9.7) |
| Forward contract liability | – | – | (9.9) | |
| Liabilities in disposal groups held for sale | 9 | (29.8) | – | – |
| Provisions | (8.9) | – | – | |
| Income taxes payable | (15.5) | (6.7) | (7.3) | |
| Other taxation payable | (40.2) | (1.9) | (2.0) | |
| Total current liabilities | (296.7) | (65.8) | (81.0) | |
| Current assets less current liabilities | 237.0 | (16.0) | (8.4) | |
| Non-current liabilities | ||||
| Deferred and contingent consideration | (1.8) | (0.4) | – | |
| Interest bearing loans and borrowings | 10 | (408.1) | (0.2) | (19.8) |
| Share option liability | 13 | – | (5.2) | (2.1) |
| Betit option liability | 8 | – | (1.7) | (0.7) |
| Deferred tax | 5 | (70.9) | – | – |
| Total non-current liabilities | (480.8) | (7.5) | (22.6) | |
| Total net assets | 1,439.2 | 137.1 | 128.1 | |
| Capital and reserves | ||||
| Issued share capital | 11 | 2.9 | 0.6 | 0.6 |
| Merger reserve | 40.4 | 40.4 | 40.4 | |
| Share premium | 1,477.6 | 85.4 | 85.4 | |
| Translation reserve | (2.8) | 0.3 | 0.3 | |
| Retained earnings | (77.5) | 10.4 | 1.4 | |
| Total equity attributable to equity holders of the parent | 1,440.6 | 137.1 | 128.1 | |
| Non-controlling interests | (1.4) | – | – | |
| Total equity | 1,439.2 | 137.1 | 128.1 |
The notes form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 30 June 2016
| Share Capital |
Merger Reserve |
Share Premium |
Translation Reserve |
Retained Earnings* |
Total | Non- Controlling interest |
Total equity |
|
| €m | €m | €m | €m | €m | €m | €m | €m | |
| Balance at 1 January 2015 (audited) | 0.6 | 40.4 | 85.4 | 0.3 | 22.7 | 149.4 | – | 149.4 |
| Share option charges** | – | – | – | – | 0.3 | 0.3 | – | 0.3 |
| Share options surrendered | – | – | – | – | (12.2) | (12.2) | – | (12.2) |
| Share options exercised | – | – | – | – | – | – | – | – |
| Dividend paid | – | – | – | – | (17.2) | (17.2) | – | (17.2) |
| Transactions with owners | – | – | – | – | (29.1) | (29.1) | – | (29.1) |
| Profit for the period | – | – | – | – | 16.8 | 16.8 | – | 16.8 |
| Other comprehensive income for the period | – | – | – | – | – | – | – | – |
| Total comprehensive income for the period | – | – | – | – | 16.8 | 16.8 | – | 16.8 |
| Balance as at 30 June 2015 (unaudited) | 0.6 | 40.4 | 85.4 | 0.3 | 10.4 | 137.1 | – | 137.1 |
| Balance at 1 January 2016 (audited) | 0.6 | 40.4 | 85.4 | 0.3 | 1.4 | 128.1 | 128.1 | |
| Share option charges** | – | – | – | – | 5.9 | 5.9 | – | 5.9 |
| Share options surrendered | – | – | – | – | (0.8) | (0.8) | – | (0.8) |
| Share options exercised | – | – | 0.3 | – | – | 0.3 | – | 0.3 |
| Issue of share capital for the Acquisition of bwin.party | 2.3 | – | 1,391.9 | – | – | 1,394.2 | – | 1,394.2 |
| Resulting from the Acquisition of bwin.party | – | – | – | – | – | – | (1.2) | (1.2) |
| Transactions with owners | 2.3 | – | 1,392.2 | – | 5.1 | 1,399.6 | (1.2) | 1,398.4 |
| Loss for the period attributable to the parent | – | – | – | – | (84.0) | (84.0) | – | (84.0) |
| Loss for the period attributable to the Non-controlling interest | – | – | – | – | – | – | (0.2) | (0.2) |
| Other comprehensive income attributable to the parent | – | – | – | (3.1) | – | (3.1) | – | (3.1) |
| Other comprehensive income attributable to the Non-controlling interest | – | – | – | – | – | – | – | – |
| Total comprehensive income for the period | – | – | – | (3.1) | (84.0) | (87.1) | (0.2) | (87.3) |
| Balance as at 30 June 2016 (unaudited) |
2.9 |
40.4 |
1,477.6 |
(2.8) |
(77.5) |
1,440.6 |
(1.4) |
1,439.2 |
*the share option reserve included within retained earnings at 30 June 2016 amounted to a debit balance of €1.7 million, largely due to the surrender of fully vested share options during 2015.
**total share option charge per the condensed income statement amounted to €6.5 million, the difference being a cash settled share option expense of €0.6 million which is not taken directly to retained earnings.
All reserves of the Company are distributable, as under the Isle of Man Companies Act 2006 distributions are not governed by reserves but by the Directors undertaking an assessment of the Company’s solvency at the time of distribution (section 49, 2006 Companies Act Isle of Man).
The notes form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS
for the period ended 30 June 2016
| Period Ended 30 June 2016 (Unaudited) |
Period Ended 30 June 2015 (Unaudited) |
|||
| Notes | €m | €m | ||
| Cash flows from operating activities | ||||
| Cash receipts from customers | 398.1 | 125.5 | ||
| Cash paid to suppliers and employees | (407.3) | (99.3) | ||
| Interest paid including initial costs and loan servicing | (20.9) | – | ||
| Corporate taxes paid | (5.2) | (0.2) | ||
| Net cash used in operating activities | (35.3) | 26.0 | ||
| Cash flows from investing activities | ||||
| Interest received | 0.9 | – | ||
| Dividends received | 3.1 | – | ||
| Acquisition earn-out payments (Betboo) | (1.2) | (1.2) | ||
| Acquisition of bwin.party (net of cash acquired) | 17 | (186.9) | – | |
| Acquisition of property, plant and equipment | (4.4) | (0.4) | ||
| Proceeds from disposal of assets held for sale | 6.6 | – | ||
| Capitalised development costs and other intangibles | 7 | (12.6) | (2.6) | |
| Decrease in short term investments | 8.1 | – | ||
| Net cash used in investing activities | (186.4) | (4.2) | ||
| Cash flows from financing activities | ||||
| Proceeds from interest bearing loan (Cerberus) | 10 | 380.0 | – | |
| Non-interest bearing loan (from William Hill) | 10 | (3.0) | – | |
| Proceeds from issue of share capital, net of costs | 11 | 192.0 | – | |
| Repayment of borrowings | 10, 17 | (39.0) | (0.9) | |
| Dividend paid | 12 | – | (17.2) | |
| Net cash from financing activities | 530.0 | (18.1) | ||
| Net increase in cash and cash equivalents | 308.3 | 3.7 | ||
| Exchange differences | 1.0 | (0.1) | ||
| Cash and cash equivalents at beginning of the period | 28.2 | 17.8 | ||
| Cash and cash equivalents at end of the period | 337.5 | 21.4 |
Cash and cash equivalents
The balance at the end of the period of €337.5 million above consists of €302.9 million cash and cash equivalents as shown on the face of the consolidated statement of financial position and €34.6 million (2015: €nil) of cash and cash equivalents recognised within assets held for sale.
The notes form part of these financial statement
Notes
The notes are available in the PDF download.