TIDMFLTR
RNS Number : 7728Q
Flutter Entertainment PLC
02 March 2021
2 March 2021
Flutter Entertainment plc - 2020 Preliminary Results
Transformational year for Group; Earnings ahead of
expectations
Flutter Entertainment plc (the "Group") announces preliminary
results for year ended 31 December 2020.
Reported(1) Pro forma(2)
2020 2019 2020 2019 CC(3)
YoY
%
----------------------------- ------
GBPm GBPm YoY % GBPm GBPm YoY
%
----------------------------- ------- ------- ------ ------- ------- ----- ------
Group revenue(4) 4,398 2,140 +106% 5,264 4,144 +27% +28%
Adjusted(5) Group EBITDA(6)
excluding US 1,037 462 +125% 1,401 1,170 +20% +23%
Adjusted Group
EBITDA 889 425 +109% 1,231 1,089 +13% +16%
Profit before
tax 1 136 -99%
Earnings per share(7) 29.3p 180.2p -84%
Adjusted earnings per
share 402.7p 298.4p +35% 496.6p 415.7p +19%
Net debt at year
end(8) 2,814 265
Operational highlights
-- Transformational year for Group
- Unparalleled scale and diversification achieved following
merger with The Stars Group, Inc ("TSG")
- Accelerated buy-out of minority shareholders in FanDuel at
compelling valuation
- Reinforced balance sheet to support investment and growth
-- Excellent momentum with 19% growth in recreational players(9) across Group
- Acceleration of channel shift from retail to online and
increased share of entertainment spend
-- Further investment in safer gambling initiatives to ensure sustainable growth
- Enhanced predictive technology; increase in safer gambling
tool usage by customers
- Advocating a customer driven approach to affordability
-- Merger integration progressing well
- Australian integration complete, PokerStars strategy in place
and core momentum maintained
- Annualised cost synergies now expected to be GBP170m, up from
GBP140m previously
-- US online leadership maintained with 40% sports betting and
20% gaming market shares in Q4(10)
- Total addressable market in 2025 now expected to exceed
GBP14bn ($20bn)
- 2020 contribution of GBP70m ($91m) from sportsbook and gaming
customers acquired in 2018 and 2019, demonstrating substantial US
earnings power
- Record breaking Super Bowl LV; over 350,000 sportsbook and
gaming customers acquired, exceeding entire 2019 customer
acquisition in 1 week; strong start in both Michigan and
Virginia
Financials (1,2,3,5,6,11)
-- Growth in reported revenue and reported adjusted EBITDA
reflects addition of TSG from May 2020
-- Reported profit of GBP1m after deduction of GBP432m in
non-cash acquisition accounting adjustments
-- Pro forma revenue and EBITDA increased primarily due to
customer growth and positive sports results
-- Pro forma online revenue of GBP5,035m, 34% higher than 2019,
constituting 96% of total Group revenue
-- Pro forma increase in cash of GBP817m in 2020 after SDIs and
interest and before equity placings
-- Leverage ratio of 2.3 times, materially reduced from 3.2 times at time of merger
Current trading/Outlook
-- Strong momentum in 2021 with growth in player volumes across all divisions
-- Favourable sports results relative to expectations, particularly in UK and Ireland
-- Group revenue +36% year on year in the first 7 weeks of the year (to Feb 21)
-- Covid restrictions impacting retail business in UK and
Ireland with estimated monthly EBITDA loss of GBP9m for each month
that both UK and Irish retail estates remain shut
-- Proposed German tax change would reduce contribution by
GBP15m- GBP25m in 2021 if introduced from 1 July
Peter Jackson, Chief Executive, commented:
"2020 was an historic year for the Group as we completed our
merger with TSG, commenced the integration of our two businesses
and increased our ownership of FanDuel in the US, whilst at the
same time navigating the challenges presented by the Covid-19
pandemic.
Safer gambling is critical to building a sustainable global
business and we are determined to lead the industry in implementing
the highest standards of customer protection across our markets.
This includes the UK, where we welcome the Government's review of
gambling legislation and support the delivery of a balanced
framework that will protect vulnerable customers while allowing the
many who enjoy a bet to continue to do so safely.
We delivered a very strong financial performance in 2020,
benefiting from our scale and diversification. We continue to grow
our recreational player base across all key regions, in Q4 alone
the Group had over 7.6m monthly online players. Nowhere has our
growth been more evident than in the US where we have consolidated
our #1 position in this crucial market, with customer economics
that continue to exceed our expectations, finishing the year as the
first US online operator to reach over $1.1bn in gross gaming
revenue .
During this exceptionally testing time, we have focused on
safeguarding the welfare of colleagues and contributed more to the
communities in which we operate. I would like to take this
opportunity to thank all my colleagues for their ongoing commitment
and resilience as we face these challenging times together. While
the global outlook remains uncertain, our momentum remains strong
and we look forward to the future with confidence."
Notes:
(1) Reported represents the IFRS reported statutory numbers.
Where amounts in the table have been normalised for SDIs they are
labelled as Adjusted.
(2) Flutter's combination with TSG completed on 5 May 2020. The
pro forma numbers presented show the Group's financials with TSG
included for a full 12-month period in both 2019 and 2020. The pro
forma numbers include a 12-month contribution from Adjarabet in
2019 (completion date: Feb 1 2019). See Appendix 4 for a
reconciliation of pro forma results to statutory results.
(3) Constant currency ("cc") growth is calculated by
retranslating the non-sterling denominated component of FY 2019 at
FY 2020 exchange rates (see Appendix 5). Growth rates in the
commentary are in local or constant currency except reported
numbers which are in nominal currency.
(4) Revenue excludes SDIs which relate to a GBP15.9m refund of
VAT from the HMRC, based on the historic incorrect application of
VAT to UK gaming machines.
(5) The "Adjusted" measures exclude separately disclosed items
that are not part of the usual business activity of the Group and
have therefore been reported as "separately disclosed items (SDIs)"
(see note 6 to the financial statements).
(6) EBITDA is profit before interest, tax, depreciation and
amortisation expenses and is a non-GAAP measure.
(7) The 2019 earnings per share figures have been restated to
incorporate the 1,312,260 new Flutter ordinary shares that were
issued in May 2020 as payment of the 2019 final dividend. The
weighted average number of shares in issue during the period was
adjusted to include these bonus shares as if they were issued 1
January 2019.
(8) Net debt at 31 December 2020 is the principal amount of
borrowings plus associated accrued interest, minus cash & cash
equivalents plus/minus carrying value of debt related derivatives.
This is comprised of the principal amount of borrowings plus
associated accrued interest of GBP3,231m plus debt related
derivatives of GBP186m less gross cash excluding customer balances
of GBP603m 31 December 2020 (see Appendix 6).
(9) Monthly Players are the total number of players who have
placed and/or wagered a stake and/or contributed to rake or
tournament fees during the month. The average number of monthly
players are taken to derive the measure per reporting period.
(10) Online sportsbook market share is the GGR market share of
FanDuel and FOX Bet for Q4 in the states in which FanDuel was live
based on published gaming regulator reports in those states. During
Q4 FanDuel was live in 8 states; Colorado (CO), Illinois (IL),
Indiana (IN), Iowa (IA), New Jersey (NJ), Pennsylvania (PA),
Tennessee (TN) and West Virginia (WV). During Q4 FOX Bet was live
in 3 states; CO, NJ and PA. Online gaming market share reflects the
combined NJ and PA market share of the FanDuel, FOX Bet, PokerStars
and Betfair brands during Q4.
(11) The leverage ratio is calculated using pro forma Adjusted
EBITDA for the 12-month period to 31 December 2020.
Analyst briefing:
The Group will host a questions and answers call for
institutional investors and analysts this morning at 9:30am (GMT).
Ahead of that call, a presentation will be available on the Group's
corporate website ( www.flutter.com ) from 8am. To dial into the
conference call, participants need to register here where they will
be provided with the dial in details to access the call.
A presentation replay facility will also be available at 8am on
our corporate website: https://www.Flutter.com/investors .
Contacts:
Investor Relations:
David Jennings, Group Director of Investor
Relations & FP&A + 353 87 951 3560
Ciara O'Mullane, Investor Relations + 353 87 947 7862
Liam Kealy, Investor Relations + 353 87 665 2014
Press:
Fi Thorne, Group Director of Corporate
Affairs + 44 75 2111 4787
Lindsay Dunford, Head of Corporate
Communications + 44 79 3197 2959
Billy Murphy, Drury / Porter Novelli + 353 1 260 5000
James Murgatroyd, Finsbury + 44 20 7251 3801
Business Review (1,2,3,4)
2020 was a transformational year for Flutter as we attained
unparalleled scale and diversification following the completion of
the TSG merger. We increased our exposure to the fast-growing US
market by accelerating our buy-out of the minority shareholders in
FanDuel at a compelling valuation and we ensured our balance sheet
is well capitalised, positioning the Group well for future
investment opportunities.
Protecting both our colleagues and customers through Covid, as
well as supporting our communities, were key priorities throughout
the year. We mobilised quickly in March to support the well-being
of our employees, without availing of government support schemes,
and we enhanced our safer gambling measures in response to
lockdowns and the evolving preferences of our customers.
Safeguarding business momentum was a key priority as we
commenced our integration work with TSG and we achieved this with a
19% increase in monthly players(5) and revenue growth of 28%. This
growth reflected excellent operational performance as well as two
key structural tailwinds benefitting our sector, namely the
migration of traditional retail spend to online and a shift in
leisure spending patterns towards more home-based activities.
Within our online business we benefitted from enhanced product
and geographic diversification, something that was particularly
evident following the widespread cancellation of sports during the
second quarter, when we saw commensurate growth in our gaming and
poker franchises. As sports resumed, we saw strong levels of
engagement across our sports betting businesses, with customer
growth of 32% in Q4 as we exited 2020.
Overall the Group delivered an excellent financial performance.
On a pro forma basis revenue grew by 28% to GBP5.3bn. Adjusted
EBITDA increased by 16% to GBP1.2bn as profitability in our core
online businesses helped to fund the marketing and platform
investments we are making in our US and International
divisions.
Flutter Group strategy
The TSG merger and the minority buy-out of FanDuel have
significantly accelerated progress against our four-pillar
strategy:
Pillar 1 - To maximise profitable growth in our core markets (UK
& Ireland, Australia)
Pillar 2 - To grow our business in the rest of the world
Pillar 3 - To attain podium positions in international regulated
markets
Pillar 4 - To grow our leadership position in the US
In our core markets, we have significantly expanded the scale of
our operations and identified a clear path to running the combined
businesses more efficiently. The recreational nature of our brands
in these markets positions us well to capitalise on regulatory
developments in the future.
The strategy within our International division to attain global
scale and diversification was greatly accelerated by the merger,
adding new podium positions and many more top ten markets. Given
this significant expansion, we have now sharpened our investment
focus within PokerStars, identified key target markets and tailored
plans for our brands and product. We set out the core elements of
this plan below.
Having attained a leadership position in the US, our strategy
now is to continue to grow it through further investment and
leveraging the strong set of assets that we have.
Ultimately, we believe that the online gaming sector is similar
to other large digital markets, whereby the largest player achieves
superior economics through operational leverage, creating a
virtuous circle for future investment in product, marketing and
generosity which in turn drives further growth.
Integration
Against the challenging backdrop of Covid, a key objective in
2020 was to maintain momentum across the Group, both before and
after our merger with TSG. This included protecting the pipeline of
innovative new products within our divisions and continuing to
prioritise growth in the business over near-term cost synergies.
