GVC Holdings PLC (LSE:GVC), the multinational sports betting and gaming group, is pleased to announce its Interim Results for the six months ended 30 June 2017.
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Presentation
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Webcast
View the Interim Results Webcast
Financial highlights
- NGR up 10% (+12% in constant currency) vs pro forma1 H1 2016
- Clean EBITDA2 of €133.9m up 28% vs pro forma1 H1 2016 (€104.4m)
- Adjusted PBT3 of €101.9m up 99% vs H1 2016 (€51.3m)
- Statutory loss before tax €6.6m (H1 2016 loss €86.1m)
- Adjusted fully diluted EPS4 of 31c up 55% vs H1 2016 (20€c)
- Interim dividend 16.5€c per share
- Long-term refinancing secured
- Net debt as at 30 June 2017 €150.7m (0.6 x LTM Clean EBITDA)
Operational highlights
- Sports Brands gross win margin 9.8% (9.1% pro forma1 H1 2016)
- Sports Brands NGR up 11% (+13% constant currency) vs pro forma1 H1 2016
- Games Brands NGR up 8% (+10% constant currency) vs pro forma1 H1 2016
- On target to achieve €125m6 synergy run rate by end of 2017
- Disposal of Kalixa Group for €29m completed May 2017 and up to €2.6m in deferred consideration
Current Trading (Q3 for period up to 10 September)
- Daily Group NGR up 12% (+15% constant currency)
- Underlying7 daily NGR up 20% (+23% constant currency)
- Board now expects Clean EBITDA for the current year to be comfortably ahead of analysts consensus8
Kenneth Alexander (CEO) said:
“I am delighted with the strong progress across the Group, which has continued to exceed our expectations since last year’s acquisition of bwin.party. A combination of high quality talent, proprietary technology and proven brands are key components driving the business forward. Scale and geographic diversification are increasingly important as the regulatory environment evolves and competition increases. The strong performance of the business together with the smooth integration of bwin.party continues to present exciting organic growth opportunities. In addition, given its proven track record of creating shareholder value, GVC remains well positioned to continue to play a pivotal role in the industry’s consolidation, should the right opportunities arise.”
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
1 Assumes bwin.party acquired 1 January 2016
2 EBITDA before exceptional items and share based payments
3 Profits before exceptional items, amortisation associated with acquisition, dividends from previously sold businesses, impairments, changes in fair value of derivative financial instruments and amortisation of early repayment of option on loan
4 Adjusted profit before tax3 less tax associated with adjusted profit3
5 For the 2016 financial year 30€c of dividends were paid out in 2017
6 Synergy target as disclosed in offer document dated 13 November 2015
7 Underlying includes stripping out Euro 2016 and Kalixa
8 2017 Clean EBITDA forecast consensus €255.9m (range €243.8m-€262.2m; source: Factset 08/09/17)
Presentation and live webcast
A presentation for analysts and investors will be held today at 9:30am BST in the offices of Nomura, 1 Angel Lane, London, EC4R 3AB.
The presentation will be webcast live and available at:
http://www.investis-live.com/gvc-holdings/59a6a1485c0472100016b2ca/jrsj
The presentation will also be accessible via a live conference call.
Dial In Number: +44 (0)20 3059 8125
Conference password: GVC
There will also be a replay available for one week.
Dial in no: +44 (0)121 260 4861
Conference reference number: 7016009#
An on demand replay will also be available on the GVC website following the presentation.
For further information:
| GVC Holdings PLC | |
| Kenneth Alexander, Chief Executive | Tel: +44 (0) 1624 652 559 |
| Paul Miles, Chief Financial Officer | Tel: +44 (0) 20 3938 0079 |
| Nick Batram, Head of Investor Relations & Corporate Strategy | Tel: +44 (0) 20 3938 0066 |
Media enquiries:
| David Rydell, Jamie Rickets, Laura Jaques | Tel: +44 (0) 7798 646021 |
About GVC Holdings PLC
GVC Holdings PLC is a leading e-gaming operator in both B2C and B2B markets. GVC has four business segments with a number of brands; Sports Brands (bwin, Sportingbet, Gamebookers), Games Brands (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, is a constituent of the FTSE 250 index and has licences in more than 18 countries.
For more information see the Group’s website: www.gvc-plc.com
Chief Executive’s review
The Group has continued to make strong progress, with the integration of bwin.party substantially completed, in a little over 18 months since its acquisition in February 2016. As a consequence we are on track to secure the targeted €125m of synergies announced at the time of the bwin.party transaction, by the end of the current year. The migration of the remaining territories onto the bwin.party technology platform is expected to be completed by the end of 2017.
Group NGR for the first six months rose 10% (+12% constant currency) to €486.2m compared to pro forma €441.8m for the same period in 2016 (actual NGR €390.6m). This was particularly pleasing as the corresponding period last year was boosted by the UEFA Euro 2016 tournament. Excluding these revenues, underlying NGR growth for the period was 14%. A combination of top line growth and synergy benefits meant Clean EBITDA of €133.9m represented a 28% improvement on the pro forma €104.4m (€91.2m actual) reported in H1 2016. As a result, the Clean EBITDA margin increased to 28% (24% pro forma H1 2016).