Whilst maintaining performance, we have nevertheless made
significant integration progress since our merger in May and have
reorganised the Group into a new four divisional structure which we
will report against from Q1 2021.
While our primary focus will continue to be delivery of this
growth-oriented strategy, we also see material opportunities to
drive cost efficiency across the Group. Following additional work,
we have increased our estimate of annualised cost synergies from
GBP140m to GBP170m. The additional savings mainly come from
Australia following our decision to move rapidly to a single brand.
Further detail on synergy guidance is provided in the operating and
financial review.
Safer gambling
During 2020 we continued to prioritise safer gambling
initiatives across the Group. We improved our operational
capabilities, expanded our safer gambling teams and stepped up
investment in technology. We upgraded the predictive models we use
in UK & Ireland, Australia and PokerStars to monitor and track
more customer behaviours while in the US, we enhanced our
cross-product safer gambling capabilities through the migration of
our customers onto our proprietary account and wallet. Education is
key and in tandem with ensuring our safer gambling teams have the
resources required to make our customers aware of the safer
gambling tools available to them, we also committed to spend 20% of
our UK TV and radio marketing budget on safer gambling
messaging.
Through these initiatives we have significantly improved our
ability to effectively identify and interact with customers who may
be at risk. For example, we more than doubled the number of
customers we checked in with via a safer gambling interaction in
the UK, Ireland and Australia in 2020. In PPB 33% of those
customers then went on to use a safer gambling tool. In SBG
approximately 40% of revenue came from customers who have a deposit
limit in place. This ensures our continued focus on growing a
sustainable and recreational customer base.
Effective regulation is key to ensuring sustainability and we
intend to be at the forefront of change. For example in Ireland, we
recently introduced a credit card ban, a whistle to whistle
advertising ban and increased our funding to improve customer
protections in that market. In the UK, the Gambling Act Review has
commenced, and we are actively engaging with all key stakeholders
during the consultation period. Ian Proctor, Executive Chairman of
Flutter UK & Ireland, has been instrumental in coordinating a
major project to review our safer gambling initiatives. We have
allocated substantial internal resources to providing robust and
transparent responses to the request for evidence where we are
advocating a customer specific and proportionate approach to
affordability. We remain hopeful that a regulatory framework will
be put in place that will better protect customers while
recognising people's freedom to spend their disposable income as
they choose.
UK & Ireland
In the UK and Ireland, our three brands will 'complement and
compete'. We are sharing the best of our technology and insights
across brands while allowing for differentiated marketing
approaches. The 2020 performance of Paddy Power and Sky Betting and
Gaming, where average monthly customers grew 36% and 12% in H2
respectively, clearly demonstrated how two recreational brands can
compete effectively side-by-side while Betfair's unique offering
continues to appeal to more value conscious customers.
The migration of retail customers to online is playing to our
strengths. The mass market appeal of our brands, coupled with the
quality of our product offering, is seeing us capture a higher
share of migrated spend. We estimate that during H2, of regular UK
high street bettors that migrated online, over 40% chose one of our
brands as their main online account. This despite the fact that our
brands only account for 5% of betting shops in the UK.
During 2020, we estimate that our share of total online revenue
in the UK (6) was approximately 28%, with a 42% share of sports and
a 19% share of gaming (2019 total share: 27%). We are encouraged by
the increased engagement we are seeing amongst recreational
customers in particular; we estimate that over 55% of all online
sports bettors engaged with our brands during Q4. This was up eight
percentage points on the comparable period in 2019 and illustrates
why we believe we are well positioned ahead of prospective
regulatory change.
Australia
The Australian online market enjoyed similar structural changes
to the UK and Irish markets during 2020. With retail closed for
prolonged periods and racing continuing behind closed doors,
average monthly players increased by 26% across our business. We
estimate that our share of the online market(6) increased from 43%
in 2019 to 46% in 2020.
This strong performance was delivered while completing the
integration of Sportsbet and BetEasy. We made the decision to move
to a single brand quickly and completed the brand migration ahead
of the 2020 Spring Carnival. The migration of BetEasy customers
across to the Sportsbet platform was seamless with players
accounting for more than 90% of BetEasy revenues in the 12 months
pre-migration going on to bet with Sportsbet. To support the
migration, we provided incremental product improvements on the
Sportsbet platform, such as tokenised generosity to ensure
continuity of key product features already enjoyed by BetEasy
customers. By doing so, we reduced the risk of customer attrition,
while also enhancing the product offering to Sportsbet
customers.
International
In International (comprising PokerStars, Betfair International
and Adjarabet), we have established a new leadership team that
combines the experience of senior members of PPB with the
considerable gaming expertise of the TSG team. We outlined at our
interim results that we would be implementing changes in order to
align compliance standards and markets with Flutter policies and in
addition, a new strategy has been developed that places multi-year
investment across product, technology and marketing at the heart of
our plans to grow the business. The key aspects of the strategy are
as follows:
-- Brand strategy: As the PokerStars brand has the largest
customer base and strongest brand awareness within our
international markets, it will be our lead brand. We will continue
to promote Betfair in select markets such as Italy, Spain, Romania
and Latin America where it enjoys strong consideration amongst
sports bettors.
-- Technology: This will include addressing some legacy
technology challenges facing the business to create flexible,
stable and modern platforms for future growth.
-- Reassert PokerStars' leadership in poker: While PokerStars
remains the global leader in poker, its share of the online poker
market has reduced in recent years. While desktop is, and will
remain, an important channel for many online poker players,
improving the customer experience on mobile is also essential. We
launched a new PokerStars app in Q3, replacing the existing app
originally developed in 2011. We have also significantly increased
marketing and customer generosity to promote the brand and
product.
-- Invest in direct casino acquisition: PokerStars has one of
the best casino offerings in the market with over 1,500 titles, of
which 100 are proprietary to Flutter. In 2020 alone, we launched
over 500 new titles on the platform. PokerStars has traditionally
relied on cross-sell from poker to grow the casino business. In H2,
we commenced direct casino investment and while it is early days,
we saw the number of customers acquired directly to casino treble
in 2020.
-- Create simple, intuitive cross-sell capabilities:
Multi-product customers deliver better unit economics than single
product players. In the near-term, our focus will continue to be on
poker and casino cross-sell with increasing emphasis on sports once
product improvements have been delivered during 2022.
-- Pursue bolt-on opportunities in new growth markets. We will
look to add to our portfolio of International businesses. The
success of Adjarabet has highlighted the benefits of acquiring
local brand leaders to which we can bring additional expertise. One
recent example is our investment in Junglee Games, a fast-growing
online rummy and daily fantasy sports (DFS) operator in India. We
acquired an initial 50.1% stake in January 2021 for GBP48m and we
look forward to helping it to grow further in the coming years. Put
and call options have been put in place that will enable us to
acquire 100% of the business in 2025.
US
In the US we have continued to make huge progress. Following our
recent launches in Michigan and Virginia, the FanDuel sportsbook is
now live online in 10 states, reaching almost a quarter of the US
population. Through very strong execution, we have reinforced our
leadership position, delivering Q4 market shares of 40% in online
sports betting and 20% in iGaming(7) .
As we assess the US opportunity, we now expect the addressable
market to exceed our previous estimates while the profitability we
are now seeing from early customer cohorts is reinforcing our
positive view with respect to the long-term potential for our
business.
Total addressable market ("TAM"): We now expect the TAM for our
US brands to exceed GBP14bn ($20bn) in 2025, a material upgrade to
our previous estimate, primarily due to:
-- An increase in our estimated value of sportsbook and gaming
driven by the spending patterns we are seeing in the early states
in which we have gone live (e.g. New Jersey, Pennsylvania and
Michigan)
-- An increase in the number of states that we expect to
regulate sports betting and gaming; we now expect online sports
betting to be available to 65% of the US adult population by 2025
while gaming is expected to be accessible to 16% (previously 50%
and 11% respectively)
Not all states will have reached their mature value by 2025 and
so we expect the value of the market to continue to grow
thereafter.
Customer economics: In the US, our 2020 EBITDA loss of GBP170m
reflected our ongoing investment in customer acquisition in both
new and existing states. This headline investment however masked
the strong underlying sportsbook and gaming contribution generated
from customers acquired in 2018 and 2019 in New Jersey,
Pennsylvania, West Virginia and Indiana:
-- Contribution from these early cohorts was GBP70m ($91m) in
2020. Contribution is the revenue we report after deducting cost of
sales and marketing costs and is before accounting for fixed costs
which can be spread over the expanding number of states as they
launch. This positive contribution was driven by our proven ability
to retain customers due to our superior product offering. On
average, retention rates in the US after 12 months have been 1.8
times those of our UK brands.
-- This positive contribution more than funded our ongoing
investment in customer acquisition in these states where we
continued to grow strongly, more than doubling our customer base
during the year. The advantage our DFS platform gives us in
acquiring customers efficiently at scale persists.
-- Excluding 2020 state launches, combined contribution from all
customers in NJ, PA, WV and IN was positive during the year with
GBP39m ($51m) generated in New Jersey (versus previous guidance of
GBP31m ($40m)).
This positive contribution, combined with the profitability of
our TVG racing and FanDuel daily fantasy sports businesses (both of
which continue to perform well), is providing us with an ongoing
source of funding to invest in our US expansion.
Operational update: In 2020 we made further progress in
increasing the reliability and scalability of our US technology
platforms. We moved FanDuel on to our own proprietary account and
wallet, making player cross-sell journeys smoother and thereby
improving our customer acquisition funnel. We also began to migrate
our sports betting platform across to the Group's Global Betting
Platform on a state by state basis, with two states now live,
giving FanDuel access to a wider range of Flutter platform
features. We expect to complete this migration by the start of the
next NFL season.
FanDuel continues to lead the market when it comes to product.
We have the widest breadth of betting markets available in the US.
Our experienced global in-house trading team of over 650 people
continues to innovate, helping us deliver higher margin product
advantages such as Same Game Parlay(TM) and engaging customer
experiences such as our "Spread the Love" campaigns, both of which
have proven to be very popular with customers.
We are also continuing to refine our state launch "playbook" as
we expand into new states. As an example, even before we went live
in Michigan and Virginia in January 2021, we had a significant
number of registered sportsbook and gaming customers. During Super
Bowl LV week, we acquired over 350,000 new sportsbook and gaming
customers, exceeding our customer acquisition for all of 2019. Our
2021 customer acquisition year to date is already close to 90% of
that achieved in all of 2020. This leaves us with a business today
of unparalleled scale, with a market leading online sportsbook and
gaming market share(7) of 31% and revenue of more than 1.4 times
our nearest competitor. Our US revenues currently exceed our next
two nearest competitors combined.
Finally, the early acquisition of FanDuel minorities in
December, at a significant discount to fair market value, has
simplified our US business. In consultation with our media partner
Fox, we are now better placed to assess the optimal structure for
our US operations going forward.
Capital structure and balance sheet update(8)
The Group's capital structure has evolved significantly during
the period. The main drivers of change were:
-- Debt re-financing in March, with well-priced facilities totalling GBP1.4bn secured
-- Combination with TSG in May increasing the Group's leverage to 3.2 times
-- Equity placing of GBP0.8bn in May to provide strategic
flexibility for additional investment opportunities
-- Accelerated acquisition of Fastball's 37.2% stake in FanDuel
for GBP3.3bn in December, of which 87% was financed via equity
(including a GBP1.1bn placing)
The net result was that the Group concluded 2020 with net debt
of GBP2.8bn, equating to pro forma leverage of 2.3 times,
materially down from 3.2 times at the time of merger completion.