The refinancing that replaced the Cerberus Loan with a six year €250m Term Loan and €70m RCF, led to a significant reduction in interest payable (pre exceptional costs) to €7.5m from €21.1m in H1 2016. After share based payment costs of €10.5m (H1 2016 €6.5m), adjusted profit before tax was €101.9m, an increase of 99% on H1 2016 (€51.3m). Meanwhile, adjusted fully diluted EPS rose 55% to 31€c per share from 20€c the previous year. An interim dividend of 16.5€c per share was also declared. In total, this interim dividend together with the special and final dividends declared in relation to the prior year, means that the Group will have returned over €138m (46.5 €c) to shareholders via dividend payments in 2017.
Also in H1 we completed the disposal of our non-core payments business, Kalixa Group, for a cash consideration of €29.0m and up to €2.6m of deferred consideration.
Strategically, the organic growth potential remains exciting and through further product development and increased marketing investment we are well placed to pursue these opportunities. However, we operate in an industry where regulation and increased taxation present headwinds and these are best addressed through scale and diversification. The combination of our people, proprietary technology and proven M & A track record, means GVC is well positioned to play a significant role in the industry’s ongoing consolidation. Our focus is to build further scale in markets where we have identified an opportunity for expansion and explore new fast growing markets, both in terms of products and geography.
Operational overview
GVC operates through four divisions; Sports Brands, Games Brands, B2B and Non-core.
Sports Brands
GVC operates a number of market leading sports brands including bwin and Sportingbet. As well as sports betting, these brands also offer an extensive range of gaming products in most markets in which they operate.
The first half of 2017 saw a continuation of the positive momentum reported in 2016 across all segments of Sports Brands, despite the absence of a major football tournament during the summer months. Amounts wagered were flat in constant currency ((1%) reported), however, adjusting for the UEFA Euro 2016 tournament, underlying wager growth was +4%. The sports gross win margin improved to 9.8% (9.1%), broadly in line with our expectation of a long-term average of 10%. Sports NGR rose 6% to €172.7m (+7% in constant currency) compared to pro forma H1 2016 – adjusting for UEFA Euro 2016, underlying NGR growth was +15%. Gaming NGR from Sports Brands continues to grow strongly, driven by improved product and more effective CRM. During the period, gaming NGR rose 16% to €182.4m against pro forma 2016.
| Pro forma | Actual | ||||
| Six months to 30 June (€m) | 2017 | 2016 | Change | Constant currency | 2016 |
| Sports wagers | 2,265.2 | 2,298.6 | (1%) | 0% | 2,082.6 |
| Sports margin % | 9.8% | 9.1% | 9.2 | ||
| Sports NGR | 172.7 | 163.4 | 6% | 7% | 146.2 |
| Gaming / other | 182.4 | 157.2 | 16% | 18% | 141.3 |
| NGR | 355.1 | 320.6 | 11% | 13% | 287.5 |
| EU VAT | (9.8) | (8.2) | (20%) | (7.1) | |
| Revenue | 345.3 | 312.4 | 11% | 13% | 280.4 |
| Contribution | 194.2 | 177.7 | 9% | 157.6 | |
| Contribution margin % | 55% | 55% | 55% |
Contribution from Sports Brands increased 9% to €194.2m (€177.7m pro forma H1 2016), with the margin 55% (55% pro forma H1 2016). Marketing spend as a percentage of NGR was 19% (18% pro forma H1 2016) and, as previously guided, we expect this to rise in H2 as we return to more normalised levels of investment.
Looking ahead, we have continued to add new games content and believe we have one of the strongest offerings in the industry. Sports product development will be a particular focus going forward, with a significant pipeline of enhancements. Our new tennis product was launched during the summer and this was well received by customers. We are now less than 12 months from the FIFA World Cup in Russia and our marketing and product development roadmaps are very much focused around the run up to the industry’s most popular betting event.
August saw the launch of a new ambitious marketing campaign for the bwin brand. Early results are very encouraging with new sign ups and first time deposit (“FTDs”) values up 113% and 98% respectively in the DACH region. Equally pleasing has been the performance of the campaign in the regulated markets of Belgium, Italy and Spain, where FTDs year on year in August have risen by between 50%-200%. The combination of an increasing number of new customers together with continuous product enhancement, should deliver material long-term benefits to the Group.
Games Brands
The Group owns a portfolio of well-established stand-alone gaming brands including partypoker, partycasino, CasinoClub, Gioco Digitale and Foxy Bingo.
| Pro forma | Actual | ||||
| Six months to 30 June (€m) | 2017 | 2016 | Change | Constant currency | 2016 |
| Sports wagers | 34.8 | 31.1 | 12% | 11% | 24.8 |
| Sports margin % | 13.9% | 8.4% | 8.4% | ||
| Sports NGR | 1.9 | 2.3 | (19%) | (20%) | 1.9 |
| Gaming / other | 110.5 | 101.3 | 9% | 11% | 86.5 |
| NGR | 112.4 | 103.6 | 8% | 10% | 88.4 |
| EU VAT | (3.6) | (1.6) | (112%) | (1.4) | |
| Revenue | 108.8 | 102.0 | 7% | 9% | 87.0 |
| Contribution | 39.2 | 44.4 | (12%) | 38.2 | |
| Contribution margin % | 35% | 43% | 43% |
Prior to its acquisition, Games Brands were the most challenged segment within bwin.party. It is therefore pleasing to report that after returning the division to growth during H2 2016, after many years of decline, the performance of Games Brands accelerated markedly through the first six months of 2017. Divisional NGR increased 8% (+10% constant currency) to €112.4m (€103.6m pro forma H1 2016), whilst the contribution decreased to €39.2m (€44.4m pro forma H1 2016) – due to timing of investment, particularly in partypoker.
The strongest performance came from partypoker, where NGR rose 32%, whilst the value of deposits increased 48%. A combination of factors are behind the impressive growth including product development, increased marketing, localised market focus and improved player experience. From a contribution perspective, we expect to see the benefits of the increased investment in partypoker to come through in the second half of the current year and beyond. Indeed, Q3 has seen a further acceleration in deposit value and NGR growth.
Casino brands also achieved positive growth with CasinoClub, Gioco Digitale and partycasino all delivering improved top line performances in H1 2017. CasinoClub continues to benefit from one of the most loyal customer bases in the industry, with more than two thirds of revenues coming from those that have been with the brand for five years or more. Gioco Digitale’s performance is equally as pleasing with deposits growing strongly in H1.
Bingo is the smallest product vertical for the Group and a deliberate decision was made to significantly reduce marketing spend in the first six months. Accordingly whilst revenue declined in H1 2017, contribution was significantly higher. During the first half Foxy was relaunched with Hollywood actress, Heather Graham, being the new face of the brand. The second half has started well with Cashcade returning to top line growth in Q3.
Although there has been a significant improvement within Games Brands, there is much more yet to come in terms of product and the overall customer experience. All the acquired bwin.party brands have been reinvigorated and we expect further progress in the second half of the year and beyond.
B2B
| Pro forma | Actual | |||
| Six months to 30 June (€m) | 2017 | 2016 | Change | 2016 |
| Revenue | 7.6 | 6.5 | 17% | 5.6 |
| Contribution | 7.7 | 6.4 | 20% | 5.5 |
| Contribution margin % | 101% | 98% | 98% |
The Group provides B2B services for a number of well-known gaming companies including MGM, Danske Spil and PMU. B2B offers the potential for the Group to gain access to markets where stand-alone or acquisition opportunities are more limited.
At the end of 2016 we expanded our relationship with MGM to launch new brands into the New Jersey online market, beyond the existing Borgata offering. A new MGM branded casino and poker offer was subsequently launched in August 2017. We continue to evaluate further B2B opportunities in the US as further states, such as Pennsylvania, look to regulate online gaming. In June we announced a partnership with one of Russia’s leading media groups, Rambler Media, to launch a licenced online sports betting proposition. GVC will provide technology and associated services, along with licencing the bwin brand to the venture. The new site, bwin.ru, is expected to go live before the end of the year.
We continue to have an active pipeline of B2B opportunities.
Non-core
| Pro forma | Actual | |||
| Six months to 30 June (€m) | 2017 | 2016 | Change | 2016 |
| Revenue | 11.1 | 11.1 | 0% | 9.1 |
| Contribution | (0.3) | (0.4) | 25% | (0.4) |
| Contribution margin % | (3%) | (4%) | (4%) |
Following the disposal of Kalixa in May, the division solely consists of InterTrader, our financial spread betting and CFD business. Prior to its disposal at the end of May, Kalixa contributed revenues of €6.1m in the period (€7.6m pro forma H1 2016). InterTrader revenues in constant currency grew 62% against pro forma H1 2016, with the previous year being impacted by the migration to a new platform provider.
Regulatory update
The regulatory landscape continues to evolve across the globe, particularly Continental Europe. Whilst we welcome sustainable and fair legislation, the national regulatory regimes across EU Member States differ significantly due to the lack of harmonised gaming rules at EU level.
In H1 2017, approximately 68% of Group NGR was derived from territories where we are licensed or currently pay gaming taxes/VAT or where a licensing structure is in the process of being implemented.
During the period under review, we withdrew our licence application in the Czech Republic. We believe the opaque licensing process falls someway short of being compliant with the principals of EU law. Poland also introduced new legislation in 2017, which creates an online casino monopoly, which in our opinion is clearly contrary to EU law. We continue to support industry attempts to improve legislation through the EU legal process.
In Germany, following elections, the state of Schleswig-Holstein has said it will not ratify proposed amendments to the State Gaming Treaty that were proposed in November 2016. The key amendment was a removal of the ceiling of the number of sports licences but with no change to the inability to gain licences for poker and casino. Schleswig-Holstein is currently the only state in Germany that licences all gaming verticals and is calling for other states to adopt its regulatory structure.