The Group remains committed to its medium-term leverage target of
1-2 times and once achieved, the Board will review its dividend
policy.
Kentucky legal proceedings
On 17 December 2020, the Kentucky Supreme Court reinstated a
2015 GBP621m ($870m) trial court judgment against TSG with
compounding interest of 12% per annum. As previously disclosed, the
gross gaming revenues that TSG generated in Kentucky during the
relevant period were approximately GBP13m ($18m). Flutter has since
petitioned the Kentucky Supreme Court for a rehearing. Flutter is
confident that any amount it ultimately becomes liable to pay will
be a limited proportion of the reinstated judgement. Further detail
is available at note 15 to the financial statements.
Operating and Financial Review (1-15)
Group
Reported Pro forma
FY FY FY FY CC
2020 2019 Change 2020 2019 Change Change
GBPm GBPm % GBPm GBPm % %
------------------------ ---------- ------- -------- -------- -------- -------- --------
Sports revenue 2,725 1,667 +64% 3,000 2,400 +25% +25%
Gaming revenue 1,673 473 +253% 2,264 1,743 +30% +32%
---------- ------- -------- -------- -------- -------- --------
Total revenue 4,398(10) 2,140 +106% 5,264 4,144 +27% +28%
Cost of sales (1,539) (650) +137% (1,782) (1,198) +49% +49%
Cost of sales as
a % of net revenue 35.0% 30.4% +460bps 33.8% 28.9% +490bps +480bps
Gross profit 2,859 1,490 +92% 3,483 2,946 +18% +20%
Sales and marketing (991) (465) +113% (1,130) (840) +34% +36%
Contribution 1,868 1,025 +82% 2,353 2,105 +12% +13%
Other operating costs (884) (544) +62% (997) (880) +13% +13%
Corporate costs (95) (55) +73% (125) (137) -9% -9%
---------- ------- -------- -------- -------- -------- --------
Adjusted EBITDA(1,2) 889 425 +109% 1,231 1,089 +13% +16%
Adjusted EBITDA margin
% 20.2% 19.9% +30bps 23.4% 26.3% -290bps -240bps
Depreciation and
amortisation (213) (145) +47% (241) (220) +10% +10%
---------- ------- -------- -------- -------- -------- --------
Adjusted (1) operating
profit 676 281 +141% 990 869 +14% +18%
Adjusted net interest
expense (110) (14) +673%
Separately disclosed
items (565) (131) +332%
Profit before tax 1 136 -99%
---------- -------
Adjusted (1) earnings
per share 402.7p 298.4p +35% 496.6p 415.7p +19%
Basic earnings per
share 29.3p 180.2p -84%
Dividends per share 0.0p 200p
Net debt at period
end 2,814 265
------------------------ ---------- ------- -------- -------- -------- -------- --------
Note: Flutter's combination with TSG completed on 5 May 2020.
Reported 2020 numbers reflect a full 12-month contribution from
Flutter and a 241-day contribution from TSG. The pro forma numbers
presented show the Group's financials with TSG included for a full
12-month period in both 2019 and 2020. The pro forma numbers
include a 12-month contribution from Adjarabet in 2019.
Reported
Revenue grew by 106% in 2020 to GBP4,398m reflecting the
combination with TSG on 5 May 2020. Adjusted EBITDA grew by 109% to
GBP889m.
Profit before tax was GBP1m (2019: GBP136m) after separately
disclosed items ('SDIs') totalling GBP565m (2019: GBP131m). The
growth in SDIs was primarily driven by an increase in the
amortisation of acquired intangibles from GBP113m to GBP432m
associated with the combination with TSG and deal costs associated
with the TSG merger and the initial delivery of synergies. Adjusted
net interest expense reflects the significant increase in debt from
the point of the combination with TSG.
Basic earnings per share were 29.3 pence primarily due to
non-cash merger related accounting. No dividend is proposed for
2020 (2019: 200 pence per share).
Proforma(3)
Total revenue increased 28% to GBP5,264m with Adjusted EBITDA
increasing by 16% to GBP1,231m. Performance was strong throughout
2020 with revenue growth of 22% in H1, accelerating to 34% in H2.
Within the revenue mix, sports and gaming grew 25% and 32%
respectively.
Performance in sports reflected a year of two halves with growth
of 8% in H1 and 40% in H2. The first half was adversely impacted by
Covid-related sports cancellations and temporary closures of
retail. This was particularly pronounced during the second
quarter.
Sportsbook staking declined 13% in H1 with growth in Australia
and the US partially offsetting declines in UK and Ireland. Sports
revenue still grew 8% in H1 as net revenue margins increased 280bps
year on year. This increase reflected a material benefit from
bookmaker friendly sports results in all divisions as well as an
uplift from changing customer preferences which saw players wager
more on higher margin sports and bet types .
During H2 the return of global sports, a condensed sporting
calendar and the launch of 3 new US states all contributed to 40%
sports revenue growth. Stakes grew 45% year on year driven by the
continued migration of customers from retail to online as access to
retail betting across Ireland, the UK and Australia was adversely
affected by Covid. Net revenue margins remained flat year on year
in the second half, with the benefit of favourable sports results
and structural margin improvements in the Group ex-US offsetting
increased promotional investment in US customer acquisition.
Combined gaming revenue increased by 32% in 2020; 40% in H1 and
25% in H2. The excellent growth reflected a substantial influx of
recreational customers, in particular during the first global
lockdown. Poker and casino both benefitted from this customer
growth.
Cost of sales as a percentage of revenue increased by 480 basis
points due to the higher proportion of revenues generated in
Australia and the US during the year, where taxes, product fees and
markets access costs lead to a higher cost of sales.
Other operating costs increased 13% year on year primarily
reflecting our expanded presence in the US and increased investment
in PokerStars during the second half of the year. Corporate costs
reduced by 9% due to merger related synergies.
Adjusted EBITDA grew 16% with strong operating leverage in SBG
and Australia helping to fund marketing and platform investment in
PokerStars and the US.
As we flagged at the time of the merger announcement, there are
certain costs (such as share based payments and recurring
professional/legal fees) that TSG historically treated as SDIs, but
Flutter considers "business as usual" operating costs. Flutter now
treats all of these costs as operating costs. Had Flutter's
accounting treatment been applied to TSG's 2019 reported earnings,
TSG's full year EBITDA would have been GBP663m versus its
previously reported figure of GBP724m, a reduction of GBP61m. A
full reconciliation of previously reported financials to presented
pro forma financials can be found in Appendix 3.
The pro forma effective tax rate for the Group was 13.2% in 2020
(2019: 10.4%) primarily driven by the geographic mix of profits
during the year and the increase in US losses not recognised for
deferred tax purposes. Excluding the US, the pro forma effective
tax rate was 10.4% in 2020.
Adjusted earnings per share increased by 19% to 496.6p in 2020
reflecting the strong performance of the Group.
PPB
PPB Total PPB Online PPB Retail
FY FY FY FY FY FY
2020 2019 Change 2020 2019 Change 2020 2019 Change
Pro forma GBPm GBPm % GBPm GBPm % GBPm GBPm %
---------------------------- ------ ------- ------------- --------- ------- -------- ------ ------ ----------
Sportsbook stakes 5,847 6,983 -16% 4,848 5,189 -7% 998 1,793 -44%
Sportsbook net revenue
margin 10.5% 9.3% +120bps 9.7% 8.1% +160bps 14.3% 12.8% +150bps
Sports revenue 813 896 -9% 670 667 +1% 143 230 -38%
Gaming revenue 481 427 +13% 424 344 +23% 57 82 -30%
------ ------- ------------- --------- ------- -------- ------ ------ ----------
Total revenue 1,294 1,323 -2% 1,094 1,011 +8% 200 312 -36%
Cost of sales (382) (355) +8% (339) (285) +19% (44) (70) -38%
Cost of sales as
a % of net revenue 29.5% 26.8% +270bps 30.9% 28.2% +280bps 21.8% 22.4% -60bps
Gross profit 912 968 -6% 756 726 +4% 156 242 -35%
Sales and marketing (287) (248) +16% (281) (241) +16% (6) (7) -11%
------ ------- ------------- --------- ------- -------- ------ ------ ----------
Contribution 625 720 -13% 475 485 -2% 150 235 -36%
Other operating costs (354) (330) +7% (206) (172) +20% (148) (159) -7%
------ ------- ------------- --------- ------- -------- ------ ------ ----------
Adjusted EBITDA
(1,2) 271 390 -31% 269 314 -14% 2 76 -98%
Adjusted EBITDA margin 20.9% 29.5% -850bps 24.6% 31.0% -640bps 0.9% 24.5% -2,360bps
Depreciation and
amortisation (94) (93) +1% (52) (50) +4% (43) (43) -1%
------ ------- ------------- --------- ------- -------- ------ ------ ----------
Adjusted (1) operating
profit 176 297 -41% 217 263 -18% (41) 33 -223%
PPB Online Q1 Q2 Q3 Q4 FY20
Average monthly players
'000s 1,358 1,107 1,457 1,719 1,410
Average monthly players(5)
YoY% +1% -25% +22% +34% +6%
PPB operates Paddy Power, Betfair and Adjarabet brands online,
as well as retail operations in the UK and Ireland.
Adjusted EBITDA for PPB declined 31% in 2020 to GBP271m. The
Covid pandemic resulted in shop closures for much of 2020 while PPB
online was negatively impacted by the cancellation of sports. This
was most pronounced on the betting exchange where we offered 18%
fewer markets than during 2019.
PPB Online
Revenue increased by 8% to GBP1,094m, driven by 6% growth in
average monthly players to 1.4m. A revenue decline of 8% in H1 was
more than offset by 24% growth in H2, benefitting from excellent
growth in average monthly players through the second half of the
year.
Total sports revenue (sportsbook and exchange) grew 1%.
Sportsbook revenue increased 12%. While sportsbook staking was down
7% (declining 32% in H1 with growth of 20% in H2), net revenue
margins increased 160 basis points year on year to 9.7%. Favourable
sports results drove most of this uplift, accounting for
approximately 140 basis points of the increase. Exchange and B2B
revenue declined by 19% in 2020, but in H2 the exchange grew 3% as
the sporting calendar normalised and US election markets generated
good levels of customer interest.
Gaming revenue grew 23%, with quarterly growth rates improving
sequentially as the year progressed (Q1: +9%, Q4: +29%). This
improvement reflected continued investment in new customer
propositions such as 'Paddy's Wonder Wheel' and 'Betfair's Prize
Pinball', both of which proved popular with customers.
Cost of sales as a percentage of revenue increased by 280 basis
points to 30.9% in 2020. The strong performance of gaming, which
attracts higher direct costs, an additional quarter of higher
remote gaming duty rate (introduced April 1 2019) and extra online
costs to support a shortfall in racing funding all contributed to
this increase.
Sales and marketing grew 16% with incremental spend upon the
return of sports in H2 and investment to support the launch of our
improved gaming product, resulting in strong customer growth. The
increase in other operating costs of 20% also reflected the
investment in this improved product, combined with further
expansion of our safer gambling programmes.