Current trading and outlook
The strong trading reported for the first two quarters has continued into Q3. Daily Group NGR is up 12% (for the period up to 10 September) against the corresponding period last year. In constant currency, daily NGR is up 15%. Underlying daily NGR which includes stripping out Euro 2016 and Kalixa is up 20% (23% constant currency). As a consequence of this together with the performance achieved during the first half, the Board now expects Group Clean EBITDA for the current year to be comfortably ahead of the current analysts’ consensus forecast of €255.9m.
Chief Financial Officer’s review
The purchase of bwin.party was completed on 1 February 2016 and in order to compare results on a like for like basis, pro forma H1 2016 assumes the acquisition took place on 1 January 2016. A summary of revenue, contribution and expenditure by reporting segment is shown below.
| Pro forma | Actual | ||
| Six months to 30 June | 2017 | 2016 | 2016 |
| €m | €m | €m | |
| Sports brands | 2,265.2 | 2,298.6 | 2,082.6 |
| Games brands | 34.8 | 31.1 | 24.8 |
| Sports wagers | 2,300.0 | 2,329.7 | 2,107.4 |
| Sports margin % | 9.8 | 9.1 | 9.2 |
| Sports brands | 355.1 | 320.6 | 287.5 |
| Games brands | 112.4 | 103.6 | 88.4 |
| B2B | 7.6 | 6.5 | 5.6 |
| Core | 475.1 | 430.7 | 381.5 |
| Non-core | 11.1 | 11.1 | 9.1 |
| NGR | 486.2 | 441.8 | 390.6 |
| EU VAT | (13.4) | (9.8) | (8.5) |
| Revenue | 472.8 | 432.0 | 382.1 |
| Sports brands | 194.2 | 177.7 | 157.6 |
| Games brands | 39.2 | 44.4 | 38.2 |
| B2B | 7.7 | 6.4 | 5.5 |
| Core | 241.1 | 228.5 | 201.3 |
| Non-core | (0.3) | (0.4) | (0.4) |
| Contribution | 240.8 | 228.1 | 200.9 |
| Sports brands | 55% | 55% | 55% |
| Games brands | 35% | 43% | 43% |
| B2B | 101% | 99% | 98% |
| Core | 51% | 53% | 53% |
| Non-core | (3%) | (4%) | (4%) |
| Contribution margin | 50% | 52% | 51% |
| Core | (80.5) | (94.6) | (84.2) |
| Non-core | (6.3) | (8.5) | (7.1) |
| Corporate | (20.1) | (20.6) | (18.4) |
| Expenditure | (106.9) | (123.7) | (109.7) |
| Core | 160.6 | 133.9 | 117.1 |
| Non-core | (6.6) | (8.9) | (7.5) |
| Corporate | (20.1) | (20.6) | (18.4) |
| Clean EBITDA | 133.9 | 104.4 | 91.2 |
NGR and Revenue
NGR increased 25% to €486.2m for the six months to 30 June 2017 (+10% pro forma H1 2016), whilst on a constant currency basis growth on pro forma H1 2016 was +12%. GVC is an internationally diverse business, with Euro denominated business accounting for c55% of NGR. Key non Euro currencies include Pound Sterling (c10% of NGR) and Turkish Lira (c10%).
The Group pays VAT on gaming revenues in a number of European countries, the most significant being Germany. After VAT of €13.4m, (€8.5m H1 2016) revenues during the period were €472.8m vs €382.1m for the same period in 2016 (€432.0m pro forma H1 2016).
Variable costs and contribution
The key component parts of variable costs continue to include betting taxes and duties, payment processing costs, software royalties, affiliate commissions, partner shares and marketing costs.
Contribution after variable costs in the period was €240.8m, up from €200.9m in H1 2016 (€228.1m pro forma H1 2016). The contribution margin decreased to 50% from pro forma 52%. Marketing costs increased as a proportion of NGR to 24% in H1 2017 vs 21% for pro forma H1 2016. As guided, in 2016 marketing cost was lower than normal due to the restructuring of bwin.party post the acquisition and in 2017 we expect to return to a more normalised level of 23-25% of NGR. There was some non-material, incremental cost in gaming taxes. Software royalties also increased as a proportion reflecting the strong cross sell performance from Sports Brands. However, underlying royalty costs have reduced as part of the targeted synergy benefits.
Expenditure
The principle expenditure items are personnel and technology costs, which combined account for 84% of the fixed cost base. Other significant costs include real estate, travel and professional fees.
| Pro forma | Actual | ||
| Six months to 30 June | 2017 | 2016 | 2016 |
| €m | €m | €m | |
| Personnel expenditure | 65.0 | 70.3 | 61.7 |
| Professional fees | 8.8 | 9.7 | 8.3 |
| Technology costs | 24.9 | 35.9 | 32.5 |
| Office, travel and other costs | 9.8 | 12.6 | 10.7 |
| Foreign exchange differences | (1.6) | (4.8) | (3.5) |
| 106.9 | 123.7 | 109.7 |
Against pro forma H1 2016, costs decreased by 14% to €106.9m. Personnel costs reflect a change in the bonus structure reflecting a greater provision than in the corresponding period last year.