PPB Retail
Adjusted EBITDA was GBP2m in 2020 (2019: GBP76m). This reflected
the disruption across our retail estates due to Covid restrictions,
with our shops closed on average for 38% of 2020. This led to a 36%
decline in revenue. In the period post-March when shops were open,
underlying performance was reasonably strong notwithstanding the
disrupted nature of trading and social distancing measures in
place.
Revenue declined 28% in our UK estate, where our shops were
closed 36% of the year. In Ireland revenue declined 46%, with shops
closed 40% of the time. The better performance in the UK can be
attributed to competitor shop closures, more favourable sports
results and a strong performance from gaming when available.
Operating costs declined 7% in 2020. We paid, and continue to
pay, our staff when shops are closed, without availing of any
government support schemes to do so.
While retail has been highly disrupted in 2020, we continue to
see a great opportunity for our well-invested estate within the
portfolio of Group assets.
SBG (9)
FY FY
2020 2019 Change
Pro forma GBPm GBPm %
------------------------------- ------ ----------- ------------
Sportsbook stakes 4,173 4,578 -9%
Sportsbook net revenue
margin 13.6% 9.1% +450bps
Sports revenue 590 442 +34%
Gaming revenue 385 295 +31%
------ ----------- ------------
Total revenue 975 736 +32%
Cost of sales (278) (203) +37%
Cost of sales as a
% of net revenue 28.5% 27.6% +90bps
Gross profit 697 533 +31%
Sales and marketing (160) (156) +3%
------ ----------- ------------
Contribution 537 377 +43%
Other operating costs (146) (124) +18%
------ ----------- ------------
Adjusted EBITDA (1,2) 391 253 +55%
Adjusted EBITDA margin 40.1% 34.4% +570bps
Depreciation and amortisation (28) (22) +28%
------ ----------- ------------
Adjusted (1) operating
profit 364 232 +57%
FY
SBG Q1 Q2 Q3 Q4 20
Average monthly players
'000s 1,621 1,297 1,574 1,766 1,564
Average monthly players(5)
YoY% +4% -17% +12% +12% +3%
SBG includes SkyBet sportsbook and Sky Gaming's various casino
brands. It also includes Oddschecker
SBG grew Adjusted EBITDA by 55% to GBP391m driven by a
combination of 32% revenue growth and cost control, particularly in
marketing, where costs only increased 3%.
Sports revenue advanced 34% with a 450 basis point increase in
net revenue margin to 13.6%. The increased margin reflected two
factors:
-- Favourable sports results with the actual margin 330 basis
points higher than expected across both football and racing;
and
-- An increase in Sky Bet's expected margin of 120 basis points,
with horse racing the main driver due to the change in mix of
racing during Q2 cancellations and ongoing refinement of our
pricing strategy.
Full year sportsbook stakes declined 9% with H1 staking 30%
lower year on year, with a subsequent 13% increase in H2. The
irregular sporting calendar and sustained period of favourable
sports results both influenced half yearly staking trends. We
believe that H2 growth is more reflective of the underlying trend
in the business, with record levels of customer engagement since
the start of the 2020/2021 football season.
Sales and marketing costs increased 3% during 2020 to GBP160m,
with marketing spend decreasing as a percentage of net revenue by
around 500 basis points to 16.4%. This reflected the fact that
revenues were boosted by positive sports results and the
cancellation of some marketing spend during sports' hiatus in
H1.
While other operating costs increased 18% as we invested to
support the expansion of the business, we benefitted from material
operating leverage on revenue growth of 32%. The efficiencies in
marketing and other operating costs has resulted in Adjusted EBITDA
margin of 40.1% for 2020, a 570 basis point improvement on
2019.
Australia(4,9)
FY FY CC
2020 2019 Change Change
Pro forma GBPm GBPm GBP A$
------------------------------ ----- --------------- --------------- -------------
Sportsbook stakes 9,713 6,751 +44% +46%
Sportsbook net revenue
margin 11.1% 10.1% +100bps +100bps
Revenue 1,075 681 +58% +59%
Cost of sales (520) (299) +74% +76%
Cost of sales as a
% of net revenue 48.4% 43.9% +450bps +450bps
Gross profit 555 382 +45% +47%
Sales and marketing (129) (124) +4% +5%
----- --------------- --------------- -------------
Contribution 426 258 +65% +66%
Other operating costs (108) (96) +12% +14%
----- --------------- --------------- -------------
Adjusted EBITDA (1,2) 318 161 +97% +98%
Adjusted EBITDA margin 29.6% 23.7% +590bps +570bps
Depreciation and amortisation (30) (30) +1% +2%
----- --------------- --------------- -------------
Adjusted (1) operating
profit 288 131 +119% +119%
Australia Q1 Q2 Q3 Q4 FY 20
Average monthly players
'000s 581 611 876 1,109 794
Average monthly players(5)
YoY% +9% -2% +39% +53% +26%
Revenue grew 59% in 2020 to GBP1,075m with excellent operating
leverage resulting in Adjusted EBITDA growth of 98%.
Strong top line growth was driven by the addition of over
675,000 new players as Sportsbet benefited from a significant
channel shift of retail customers to online. Momentum in customer
growth accelerated as the year progressed. A condensed calendar of
marquee sporting events such as the Spring Racing Carnival and
State of Origin series saw average monthly players grow by 46% in
H2 to more than 1.1m by Q4.
Staking increased by 46% to GBP9.7bn despite net revenue margins
increasing 100 basis points year on year with several factors
driving this growth:
-- Generosity increased by 150 basis points, helping to
stimulate acquisition and staking growth, particularly in H2 when
staking was up 71% compared to the prior year
-- Favourable results added 80 basis points to net revenue margin
-- The temporary increase in racing's share of revenue led to a structural margin benefit
-- Customers continued to move towards higher margin products
such as "Same Game Multis" with over 50% of Australian customers
placing a bet of this type during 2020
Cost of sales as a percentage of revenue increased 450 basis
points, driven by a higher proportion of revenues coming from
racing (which incur higher product fees) as well as the impact of
an increase in tax and product fee rates in 2020.
Sales and marketing increased by GBP10m reflecting additional
investment in customer retention, partly offset by synergies of
GBP5m as we moved to a single brand ahead of the Spring Carnival.
Other operating costs increased by 14%, reflecting ongoing
investment in our technology platforms to increase capacity, with
Sportsbet processing double the volume of bets in 2020 compared
with 2019. Operating cost synergies were delivered towards the end
of 2020 and had limited impact on the 2020 cost base. Adjusted
EBITDA almost doubled to GBP318m, reflecting excellent momentum and
operating leverage.
PokerStars (4,9)
FY FY CC
2020 2019 Change Change
Pro forma GBPm GBPm % %
------------------------------- ------ ------------- ------------- ------------
Sportsbook stakes 748 755 -1% +1%
Sportsbook net revenue
margin 8.5% 7.5% +100bps +100bps
Sports revenue 64 57 +12% +13%
Gaming revenue 1,161 961 +21% +24%
------ ------------- ------------- ------------
Total revenue 1,225 1,018 +20% +23%
Cost of sales (282) (217) +30% +29%
Cost of sales as a
% of net revenue 23.0% 21.3% +170bps +100bps
Gross profit 943 801 +18% +22%
Sales and marketing (206) (144) +43% +46%
------ ------------- ------------- ------------
Contribution 737 657 +12% +16%
Other operating costs (191) (154) +24% +21%
------ ------------- ------------- ------------
Adjusted EBITDA (1,2) 545 503 +8% +15%
Adjusted EBITDA margin 44.5% 49.4% -490bps -340bps
Depreciation and amortisation (47) (42) +13% +14%
------ ------------- ------------- ------------
Adjusted (1) operating
profit 498 461 +8% +15%
FY
PokerStars Q1 Q2 Q3 Q4 20
Average monthly players
'000s 1,469 1,981 1,501 1,558 1,627
Average monthly players(5)
YoY% +5% +57% +25% +26% +28%
PokerStars includes PokerStars, PokerStars Casino, PokerStars
Sports and Full Tilt brands which collectively offer online poker,
casino and sports betting products. Excludes PokerStars US
business.
PokerStars grew revenue by 23% to GBP1,225m in 2020 with EBITDA
growth of 15% to GBP545m. This performance was driven by 28% growth
in average monthly players. Player engagement with the brand
initially increased in Q2 following the introduction of lockdown
restrictions in many jurisdictions and was supplemented by our
increased investment in customer retention and marketing in H2. For
example, in H2 promotional generosity as a percentage of gross
revenue increased to 28%, double the rate in 2019.
Gaming revenue increased by 24% year on year, with casino and
poker growing 37% and 17% respectively:
-- In H1, gaming revenue grew 43% (Poker +38%, Casino +51%)
driven by elevated player volumes as customers sought alternative
forms of home entertainment during Covid restrictions
-- During H2, underlying customer activity on Poker was
encouraging, as we increased player generosity and marketing spend,
driving greater customer engagement. Around 30% of players acquired
/ reactivated in Q2 continued to play in Q4. Net revenue declined
6% in H2 as a result of the compliance measures taken to improve
the sustainability of the business.
-- Casino continued its strong performance with revenue up 24%
in H2, benefitting from cross-sell and direct casino customer
volumes. The quality of the PokerStars casino proposition and
increased investment in generosity has resulted in strong month on
month customer retention rates.
Sports revenue increased by 13% to GBP64m, benefitting from
favourable sports results across the year. Cost of sales as a
percentage of revenue grew one percentage point to 23.0% due to the
higher direct costs associated with casino games which accounted
for a larger proportion of revenue in 2020.
Sales and marketing costs increased 46% to GBP206m, with H2
marking a significant step-change in investment behind the brand to
address historic underinvestment. H2 marketing spend was GBP43m
higher than H1 and GBP55m above H2 2019. This investment supported
the new 'I'm in' brand campaign and the direct acquisition of
casino customers.
Other operating costs increased 21% as we commenced the
programme to improve PokerStars technology and operating
capabilities. This multi-year investment includes additional
technology resources, with headcount exiting 2020 20% higher than
the start of the year, and technology infrastructure improvements
to address the foundational capabilities required to stabilise the
business.
US(4,9)
FY FY CC
2020 2019 Change Change
Pro forma GBPm GBPm GBP US$
------------------------------- ------- -------------- ------------- ------------
Sportsbook stakes 4,411 2,396 +84% +86%
Sportsbook net revenue
margin 4.6% 4.3% +30bps +30bps
Sports revenue 458 325 +41% +42%
Gaming revenue 237 61 +288% +292%
------- -------------- ------------- ------------
Total revenue 695 386 +80% +81%
Cost of sales (319) (124) +157% +160%
Cost of sales as a
% of net revenue 46.0% 32.2% +1,380bps +1,390bps
Gross profit 376 262 +43% +44%
Sales and marketing (348) (168) +107% +110%
------- -------------- ------------- ------------
Contribution 28 94 -70% -71%
Other operating costs (198) (175) +13% +14%
------- -------------- ------------- ------------
Adjusted EBITDA (1,2) (170) (82) +108% +115%
Adjusted EBITDA margin -24.4% -21.1% -330bps -380bps
Depreciation and amortisation (37) (29) +28% +30%
------- -------------- ------------- ------------
Adjusted (1) operating
profit (207) (110) +87% +92%
US Q1 Q2 Q3 Q4 FY20
Average monthly players
'000s 765 455 1,176 1,490 972
Average monthly players(5)
YoY% +57% +18% +111% +55% +62%
The US division includes FanDuel, FOX Bet, TVG, PokerStars and
Betfair Casino brands, offering regulated real money and
free-to-play sports betting, online gaming, daily fantasy sports
and online racing wagering products to customers across various
states in the US
Revenue grew by 81% to GBP695m reflecting the diversified
product portfolio offered in the US, as well as additional state
openings. During the year we launched the FanDuel online sportsbook
in 4 additional states (Colorado, Illinois, Iowa and Tennessee) and
online gaming in Pennsylvania in January. FOX Bet also added
Colorado.