Clean EBITDA
While Clean EBITDA is a non GAAP measure, it is used by the Group’s management to assess the underlying performance of the business. Clean EBITDA for the period under review was €133.9m, compared to €91.2m reported for H1 2016 (€104.4m pro forma H1 2016). As a result the Clean EBITDA margin improved to 28% vs 24% for pro forma H1 2016.
Depreciation and amortisation
Depreciation for the period was €8.7m, while total amortisation was €65.4m. Amortisation consists of €5.9m associated with internally generated assets and €59.5m relating to assets recognised on acquisition.
| Six months to 30 June | 2017 | 2016 |
| €m | €m | |
| Depreciation | 8.7 | 10.4 |
| Amortisation | ||
| – intangible assets recognised on acquisition | 59.5 | 52.2 |
| – internally generated intangibles | 5.9 | 2.9 |
| 74.1 | 65.5 |
Exceptional items
Total exceptional costs incurred during the period amounted to €15.7m, of which €11.1m were associated with the restructuring post the bwin.party acquisition.
| Six months to 30 June | 2017 | 2016 |
| €m | €m | |
| M & A costs | 2.3 | 46.1 |
| Premium listing application costs | – | 4.4 |
| Reorganisation costs | 11.1 | 5.1 |
| Accelerated depreciation | – | 12.5 |
| Progressive jackpots | – | 7.6 |
| Foreign exchange on deposit | 0.3 | 13.6 |
| Legal settlements | 0.8 | – |
| Other | 1.2 | – |
| Total | 15.7 | 89.3 |
Operating profit
The Group reported an operating profit of €9.5m for the period compared to a loss of €60.8m for the same period in 2016. Excluding exceptional items, amortisation associated with the acquisition of bwin.party, impairments of assets held for sale and available for sale assets and changes in the fair value of derivative financial instruments, adjusted operating profit was €108.8m vs €71.4m for H1 2016.
Financing charges
During the first half of 2017, the Cerberus Loan was repaid in full by a bridging facility provided by Nomura International plc. The Nomura facility was subsequently replaced by a €250m six year Term Loan and €70m revolving credit facility.
| Six months to 30 June | 2017 | 2016 |
| €m | €m | |
| Loan interest | 7.3 | 21.1 |
| Amortisation of loan fees and early repayment option | 9.2 | 8.3 |
| Other interest | 0.2 | – |
| 16.7 | 29.4 |
Interest payments in the period were €7.3m, whilst amortisation and other charges associated with the refinancing deals amounted to €9.2m. In aggregate net finance charges totalled €16.5m in H1 2017.
(Loss)/profit after tax
The Group reported a pre-tax loss of €6.6m for the period compared to a loss of €86.1m for H1 2016. Excluding exceptional items, amortisation of acquired intangibles, impairments, changes in the value of derivative instruments and loan amortisation fees, adjusted pre-tax profit for the first six months was €101.9m (€51.3m).
| Six months to 30 June | 2017 | 2016 |
| €m | €m | |
| Loss before tax | (6.6) | (86.1) |
| Exceptional items | 15.7 | 89.3 |
| Impairment of available for sale asset | – | 4.8 |
| Impairment of assets held for sale | 1.6 | – |
| Changes in the fair value of derivative instruments | 22.5 | (14.1) |
| Amortisation of acquired intangibles | 59.5 | 52.2 |
| Dividend income | – | (3.1) |
| Amortisation of loan fees and early repayment options | 9.2 | 8.3 |
| Adjusted profit before tax | 101.9 | 51.3 |
| Taxation | (7.8) | (1.2) |
| Adjusted profit | 94.1 | 50.1 |
| Adjusted fully diluted earnings per share (€c) | 31 | 20 |
Taxation
The total tax charge for the period amounted to €0.9m, the corporation tax charge was €8.2m and there was a deferred tax credit of €7.3m.
Earnings per share
Reported EPS for the period was a loss of 2€c compared to a loss of 33€c for the corresponding period in 2016. Adjusted fully diluted EPS (based on adjusted profit) was 3€c vs 20€c in H1 2016.
Dividends
A special dividend of 14.9€c per share was declared in December 2016 and subsequently paid in February 2017. A final dividend of 15.1€c per share in relation to the 2016 financial year was declared in March 2017 and paid to shareholders in May 2017.
An interim dividend of 16.5€c per share has been declared and will be paid on 19 October 2017. The interim dividend declared is expected to represent 50% of the aggregate full year payout. As previously announced, we will pursue a progressive dividend policy, reflecting the growth in business and aiming to return no less than 50% of free cash flow.
Dividend timetable
| 14 September 2017 | Dividend declared |
| 21 September 2017 | Ex-dividend date |
| 22 September 2017 | Record date |
| 19 October 2017 | Payment |
Cash flow
| Six months to 30 June | 2017 | 2016 |
| €m | €m | |
| Clean EBITDA | 133.9 | 91.2 |
| Capitalised software development | (11.5) | (8.2) |
| Other intangible asset purchases | (2.7) | (4.4) |
| Property, plant and equipment purchases | (7.1) | (4.4) |
| Interest paid including loan costs | (32.2) | (20.9) |
| Corporate taxes | (12.4) | (5.2) |
| Other working capital movements | (38.1) | (40.7) |
| Free cash flow before exceptional costs | 29.9 | 7.4 |
| Exceptional items (cash) | (15.7) | (59.7) |
| Acquisitions (net of cash acquired) | – | (186.9) |
| Proceeds from issued share capital net of costs | 25.6 | 192.0 |
| Proceeds from disposals | 29.0 | 6.6 |
| Interest bearing loan drawdown | 500.0 | 380.0 |
| Loan repayments | (636.5) | (42.0) |
| Dividends paid | (88.8) | – |
| Other cash movements | 1.1 | 10.9 |
| Net cash generated | (155.4) | 308.3 |
| Foreign exchange | – | 1.0 |
| Cash and cash equivalents at beginning of period | 367.0 | 28.2 |
| Cash and cash equivalents at the end of period | 211.6 | 337.5 |
Free cash flow in the period was €29.9m. There was a net working capital outflow of €38.1m, which was principally due to the settlement of staff bonuses and trade payables. Capital expenditure during the first half was €21.3m, of which €11.5m represented investment in internally generated assets. We expect capital expenditure for the full year to be around €35-40m. Exceptional cash costs predominantly associated with the restructuring of the business post the acquisition of bwin.party amounted to €15.7m. For the year as a whole we anticipate the exceptional cash cost being in the range of €25-35m.
The Group incurred interest and financing fees of €32.2m in the first half, the majority of which related to the redemption of the Cerberus Loan. Other notable cash movements included dividends (€88.8m) and €25.6m received from the exercise of share options. During the period there was a net cash outflow of €155.4m predominantly as a result of reducing the Group’s borrowings from €386.5m to €250m.
Net debt and liquidity
During the first half the Group successfully refinanced its debt facilities, extending the term and significantly reducing the cost. The Group’s debt facilities consist of a Euribor +3.25% €250m six year term loan and a €70m revolving credit facility. Net debt as at 30 June 2017 was €150.7m, representing leverage of 0.6x (last twelve months Clean EBITDA).
| Six months to 30 June | 2017 | 2016 |
| €m | €m | |
| Loans due <1 year | – | (400.0) |
| Loans due >1 year | (250.0) | – |
| Gross debt | (250.0) | (400.0) |
| Cash and cash equivalents | 211.6 | 337.5 |
| Less client liabilities | (112.3) | (107.8) |
| Net debt | (150.7) | (170.3) |
| Cash in transit with payment processors | 46.2 | 57.6 |
| Net debt adjusted for payment processors | (104.5) | (112.7) |
Review of balance sheet
A summarised balance sheet is shown below.
| (€m) | As at 30 June 2017 | As at 31 December 2016 |
| Goodwill | 1,090.3 | 1,090.3 |
| Other intangible assets | 467.1 | 519.1 |
| Other non-current assets | 27.2 | 28.3 |
| Total non-current assets | 1,584.6 | 1,637.7 |
| Cash & cash equivalents | 211.6 | 354.8 |
| Trade receivables | 109.7 | 105.2 |
| Other current assets | 19.1 | 98.0 |
| Total current assets | 340.4 | 558.0 |
| Total assets | 1,925.0 | 2,195.7 |
| Trade and other payables | (73.3) | (93.9) |
| Balances with customers | (112.3) | (112.0) |
| Progressive prize pools | (15.3) | (22.8) |
| Loans and borrowings | (1.8) | (403.5) |
| Other current liabilities | (70.6) | (89.3) |
| Total current liabilities | (273.3) | (721.5) |
| Loans and borrowings | (246.6) | – |
| Deferred tax | (59.2) | (65.6) |
| Other non-current liabilities | (10.8) | (11.3) |
| Total non-current liabilities | (316.6) | (76.9) |
| Total net assets | 1,335.1 | 1,397.3 |
The most significant movement in the balance sheet is the decrease in current liabilities and the increase in non-current liabilities. This reflects the debt refinancing undertaken in the first half, with the full repayment of the outstanding Cerberus loan and associated liabilities (€403.5m as at 31 December 2016) and replacement by the €250m 6 year term loan detailed above.
Paul Miles
Chief Financial Officer
Principal risks
The principal risks which could impact the Group for the remainder of the year are set out below. Further information on these risks and actions taken by the Group to mitigate them are disclosed on pages 32 to 33 of the Group’s 2016 Annual Report.
Technology
- Denial of Service attacks or similar
- Natural or man-made disasters may affect continuity of operations
- Migration of brands to the acquired bwin.party technology platform
Regulatory
- Ensuring compliance in regulated markets
- Additional regulation and enforcement
Taxation
- Imposition of additional gaming or other indirect taxes
- Changes in VAT rules within the EU impacting the digital economy
Country and currency risk
- Macro-economic decline in core European markets
- Devaluation of the Group’s operating currency
Impact of Brexit
- Potential reduction of the Group’s ability to challenge protectionist measures at EU level
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: (a) 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; (b) 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 2016.
The Directors of GVC Holdings PLC are listed on the GVC website: www.gvc-plc.com.