Sports revenue increased by 42% reflecting sportsbook growth of
101% and combined daily fantasy sports and racing growth of 15%.
The profile of revenue growth for each product varied significantly
quarter to quarter due to sports cancellations. The increased
prominence of US horse racing led our TVG business to generate
record customer volumes during the year with average monthly
players growing 60% over 2019. Conversely daily fantasy was
materially impacted by the reduced number of sports events during
the year.
Sportsbook staking grew 86%, with the return of sport and new
state launches driving growth in H2 of 124% year on year. Net
revenue margin increased by 30 basis points reflecting structural
increases arising from risk and trading improvements and a greater
demand for higher margin products such as parlays as well as
bookmaker friendly results. These margin benefits helped to offset
the significant level of investment we made in generosity during
the year as we continued to focus on new customer acquisition in
both new and existing states.
Gaming revenue grew 292% to GBP237m with the launch in
Pennsylvania in January augmented by a shift in wallet share from
sports to poker and casino in H1 as the sporting calendar was
disrupted. Launch of the FanDuel proprietary account and wallet in
July boosted cross-sell performance in H2 through an improved
customer journey. The launch of live casino in November in
Pennsylvania has also proven popular with customers.
Cost of sales increased as a percentage of revenue by 1,390
basis points due to the increase in the proportion of revenue
generated by our higher cost of sales sportsbook and gaming
businesses.
Marketing more than doubled to GBP348m, increasing as a
percentage of revenue to 50%. This reflects three factors: (i) new
state launches, (ii) the continued strong customer acquisition in
existing states and (iii) additional investment to re-engage
customers following the return of sport.
Other operating costs increased 14% year on year but reduced as
a percentage of revenue as we leverage our scale to increase
efficiency. The increase of GBP22m was primarily driven by
investment in our technology and teams to support the migration to
our proprietary platforms as well as new state launches.
The US business generated an EBITDA loss of GBP170m, in line
with previous guidance.
Synergies
We now expect our combination with TSG to yield GBP170m in
annualised cost synergies for the Group versus guidance of GBP140m
upon announcement of the transaction. The additional savings arise
primarily from the move to a single brand in Australia. The synergy
figure is net of re-investments in certain parts of the business.
For example, we have reallocated certain technology teams from
duplicate systems work to support PokerStars technology
improvements and Group functions required strengthening to support
a Group of our scale.
FY FY FY FY
GBPm 2020 2021 2022 2023
---------------- ---- ---- ---- ----
Synergy by year 25 90 140 170
---------------- ---- ---- ---- ----
In addition to the above cost synergies, we also expect to
achieve GBP20m in Capex synergies annually. This saving will be
achieved by leveraging Flutter's proprietary Global Betting
Platform for the provision of sports betting across the Group and
lower infrastructure costs in Australia.
We have also taken steps to realise finance cost synergies
through refinancing the Group debt. This has already seen the
weighted average cash cost of our debt decrease to 4.18% in
December from 4.90% on a pro forma basis in March 2020. The step
down in the make-whole costs in July 2021 for the $1bn Senior
Unsecured Notes is an opportunity to refinance and reduce our debt
cost further. Additionally, the TLB is currently priced above the
level we would expect for a credit of the quality of Flutter and we
will look to refinance this debt, considering prevailing credit
market conditions and our expectations around our credit
rating.
Cash flow and financial position
FY
2020
Pro forma GBPm
--------------------------------------- --------
Adjusted EBITDA 1,231
Capex (252)
Working capital 310
Corporation tax (93)
Adjusted free cash flow 1,197
Cash flow from separately disclosed
items (SDI) (120)
Free cash flow 1,077
Interest cost (177)
Other borrowing costs (24)
Settlement of swaps (36)
Lease liabilities paid and other (23)
Net increase in cash before equity
raises & FanDuel consideration 817
Proceeds from equity raises 1,921
Acquisition of further interest
in FanDuel (1,546)
Net increase in cash 1,192
Net debt at start of year (3,827)
Foreign currency exchange translation (20)
Change in fair value of hedging
derivatives (159)
Net debt at 31 December 2020 (2,814)
The net increase in cash of GBP1,192m during the period
primarily relates to strong free cash flow of GBP1,077m.
Capital expenditure of GBP252m, reflects the on-going investment
in Group-wide product and technology development, as well as
expansion into the US.
Working capital continues to be positively affected by enhanced
scale and the strong financial performance of the Group,
particularly in Q4. Creditors have increased significantly,
principally in relation to direct costs where point of consumption
taxes and product fees are generally paid one quarter after revenue
is generated. The overall working capital benefit in 2020 is
expected to partially unwind in 2021.
Cash flow from SDIs principally relates to deal fees and
integration costs in relation to the combination with TSG.
Interest costs were GBP48m lower than 2019 on a pro forma basis
from the repayment of debt following the Group's equity raise in
May and the reduction in weighted average cost of debt following
agreement of more favourable financing terms post completion.
As discussed earlier, the Group's financial structure has
evolved significantly during 2020. The increase in debt following
the combination with TSG was partly offset by an equity raise of
GBP0.8bn in May. A further equity raise in December of GBP1.1bn was
used to partly fund the additional interest acquired in
FanDuel.
The Group has cross currency swap agreements in place as part of
its strategy to hedge the impact of currency fluctuations on its
leverage ratio. Changes in the fair value of these hedging
derivatives are reflected in net debt.
As at 31 December 2020, the Group had net debt of GBP2,814m,
excluding customer balances, representing a leverage ratio of 2.3
times.
Separately disclosed items
FY FY
2020 2019
GBPm GBPm
---------------------------------------- ------ -----------------
Amortisation of acquisition related
intangible assets (432) (113)
Acquisition fees and associated
costs (33) (18)
Restructuring and integration costs (96) -
Impairment (23) -
VAT refund 11 -
Operating profit impact of separately
disclosed items (573) (131)
Financial Income 79 -
Financial Expense (71) -
Profit before tax impact of separately
disclosed items (565) (131)
Tax credit on separately disclosed
items 58 19
Total separately disclosed items (507) (112)
Separately disclosed items do not relate to business as usual
activity of the Group and therefore are excluded from adjusted
profits.
During 2020 the primary driver of these costs was the
combination with TSG.
The uplift in amortisation of intangibles to GBP432m was due to
the 2020 combination with TSG, with ongoing amortisation related to
the acquisition of Betfair in 2016, the combination of the Group's
US assets with FanDuel in 2018 and the 2019 acquisition of
Adjarabet.
The Group also incurred transaction fees and associated costs of
GBP33m in connection with the TSG combination and the acquisition
of the Group's additional 37.2% stake in FanDuel in December 2020.
This does not include any professional fees incurred by TSG prior
to the date of the combination.
Restructuring and integration costs primarily relate to the
delivery of integration and synergies associated with the TSG
combination.
During the year, the Group recognised impairments of GBP23m
relating to certain property assets, retail licenses and
capitalised development expenditure incurred by the TSG
business.
The Group received a VAT refund in respect of a historical VAT
overpayment in relation to retail gaming machines in the UK.
Financial income and expense items reflect gains and/or losses
in respect of the Group's debt financing, principally related to
embedded derivatives, accelerated accretion on debt repayments and
foreign exchange. The expense line also includes additional
contingent consideration payable for HRTV, now part of TVG of
GBP22m.
For further details in relation to separately disclosed items,
see note 6 of the financial statements.
Current trading/ Outlook
2021 has seen a continuation of the strong momentum enjoyed by
the Group. Growth in player volumes remains encouraging across all
divisions, while sports results have also been favourable relative
to expectations, particularly in the UK and Ireland. These factors
have resulted in an increase in Group revenue of 36% in the first 7
weeks of the year (to Feb 21) versus the comparable period in
2020.
Covid restrictions continue to impact our retail business in the
UK and Ireland. The latest Government guidelines suggest that our
UK shops may re-open in mid-April while it looks like it could be
May at the earliest before we are able to reopen our Irish shops.
For each month that our UK estate is shut, we anticipate an EBITDA
loss of GBP5m while in Ireland, the monthly loss is expected to be
GBP4m.
In Germany, there are proposals to introduce a 5.3% turnover tax
on online poker and slots from July 1st this year. While the tax is
yet to be ratified, if it does come into force we believe it would
effectively make the German online gaming market commercially
unviable for regulated operators, with the taxes being equivalent
to significantly greater than 100% of gross revenue. The financial
impact of such a change would depend on how it is implemented and
what, if anything, we could to do to mitigate the charge, but our
initial estimate is that the contribution impact could be between
GBP15m and GBP25m in 2021 if it comes into effect on July 1.
Overall, we are very pleased with the momentum in our business
as we continue to build our recreational player base globally and
look forward to the future with confidence.
_____________________________________________________________________________________
(1) The "Adjusted" measures exclude separately disclosed items,
that are not part of the usual business activity of the Group and
have been therefore reported as "separately disclosed items" (see
note 6 to the financial statements).
(2) EBITDA is profit before interest, tax, depreciation and
amortisation expenses and is a non-GAAP measure. The Group uses
EBITDA, Adjusted EBITDA and Adjusted operating profit to comment on
its financial performance. These measures are used internally to
evaluate performance, to establish strategic goals and to allocate
resources. The directors also consider that these are commonly
reported and widely used by investors as an indicator of operating
performance and ability to incur and service debt, and as a
valuation metric. These are non-GAAP financial measures and are not
prepared in accordance with IFRS and, as not uniformly defined
terms, these may not be comparable with measures used by other
companies to the extent they do not follow the same methodology
used by the Group. Non-GAAP measures should not be viewed in
isolation, nor considered as a substitute for measures reported in
accordance with IFRS. All of the adjustments shown have been taken
from the financial statements.
(3) Flutter's combination with TSG completed on 5 May 2020. The
pro forma numbers presented show the Group's financials with TSG
included for a full 12-month period in both 2019 and 2020. The pro
forma numbers include a 12-month contribution from Adjarabet in
2019 (completion date: 1 Feb 2019). See Appendix 4 for a
reconciliation of pro forma results to statutory results.
(4) Growth rates in the commentary are in local or constant
currency(12) except reported numbers which are in nominal
currency.
(5) Monthly Players are the total number of players who have
placed and/or wagered a stake and/or contributed to rake or
tournament fees during the month. The average number of monthly
players are taken to derive the measure per reporting period.
(6) Total market share of Flutter brands in UK and Australia
based on internal estimates.
(7) Online sportsbook market share is the GGR market share of
FanDuel and FOX Bet for Q4 in the states in which FanDuel was live
using published gaming regulator reports in those states. During Q4
FanDuel was live in 8 states; Colorado (CO), Indiana (IN), Iowa
(IA), Illinois (IL), New Jersey (NJ), Pennsylvania (PA), Tennessee
(TN) and West Virginia (WV). During Q4 FOX Bet was live in 3
states; Colorado (CO), New Jersey (NJ) and Pennsylvania (PA).
Online gaming market share reflects the combined NJ and PA market
share of the FanDuel, FOX Bet, PokerStars and Betfair brands during
Q4. Total online share refers to our share of both sportsbook and
gaming markets combined as defined above.
(8) The leverage ratio is calculated using pro forma Adjusted
EBITDA for the 12-month period to 31 December 2020.
(9) A full reconciliation of previously reported financials to
presented pro forma financials can be found in Appendix 3.
(10) Reported revenue and cost of sales exclude SDIs which
relate to a GBP15.9m refund of VAT from the HMRC, based on the
historic incorrect application of VAT to UK gaming machines.
(11) Reported represents the IFRS reported statutory numbers.
Where amounts have been normalised for SDIs they are labelled as
Adjusted.
(12) Constant currency ("cc") growth throughout the Business
Review and Operating & Financial Review is calculated by
retranslating the non-sterling denominated component of FY 2019 at
FY 2020 exchange rates (see Appendix 5).
(13) The 2019 earnings per share figures have been restated to
incorporate the 1,312,260 new Flutter ordinary shares that were
issued in May 2020 as payment of the 2019 final dividend. The
weighted average number of shares in issue during the period was
adjusted to include these bonus shares as if they were issued 1
January 2019.
(14) Net debt at 31 December 2020 is the principal amount of
borrowings plus associated accrued interest, minus cash & cash
equivalents plus/minus carrying value of debt related derivatives.
This comprised of the principal amount of borrowings plus
associated accrued interest of GBP3,231m plus debt related
derivatives of GBP186m less gross cash of GBP603m at 31 December
2020 (see Appendix 6).
(15) Differences due to rounding unless otherwise stated.
Appendix 1: Divisional Key Performance Indicators FY20
Pro forma basis(1)
GBPm PPB(3) SBG PokerStars Australia US Group
------------------------ ---------------------------------------
FY FY % FY FY % FY FY % CC(2) FY FY % A$ FY FY % US$ FY FY % CC(2)
2020 2019 Change 2020 2019 Change 2020 2019 Change % 2020 2019 Change % 2020 2019 Change % 2020 2019 Change % Change
Change Change Change
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Sportsbook
stakes 5,847 6,983 -16% 4,173 4,578 -9% 748 755 -1% +1% 9,713 6,751 +44% +46% 4,411 2,396 +84% +86% 24,892 21,463 +16% +17%
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Sportsbook
net revenue
margin 10.5% 9.3% +120bps 13.6% 9.1% +450bps 8.5% 7.5% +100bps +100bps 11.1% 10.1% +100bps +100bps 4.6% 4.3% +30bps +30bps 10.1% 8.9% +120bps +120bps
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Sports
revenue 813 896 -9% 590 442 +34% 64 57 +12% +13% 1075 681 +58% +59% 458 325 +41% +42% 3,000 2,400 +25% +25%
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Gaming
revenue 481 427 +13% 385 295 +31% 1161 961 +21% +24% - - - - 237 61 +288% +292% 2,264 1,743 +30% +32%
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Total revenue 1294 1323 -2% 975 736 +32% 1225 1018 +20% +23% 1075 681 +58% +59% 695 386 +80% +81% 5,264 4,144 +27% +28%
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Cost of
sales (382) (355) +8% (278) (203) +37% (282) (217) +30% +29% (520) (299) +74% +76% (319) (124) +157% +160% (1,782) (1,198) +49% +49%
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Cost of
sales as
% of net
revenue 29.5% 26.8% +270bps 28.5% 27.6% +90bps 23.0% 21.3% +170bps +100bps 48.4% 43.9% +450bps +450bps 46.0% 32.2% +1380bps +1390bps 33.8% 28.9% +490bps +480bps
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Gross Profit 912 968 -6% 697 533 +31% 943 801 +18% +22% 555 382 +45% +47% 376 262 +43% +44% 3,483 2,946 +18% +20%
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Sales &
marketing (287) (248) +16% (160) (156) +3% (206) (144) +43% +46% (129) (124) +4% +5% (348) (168) +107% +110% (1,130) (840) +34% +36%
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Contribution 625 720 -13% 537 377 +43% 737 657 +12% +16% 426 258 +65% +66% 28 94 -70% -71% 2,353 2,105 +12% +13%
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Other
Operating
Costs (354) (330) +7% (146) (124) +18% (191) (154) +24% +21% (108) (96) +12% +14% (198) (175) +13% +14% (997) (880) +13% +13%
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Corporate
costs (125) (137) -9% -9%
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Adjusted
EBITDA 271 390 -31% 391 253 +55% 545 503 +8% +15% 318 161 +97% +98% (170) (82) +108% +115% 1,231 1,089 +13% +16%
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Adjusted
EBITDA
margin 20.9% 29.5% -850bps 40.1% 34.4% +570bps 44.5% 49.4% -490bps -340bps 29.6% 23.7% +590bps +570bps -24.4% -21.1% -330bps -380bps 23.4% 26.3% -290bps -240bps
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Depreciation
&
amortisation (94) (93) +1% (28) (22) +28% (47) (42) +13% +14% (30) (30) +1% +2% (37) (29) +28% +30% (241) (220) +10% +10%
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
Adjusted
operating
profit /
(loss) 176 297 -41% 364 232 +57% 498 461 +8% +15% 288 131 +119% +119% (207) (110) +87% +92% 990 869 +14% +18%
------ ------ -------- ------ ------ -------- ------ ------ -------- -------- ------ ------ -------- -------- ------- ------- --------- --------- -------- -------- -------- ---------
(1) Flutter's combination with TSG completed on May 5 2020. The
pro forma numbers presented show Group financials with TSG included
for a full 12-month period in both 2019 and 2020. The pro forma
numbers include a 12-month contribution from Adjarabet in 2019
(completion date: Feb 1 2019).
(2) Constant currency ("cc") growth is calculated by
retranslating non-sterling denominated component of FY 2019 at FY
2020 exchange rates (see Appendix 5)
(3) For split of PPB between Online and Retail, please see the
KPIs section of our investor relations website.
Appendix 2: Divisional Key Performance Indicators FY20 - Average
Monthly Players
Monthly Players are the total number of players who have placed
and/or wagered a stake and/or contributed to rake or tournament
fees during the month. The average number of monthly players are
taken to derive the measure per reporting period.
Pro forma basis(1)
Average Monthly PPB SBG PokerStars Australia US Group
Players
(in thousands)
----------------------- ----------------------- ------------------------ ---------------------- ------------------------
2020 2019 % 2020 2019 % 2020 2019 % 2020 2019 % 2020 2019 % 2020 2019 %
Change Change Change Change Change Change
------ ------ ------- ------ ------ ------- ------ ------ -------- ------ ----- -------- ------ ----- ------- ------ ------ --------
Full Year 1,410 1,327 +6% 1,564 1,525 +3% 1,627 1,275 +28% 794 629 +26% 972 598 +62% 6,367 5,354 +19%
------ ------ ------- ------ ------ ------- ------ ------ -------- ------ ----- -------- ------ ----- ------- ------ ------ --------
H1 1,232 1,411 -13% 1,459 1,557 -6% 1,725 1,328 +30% 596 580 +3% 610 437 +40% 5,622 5,314 +6%
------ ------ ------- ------ ------ ------- ------ ------ -------- ------ ----- -------- ------ ----- ------- ------ ------ --------
H2 1,588 1,243 +28% 1,670 1,493 +12% 1,530 1,221 +25% 992 678 +46% 1,333 760 +75% 7,113 5,395 +32%
------ ------ ------- ------ ------ ------- ------ ------ -------- ------ ----- -------- ------ ----- ------- ------ ------ --------
Q1 1,358 1,350 +1% 1,621 1,560 +4% 1,469 1,396 +5% 581 535 +9% 765 488 +57% 5,793 5,327 +9%
------ ------ ------- ------ ------ ------- ------ ------ -------- ------ ----- -------- ------ ----- ------- ------ ------ --------
Q2 1,107 1,472 -25% 1,297 1,554 -17% 1,981 1,261 +57% 611 626 -2% 455 387 +18% 5,451 5,301 +3%
------ ------ ------- ------ ------ ------- ------ ------ -------- ------ ----- -------- ------ ----- ------- ------ ------ --------
Q3 1,457 1,198 +22% 1,574 1,409 +12% 1,501 1,204 +25% 876 632 +39% 1,176 557 +111% 6,584 5,001 +32%
------ ------ ------- ------ ------ ------- ------ ------ -------- ------ ----- -------- ------ ----- ------- ------ ------ --------
Q4 1,719 1,287 +34% 1,766 1,577 +12% 1,558 1,239 +26% 1,109 724 +53% 1,490 962 +55% 7,642 5,788 +32%
------ ------ ------- ------ ------ ------- ------ ------ -------- ------ ----- -------- ------ ----- ------- ------ ------ --------
(1) Flutter's combination with TSG completed on May 5 2020. The
pro forma monthly player data presented show Group players with TSG
included for a full 12-month period in both 2019 and 2020. The pro
forma data includes a 12-month contribution from Adjarabet in 2019
(completion date: Feb 1 2019).
Appendix 3: Reconciliation of previously reported TSG results to
Flutter pro forma results
Financial Year 2019, unaudited
Adjustments
(US$m)
--------- ------------------- --------- --------- --------- ----------
Legacy
Per Legacy Flutter Total
TSG Flutter TSG pro pro Flutter
Reported policies forma forma* pro forma
FY 2019 (US$m) 1 2 3 (US$m) (GBPm) (GBPm) (GBPm)
--------------------------- --------- ----- ----- ----- --------- --------- ----------- --------- ----------
Total revenue N/A PPB* 1,323 1,323
Cost of sales (355) (355)
Gross profit 968 968
Total operating
costs (578) (578)
Adjusted EBITDA 390 390
--------------------------- ----- ----- ----- ---------
Total
UK revenue 947 - (8) - 939 736 SBG N/A 736
----------- ---------
Cost of sales (292) - 32 - (260) (203) (203)
----------- ---------
Gross profit 655 - 24 - 679 533 533
Total operating
costs (330) - (24) (2) (357) (280) (280)
Adjusted EBITDA 325 - - (2) 322 253 253
--------------------------- ----- ----- ----- ----------- ---------
Total
INTERNATIONAL revenue 1,312 (12) - - 1,300 1,018 POKERSTARS N/A 1,018
----------- ---------
Cost of sales (297) 12 7 - (278) (217) (217)
----------- ---------
Gross profit 1,015 (0) 7 - 1,022 801 801
Total operating
costs (410) 37 (7) (0) (382) (298) (298)
Adjusted EBITDA 605 37 - (0) 641 503 503
--------------------------- ----- ----- ----- ----------- ---------
Total
AUSTRALIA revenue 274 - 25 - 300 235 AUSTRALIA 446 681
-----------
Cost of sales (104) - (45) - (150) (117) (182) (299)
-----------
Gross profit 170 - (20) - 150 118 264 382
Total operating
costs (126) - 20 (1) (107) (84) (137) (221)
Adjusted EBITDA 44 - - (1) 43 34 127 161
--------------------------- ----- ----- ----- ----------- ---------
Total
US revenue N/A 12 - - 12 10 US 376 386
--------- -----------
Cost of sales (12) 2 - (11) (8) (116) (124)
--------- -----------
Gross profit 0 2 - 2 1 261 262
Total operating
costs (38) (2) (19) (59) (47) (297) (343)
Adjusted EBITDA (38) - (19) (57) (45) (36) (82)
--------- ----- ----- ----- ----------- ---------
Total CORPORATE
CORPORATE revenue (5) - 5 - - - COSTS - -
-----------
Cost of - - - - - - - -
sales
-----------
Gross profit (5) - 5 - - - - -
Total operating
costs (48) 2 (5) (55) (106) (82) (55) (137)
Adjusted EBITDA (53) 2 - (55) (106) (82) (55) (137)
--------------------------- ----- ----- ----- ----------- ---------
Total
GROUP revenue 2,528 - 23 - 2,551 1,999 GROUP 2,145 4,144
Cost of sales (693) - (5) - (698) (546) (652) (1,198)
Gross profit 1,835 - 18 - 1,854 1,453 1,493 2,946
Total operating
costs (914) - (18) (77) (1,010) (790) (1,067) (1,857)
Adjusted EBITDA 921 - - (77) 844 663 426 1,089
--------------------------- ----- ----- ----- --------- ---------
Adjustments:
1. TSG US financials: These were previously reported within TSG
International and 'Corporate', they have now moved to Flutter's US
division. This increases the profitability of International and
increases the loss in the US. The net EBITDA impact of this change
is nil.