By order of the Board
Robert Hoskin
Company Secretary
13 September 2017
Independent review report to GVC Holdings PLC
Introduction
We have reviewed the condensed set of financial statements in the half-yearly financial report of GVC Holdings PLC (the company) for the six months ended 30 June 2017, which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated 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, as a body, 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’. 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 as a body, 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 Guidance 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 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’. 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 2017 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 Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
13 September 2017
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 30 June 2017
| Period Ended 30 June 2017 (Unaudited) |
Period Ended 30 June 2016 (Unaudited) |
||
| Notes | €m | €m | |
| NGR | 486.2 | 390.6 | |
| EU VAT | (13.4) | (8.5) | |
| Revenue | 2 | 472.8 | 382.1 |
| Cost of sales | (232.0) | (181.2) | |
| Contribution | 2 | 240.8 | 200.9 |
| Administrative costs | 3 | (106.9) | (109.7) |
| Clean EBITDA | 133.9 | 91.2 | |
| Share based payments | 11 | (10.5) | (6.5) |
| Exceptional items | 3 | (15.7) | (89.3) |
| Depreciation and amortisation | 3 | (74.1) | (65.5) |
| Impairment of assets held for sale | 8 | (1.6) | – |
| Impairment of available for sale asset | – | (4.8) | |
| Changes in the fair value of derivative financial instruments | 9 | (22.5) | 14.1 |
| Operating profit (loss) | 9.5 | (60.8) | |
| Financial income | 0.6 | 0.9 | |
| Financial expense | 4 | (16.7) | (29.4) |
| Dividend income | – | 3.1 | |
| Share of profit of associate | – | 0.1 | |
| Loss before tax | (6.6) | (86.1) | |
| Taxation (expense) credit | 5 | (0.9) | 1.9 |
| Loss after tax | (7.5) | (84.2) | |
| Loss after tax for the period attributable to: | |||
| Owners of the parent | (7.3) | (84.0) | |
| Non-controlling interests | (0.2) | (0.2) | |
| Loss per share | € | € | |
| Basic | 6 | (0.02) | (0.33) |
| Diluted | 6 | (0.02) | (0.33) |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2017
| Period Ended 30 June 2017 (Unaudited) |
Period Ended 30 June 2016 (Unaudited) |
||
| Notes | €m | €m | |
| Loss for the period | (7.5) | (84.2) | |
| Other comprehensive expense | |||
| Items that will be reclassified subsequently to profit or loss: | |||
| Exchange differences on translation of foreign operations | (2.5) | (3.1) | |
| Total comprehensive expense for the period | (10.0) | (87.3) | |
| Loss after tax for the period attributable to: | |||
| Owners of the parent | (9.8) | (87.1) | |
| Non-controlling interests | (0.2) | (0.2) |
The notes on pages 19 to 30 form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2017
| 30 June 2017 (Unaudited) |
31 December 2016 (Audited) | 30 June 2016 (Unaudited) |
||
| Notes | €m | €m | €m | |
| Non-current assets | ||||
| Intangible assets | 7 | 1,557.4 | 1,609.4 | 1,660.8 |
| Property, plant and equipment | 18.1 | 19.7 | 20.0 | |
| Trade and other receivables | 3.9 | 4.9 | – | |
| Investments and available for sale financial assets | 4.0 | 3.7 | 1.4 | |
| Deferred tax | 5 | 1.2 | – | 0.8 |
| Total non-current assets | 1,584.6 | 1,637.7 | 1,683.0 | |
| Current assets | ||||
| Trade and other receivables | 109.7 | 105.2 | 116.3 | |
| Derivative financial assets | 3.7 | 26.2 | 25.3 | |
| Income and other taxes reclaimable | 8.5 | 6.7 | 8.6 | |
| Short term investments | 4.9 | 5.4 | 5.3 | |
| Cash and cash equivalents | 211.6 | 354.8 | 302.9 | |
| Assets in disposal groups classified as held for sale | 8 | 2.0 | 59.7 | 75.3 |
| Total current assets | 340.4 | 558.0 | 533.7 | |
| Total assets | 1,925.0 | 2,195.7 | 2,216.7 | |
| Current liabilities | ||||
| Trade and other payables | (73.3) | (93.9) | (75.9) | |
| Balances with customers | (112.3) | (112.0) | (107.8) | |
| Progressive prize pools | (15.3) | (22.8) | (18.4) | |
| Amounts due under finance leases | – | – | (0.2) | |
| Loans and borrowings | 9 | (1.8) | (403.5) | – |
| Provisions | (1.1) | (1.2) | (8.9) | |
| Income taxes payable | (14.9) | (18.2) | (15.5) | |
| Other taxation payable | (53.5) | (47.2) | (40.2) | |
| Liabilities in disposal groups classified as held for sale | 8 | (1.1) | (22.7) | (29.8) |
| Total current liabilities | (273.3) | (721.5) | (296.7) | |
| Current assets less current liabilities | 67.1 | (163.5) | 237.0 | |