2. Accounting treatment adjustments: reclassifications with nil
net impact on Adjusted EBITDA at a Group level.
Revenue recognition: The most material change here is in
Australia where TSG reported revenue excluding Goods and Services
Tax ("GST"). Flutter includes GST within revenue with a
corresponding deduction in the cost of sales line.
UK Intercompany transactions: Certain costs and revenues that
had been removed at a consolidated Group level, via the corporate
cost centre, are now consolidated within SBG per Flutter policies.
Separately TSG previously recorded an 'Other income' line in each
of its divisions, which has been reallocated to sports or gaming as
appropriate. This is not visible in the table above.
Expense allocation: Reallocation of expenses between cost of
sales and operating expenses, principally relating to treatment of
affiliates, licensing, streaming, and other costs.
3. Accounting treatment adjustments - separately disclosed items:
Applying Flutter accounting policies in relation to separately
disclosed items results in certain items previously added back to
Adjusted EBITDA within TSG now being reported as ongoing expenses.
These include share-based payments, non-recurring
professional/legal fees and certain other costs. The application of
Flutter policy to TSG 2019 reported earnings would have been -$77m
at the EBITDA line in FY20.
* Note PPB 2019 results are pro forma for Adjarabet, acquired in
February 2019 as well as combining the legacy PPB Online and Retail
divisions.
Appendix 4: Reconciliation of pro forma results to Statutory
results
The merger of Flutter and TSG completed on 5 May 2020, with the
merger accounted for as an acquisition of TSG by Flutter on that
date. The Statutory results reflect this accounting treatment. Pro
forma results for the Group are prepared as if Flutter and TSG had
always been merged and are included in these Preliminary Results,
as they best represent the Group's underlying performance. The 2019
pro forma numbers also include a 12-month contribution from
Adjarabet in 2019, completed on 1st Feb 2019. The difference
between the Statutory and Pro forma results is inclusion of the
results of TSG and Adjarabet in the period prior to completion as
per the table below. Adjusted EBITDA and revenue are reconciled by
division below to Note 5 of the financial statements.
Pro forma TSG & Adjarabet Statutory
results results pre-merger results (Adjusted)
completion*
FY FY FY FY FY FY
GBPm 2020 2019 2020 2019 2020 2019
------------------------------- -------- -------- ---------- ---------- ------------ --------
Sports revenue 3,000 2,400 275 734 2,725 1,667
Gaming revenue 2,264 1,743 592 1,270 1,673 473
-------- -------- ---------- ---------- ------------ --------
Total revenue 5,264 4,144 866 2,004 4,398 2,140
Cost of sales (1,782) (1,198) (243) (548) (1,539) (650)
Cost of sales as a
% of net revenue 33.8% 28.9% 28.0% 27.3% 35.0% 30.4%
Gross profit 3,483 2,946 624 1,456 2,859 1,490
Sales and marketing (1,130) (840) (139) (375) (991) (465)
Contribution 2,353 2,105 484 1,081 1,868 1,025
Other operating costs (997) (880) (113) (335) (884) (544)
Corporate costs (125) (137) (29) (82) (95) (55)
-------- -------- ---------- ---------- ------------ --------
Adjusted EBITDA(1,2) 1,231 1,089 342 663 889 425
Adjusted EBITDA margin 23.4% 26.3% 39.5% 33.1% 20.2% 19.9%
Depreciation and amortisation (241) (220) (28) (75) (213) (145)
-------- -------- ---------- ---------- ------------ --------
Adjusted (1) operating
profit 990 869 314 588 676 281
Revenue by division
PPB 1,294 1,323 - 5 1,294 1,318
SBG 975 736 290 736 685 -
PokerStars 1,225 1,018 468 1,018 757 -
Australia 1,075 681 87 235 989 446
US 695 386 22 10 673 376
Adjusted EBITDA by
division
PPB 271 390 - 1 271 389
SBG 391 253 117 253 274 -
PokerStars 545 503 264 503 281 -
Australia 318 161 11 34 307 127
US (170) (82) (22) (45) (148) (36)
Corporate costs (125) (137) (29) (82) (95) (55)
------------------------------- -------- -------- ---------- ---------- ------------ --------
* Note the adjustments to reflect the exclusion of TSG results
prior to the merger also include any transactions that are now
deemed to be intercompany as a result of the merger.
Appendix 5: Reconciliation of pro forma growth rates to pro
forma constant currency growth rates
Constant currency ("cc") growth is calculated by retranslating
non-sterling denominated component of FY 2019 at FY 2020 exchange
rates as per the table below.
FY FY CC
FY FY % 2019 2019 %
GBPm, pro forma 2020 2019 Change FX impact CC Change
------------------------------- -------- -------- ---------- -------- --------
Sports revenue 3,000 2,400 +25% (6) 2,394 +25%
Gaming revenue 2,264 1,743 +30% (33) 1,710 +32%
-------- -------- ---------- -------- --------
Total revenue 5,264 4,144 +27% (39) 4,105 +28%
Cost of sales (1,782) (1,198) +49% 4 (1,194) +49%
Cost of sales as a
% of net revenue 33.8% 28.9% +490bps - 29.1% +480bps
Gross profit 3,483 2,946 +18% (35) 2,911 +20%
Sales and marketing (1,130) (840) +34% 8 (833) +36%
Contribution 2,353 2,105 +12% (28) 2,078 +13%
Other operating costs (997) (880) +13% (2) (881) +13%
Corporate costs (125) (137) -9% (137) -9%
Adjusted EBITDA 1,231 1,089 +13% (29) 1,060 +16%
Adjusted EBITDA margin 23.4% 26.3% -290bps - 25.8% -240bps
Depreciation and amortisation (241) (220) +10% 1 (219) +10%
-------- -------- ---------- -------- --------
Adjusted operating
profit 990 869 +14% (28) 840 +18%
-------- -------- ---------- -------- --------
Revenue by division
PPB 1,294 1,323 -2% (5) 1,318 -2%
SBG 975 736 +32% - 736 +32%
PokerStars 1,225 1,018 +20% (26) 992 +23%
Australia 1,075 681 +58% (6) 674 +59%
US 695 386 +80% (3) 383 +81%
Adjusted EBITDA by
division
PPB 271 390 -31% (4) 386 -30%
SBG 391 253 +55% - 253 +55%
PokerStars 545 503 +8% (28) 475 +15%
Australia 318 161 +97% (0) 161 +98%
US (170) (82) +108% 3 (79) +115%
Corporate costs (125) (137) -9% - (137) -9%
------------------------------- -------- -------- ---------- -------- --------
Appendix 6: Reconciliation of Pro forma cash flow to Reported
statutory cash flow
In the Operating and Financial Review the cash flow has been
presented on a pro forma net cash basis. The merger of Flutter and
TSG completed on 5 May 2020, with the merger accounted for as an
acquisition of TSG by Flutter on that date. The Statutory cash flow
reflects this treatment while the pro forma cash flow is prepared
as if Flutter and TSG had always been merged. The difference
between the net cash basis and the reported cash flow is the
inclusion of borrowings to determine a net cash position.
Pro forma TSG results Adjustment Statutory
cash flow pre-merger to include cash flow
completion* borrowings
FY FY FY
GBPm 2020 2020 2020
----------------------------- ------------- ------------ -----------
Adjusted EBITDA 1,231 342 889
Capex (252) (33) (219)
Working capital 310 (8) 318
Corporation tax (93) (3) (89)
Adjusted free cash flow 1,197 298 899
Cash flow from separately
disclosed items (SDI) (120) - (120)
Free cash flow 1,077 298 779
Interest cost (177) (64) (113)
Other borrowing costs (24) - (24)
Settlement of swaps (36) - (36)
Lease liabilities paid
and other (23) 1 (24)
Net increase in cash before
equity raises & FanDuel
consideration 817 235 582
Proceeds from equity raises 1,921 - 1,921
Acquisition of further
interest in FanDuel (1,546) - (1,546)
Net amounts drawn down
/ (repaid) on borrowings - - (923) (923)
Cash acquired in TSG - - 445 445
Net increase / (decrease)
in cash 1,192 235 (478) 479
Net (debt)/cash at start
of year (3,827) (3,563) 372 108
Foreign currency exchange
translation (20) - 37 (17)
Change in fair value of
hedging derivatives (159) - 159 -
Net debt at 31 December
2020 (2,814) (3,328) 89 603
(1) Adjusted EBITDA includes the following line items in the
statutory cash flow: Profit for the period, separately disclosed
items, tax expense before separately disclosed items, financial
income before separately disclosed items, financial expense before
separately disclosed items and depreciation and amortisation before
separately disclosed items.
(2) Capex includes purchase of property, plant and equipment,
purchase of intangible assets, capitalised internal development
expenditure and payment of contingent deferred consideration.
(3) Working capital includes increase in trade and other
receivables, increase / (decrease) in trade, other payables and
provisions, employee equity-settled share-based payments expense
before separately disclosed items, and foreign currency exchange
loss / (gain).
(4) Cash flow from separately disclosed items relates to costs
incurred as a result of the Combination with TSG net of the
historic VAT refund in respect of an historic claim in relation to
retail gaming machines in the UK.
(5) Interest and other borrowing costs includes interest paid,
interest received and fees in respect of borrowing facilities.
(6) Lease liabilities paid and other includes payment of lease
liabilities and lease interest, proceeds from the issue of shares
on exercise of employee options, dividends paid to non-controlling
interest, release of cash from restricted cash and proceeds from
the disposal of assets.
(7) Net amounts repaid on borrowings includes proceeds from GBP
First Lien Term Loan A, net amounts drawn down on previous GBP
revolving credit facility, repayment of USD and EUR First Lien Term
Loan B and old GBP Term Loan facility and amounts repaid on
overdraft facility
(8) Net debt comprises principal outstanding balance of
borrowings, accrued interest on those borrowings, cash and cash
equivalents and derivatives held for hedging debt instruments.