| Non-current liabilities | ||||
| Trade and other payables | (4.3) | (4.4) | (1.8) | |
| Loans and borrowings | 9 | (246.6) | – | (408.1) |
| Provisions | (6.5) | (6.9) | – | |
| Deferred tax | 5 | (59.2) | (65.6) | (70.9) |
| Total non-current liabilities | (316.6) | (76.9) | (480.8) | |
| Total net assets | 1,335.1 | 1,397.3 | 1,439.2 | |
| Capital and reserves | ||||
| Issued share capital | 3.0 | 2.9 | 2.9 | |
| Merger reserve | 40.4 | 40.4 | 40.4 | |
| Share premium | 1,503.9 | 1,478.4 | 1,477.6 | |
| Translation reserve | (4.5) | (2.0) | (2.8) | |
| Retained earnings | (206.0) | (120.9) | (77.5) | |
| Total equity attributable to equity holders of the parent | 1,336.8 | 1,398.8 | 1,440.6 | |
| Non-controlling interests | (1.7) | (1.5) | (1.4) | |
| Total equity | 1,335.1 | 1,397.3 | 1,439.2 |
The notes on 19 to 30 form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2017
| 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 2016 (audited) | 0.6 | 40.4 | 85.4 | 0.3 | 1.4 | 128.1 | – | 128.1 |
| Share based payments | – | – | – | – | 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 expense 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 |
| Balance at 1 January 2017 (audited) | 2.9 | 40.4 | 1,478.4 | (2.0) | (120.9) | 1,398.8 | (1.5) | 1,397.3 |
| Share based payments | – | – | – | – | 11.0 | 11.0 | – | 11.0 |
| Share options surrendered | – | – | – | – | – | – | – | – |
| Share options exercised | 0.1 | – | 25.5 | – | – | 25.6 | – | 25.6 |
| Dividends paid | – | – | – | – | (88.8) | (88.8) | – | (88.8) |
| Transactions with owners | 0.1 | – | 25.5 | – | (77.8) | (52.2) | – | (52.2) |
| Loss for the period attributable to the parent | – | – | – | – | (7.3) | (7.3) | – | (7.3) |
| Loss for the period attributable to the non-controlling interest | – | – | – | – | – | – | (0.2) | (0.2) |
| Other comprehensive expense attributable to the parent | – | – | – | (2.5) | – | (2.5) | – | (2.5) |
| Other comprehensive income attributable to the non-controlling interest | – | – | – | – | – | – | – | – |
| Total comprehensive income for the period | – | – | – | (2.5) | (7.3) | (9.8) | (0.2) | (10.0) |
| Balance as at 30 June 2017 (unaudited) | 3.0 | 40.4 | 1,503.9 | (4.5) | (206.0) | 1,336.8 | (1.7) | 1,335.1 |
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 on pages 19 to 30 form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2017
| Period Ended 30 June 2017 (Unaudited) |
Period Ended 30 June 2016 (Unaudited) |
||
| Notes | €m | €m | |
| Cash flows from operating activities | |||
| Cash receipts from customers | 499.5 | 398.1 | |
| Cash paid to suppliers and employees | (419.4) | (407.3) | |
| Interest paid including initial costs and loan servicing | 9 | (32.2) | (20.9) |
| Corporate taxes paid | (12.4) | (5.2) | |
| Net cash generated (used) in operating activities | 35.5 | (35.3) | |
| Cash flows from investing activities | |||
| Interest received | 0.6 | 0.9 | |
| Dividends received | – | 3.1 | |
| Acquisition earn-out payments (Betboo) | – | (1.2) | |
| Acquisition of bwin.party (net of cash acquired) | – | (186.9) | |
| Acquisition of property, plant and equipment | (7.1) | (4.4) | |
| Proceeds from disposal of assets held for sale | 8 | 29.0 | 6.6 |
| Capitalised development costs and other intangibles | 7 | (14.2) | (12.6) |
| Decrease in short term investments | 0.5 | 8.1 | |
| Net cash generated (used) in investing activities | 8.8 | (186.4) | |
| Cash flows from financing activities | |||
| Proceeds from interest bearing loans | 9 | 500.0 | 380.0 |
| Repayment of non-interest bearing loan (from William Hill) | – | (3.0) | |
| Proceeds from issue of share capital, net of costs | 25.6 | 192.0 | |
| Repayment of borrowings | 9 | (636.5) | (39.0) |
| Dividends paid | 10 | (88.8) | – |
| Net cash (used) generated from financing activities | (199.7) | 530.0 | |
| Net (decrease) increase in cash and cash equivalents | (155.4) | 308.3 | |
| Exchange differences | – | 1.0 | |
| Cash and cash equivalents at beginning of the period | 367.0 | 28.2 | |
| Cash and cash equivalents at end of the period | 211.6 | 337.5 |
Cash and cash equivalents
The balance at 30 June 2016 of €337.5 million consists of €302.9 million cash and cash equivalents as shown on the face of the condensed consolidated statement of financial position and €34.6 million of cash and cash equivalents recognised within assets held for sale.
The notes on pages 19 to 30 form part of these financial statements.
Notes
The notes are available in the PDF download.