CONDENSED CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2020
Before Separately Before Separately
separately disclosed separately disclosed
disclosed items disclosed items
items (Note 6) Total items (Note 6) Total
2020 2020 2020 2019 2019 2019
Note GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ------- ------------ ------------ ------------ ------------ ------------ -----------------
Continuing
operations
Revenue 5 4,398.0 15.9 4,413.9 2,140.0 - 2,140.0
Cost of sales 5 (1,539.0) (2.7) (1,541.7) (650.2) - (650.2)
-------------------- ------- ------------ ------------ ------------ ------------ ------------ -----------------
Gross profit 2,859.0 13.2 2,872.2 1,489.8 - 1,489.8
Operating costs
excluding
depreciation,
amortisation and
impairment 5 (1,969.8) (130.8) (2,100.6) (1,064.4) (17.6) (1,082.0)
-------------------- ------- ------------ ------------ ------------ ------------ ------------ -----------------
EBITDA (1) 889.2 (117.6) 771.6 425.4 (17.6) 407.8
Depreciation and
amortisation 5 (213.2) (432.3) (645.5) (144.8) (113.1) (257.9)
Impairment 5 - (22.6) (22.6) - - -
-------------------- ------- ------------ ------------ ------------ ------------ ------------ -----------------
Operating profit 676.0 (572.5) 103.5 280.6 (130.7) 149.9
-------------------- ------- ------------ ------------ ------------ ------------ ------------ -----------------
Financial income 7 1.4 78.5 79.9 1.0 - 1.0
Financial expense 7 (111.2) (71.1) (182.3) (15.2) - (15.2)
-------------------- ------- ------------ ------------ ------------ ------------ ------------ -----------------
Profit/ (loss)
before tax 566.2 (565.1) 1.1 266.4 (130.7) 135.7
-------------------- ------- ------------ ------------ ------------ ------------ ------------ -----------------
Tax (expense) /
credit 8 (94.2) 58.4 (35.8) (42.4) 18.6 (23.8)
-------------------- ------- ------------ ------------ ------------ ------------ ------------ -----------------
Profit/ (loss)
for the year 472.0 (506.7) (34.7) 224.0 (112.1) 111.9
-------------------- ------- ------------ ------------ ------------ ------------ ------------ -----------------
Attributable to:
Equity holders of
the Company 521.7 (483.8) 37.9 238.4 (94.4) 144.0
Non-controlling
interest (49.7) (22.9) (72.6) (14.4) (17.7) (32.1)
-------------------- ------- ------------ ------------ ------------ ------------ ------------ -----------------
472.0 (506.7) (34.7) 224.0 (112.1) 111.9
-------------------- ------- ------------ ------------ ------------ ------------ ------------ -----------------
Earnings per share Restated (2)
(Note 9)
Basic 9 GBP0.293 GBP1.802
Diluted 9 GBP0.285 GBP1.793
-------------------- ------- ------------ ------------ ------------ ------------ ------------ -----------------
1 EBITDA is defined as profit for the year before depreciation,
amortisation and impairment, financial income, financial expense
and tax expense / credit. It is considered by the Directors
to be a key measure of the Group's financial performance.
2 The 2019 earnings per share figures have been restated to incorporate
the 1,312,260 new Flutter ordinary shares that were issued
in May 2020 as payment of the 2019 final dividend. The weighted
average number of shares in issue during the period was adjusted
to include these bonus shares as if they were issued 1 January
2019.
Notes 1 to 22 form an integral part of these condensed
consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE
INCOME
Year ended 31 December 2020
2020 2019
GBPm GBPm
---------------------------------------------------- -------------- ---------
(Loss)/ profit for the year (34.7) 111.9
---------------------------------------------------- -------------- ---------
Other comprehensive (loss)/ income
Items that are or may be reclassified subsequently
to profit or loss:
Effective portion of changes in fair value of
cash flow hedges (280.4) 2.6
Fair value of foreign exchange cash flow hedges
transferred to income statement 267.8 (0.3)
Foreign exchange gain/ (loss) on translation
of the net assets of foreign currency denominated
entities, net of tax (1) 61.5 (33.1)
Financial assets at FVOCI (0.4) -
Other comprehensive income/ (loss) 48.5 (30.8)
---------------------------------------------------- -------------- ---------
Total comprehensive income for the year 13.8 81.1
---------------------------------------------------- -------------- ---------
Attributable to:
---------------------------------------------------- -------------- ---------
Equity holders of the Company 93.8 120.7
Non-controlling interest (80.0) (39.6)
---------------------------------------------------- -------------- ---------
13.8 81.1
---------------------------------------------------- -------------- ---------
(1) Foreign exchange gain on translation of the net assets of
foreign currency denominated entities is presented net of an income
tax charge of GBP5.1m which relates to the tax effect on foreign
exchange activities with respect to the Group's hedging activities.
A corresponding tax credit of GBP5.1m in relation to the same is
recognised in the Consolidated Income Statement such that there is
no overall impact on the Consolidated Statement of Financial
Position.
Notes 1 to 22 form an integral part of these condensed
consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2020
31 December 31 December
Note 2020 2019
GBPm GBPm
----------------------------------------- ------- ------------ ------------
Assets
Property, plant and equipment 361.9 298.2
Intangible assets 5,527.8 558.5
Goodwill 10 9,516.7 4,120.3
Deferred tax assets 7.4 11.9
Non-current tax receivable 15.3 -
Derivative financial assets 17 16.9 -
Investments 12 3.0 0.1
Other receivables 12 75.2 50.4
Financial assets - restricted cash 13 6.9 -
----------------------------------------- ------- ------------ ------------
Total non-current assets 15,531.1 5,039.4
----------------------------------------- ------- ------------ ------------
Trade and other receivables 12 139.5 64.6
Current tax receivable 47.5 -
Financial assets - restricted cash 13 587.9 189.1
Current investments - customer deposits 13 82.8 -
Cash and cash equivalents 13 603.4 108.1
----------------------------------------- ------- ------------ ------------
Total current assets 1,461.1 361.8
----------------------------------------- ------- ------------ ------------
Total assets 16,992.2 5,401.2
----------------------------------------- ------- ------------ ------------
Equity
Issued share capital and share premium 2,481.7 428.3
Merger reserve 7,982.9 -
Treasury shares 18 (40.7) (40.7)
Shares held by employee benefit
trust 18 (5.8) (6.1)
Cash flow hedge reserve (10.3) 2.3
Other reserves 152.3 61.4
Retained earnings 405.0 3,539.5
----------------------------------------- ------- ------------ ------------
Equity attributable to owners of
the parent 10,965.1 3,984.7
Non-controlling interest 18 30.8 204.9
Total equity 10,995.9 4,189.6
Liabilities
Trade and other payables 14 1,033.0 369.6
Customer balances 643.4 179.2
Derivative financial liabilities 17 150.9 20.4
Provisions 15 14.3 2.9
Current tax payable 41.0 20.0
Lease liabilities 48.3 38.4
Borrowings 16 50.8 255.0
Total current liabilities 1,981.7 885.5
Trade and other payables 14 14.6 11.5
Derivative financial liabilities 17 102.3 0.7
Provisions 15 145.0 1.1
Deferred tax liabilities 500.9 65.0
Non-current tax payable 18.0 -
Lease liabilities 145.7 132.1
Borrowings 16 3,088.1 115.7
----------------------------------------- ------- ------------ ------------
Total non-current liabilities 4,014.6 326.1
----------------------------------------- ------- ------------ ------------
Total liabilities 5,996.3 1,211.6
Total equity and liabilities 16,992.2 5,401.2
Notes 1 to 22 form an integral part of these condensed
consolidated financial statements.
On behalf of the Board
Peter Jackson Jonathan Hill
Chief Executive Officer Chief Financial Officer
1 March 2021
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 December 2020
2020 2019
Note GBPm GBPm
Cash flows from operating activities
Loss / (profit) for the year (34.7) 111.9
Separately disclosed items 6 506.7 112.1
Tax expense before separately disclosed items 94.2 42.4
Financial income before separately disclosed items 7 (1.4) (1.0)
Financial expense before separately disclosed items 7 111.2 15.2
Depreciation and amortisation before separately disclosed items 5 213.2 144.6
Employee equity-settled share-based payments expense before separately disclosed items 52.1 17.1
Foreign currency exchange (gain)/ loss (31.6) 1.5
(Gain)/ loss on disposal of property, plant and equipment and intangible assets (0.2) 0.2
Cash from operations before changes in working capital 909.5 444.0
Decrease in trade and other receivables 18.1 13.1
Increase in trade, other payables and provisions 280.1 56.1
Cash generated from operations 1,207.7 513.2
Tax paid (89.4) (41.3)
Net cash from operating activities before acquisition fees, restructuring costs and legacy
tax assessments 1,118.3 471.9
Acquisition fees, restructuring and integration costs paid, net of VAT refund received (119.9) (12.9)
Amounts paid in respect of legacy Greek and German tax assessments - (39.6)
Net cash from operating activities 998.4 419.4
Purchase of property, plant and equipment (59.3) (44.0)
Purchase of intangible assets (53.2) (33.7)
Capitalised internal development expenditure (99.6) (53.1)
Proceeds from disposal of assets 12.5 -
Proceeds from disposal of investment - 2.3
Purchase of businesses 11 - (102.0)
Cash acquired from acquisitions 11 445.2 0.2
Payment of contingent deferred consideration 11 (7.2) (4.8)
Interest received 1.3 0.9
Change in restricted cash 13 (4.8) -
Net cash from / (used in) investing activities 234.9 (234.2)
Proceeds from the issue of shares in respect of equity placement (net of issuance costs) 18 1,920.8 -
Proceeds from the issue of new shares on exercise of employee stock options 18 34.3 3.6
Acquisition of further interest in subsidiary 11 (1,546.0) -
Dividends paid to Non-controlling interest 18 (15.2) -
Dividends paid 19 - (156.2)
Payment of lease liabilities (45.7) (36.4)
Payment of lease interest (5.7) (5.0)
Proceeds from GBP First Lien Term Loan A and previous GBP Term Loan 16 950.0 250.0
Net amounts drawn down on Previous GBP Revolving Credit Facility 16 (117.2) (167.2)
Repayment of USD and EUR First Lien Term Loan B and old GBP Term Loan Facility 16 (1,751.0) -
Amounts repaid on overdraft facility 16 (5.0) -
Interest paid (114.1) (7.1)
Settlement of derivatives 17 (35.6) -
Financing fees in respect of borrowing facilities (24.4) (0.8)
Purchase of own shares including direct purchase costs - (86.8)
Net cash used in financing activities (754.8) (205.9)
Net increase / (decrease) in cash and cash equivalents 478.5 (20.7)
Cash and cash equivalents at start of year 108.1 123.7
Foreign currency exchange gain on cash and cash equivalents 16.8 0.1
Net Cash and cash equivalents at end of year 13 603.4 103.1
Bank Overdraft - 5.0
Cash and cash equivalents at end of year 13 603.4 108.1
Non-cash transactions during the year included an all share
Combination with The Stars Group Inc (See Note 11).
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2020
Total
Number Equity
of Issued Shares attributable
ordinary share Foreign held by Share- to
shares capital exchange Cash Financial employee based shareholders Non-controlling
in and Merger translation flow assets at Other Treasury benefit payment Retained of the interest
issu e share reserve reserve hedge FVOCI reserves shares trust reserve earnings Company GBPm Total
millions premium GBPm GBPm reserve GBPm GBPm GBPm GBPm GBPm GBPm GBPm Equity
# GBPm GBPm GBPm
Balance at 1
January 2020 80.3 428.3 - (21.5) 2.3 - 2.3 (40.7) (6.1) 80.6 3,539.5 3,984.7 204.9 4,189.6
Total comprehensive income for the year:
Profit/ (loss)
for the year - - - - - - - - - - 37.9 37.9 (72.6) (34.7)
Foreign exchange
translation
(Note 7) - - - 74.0 - - - - - - - 74.0 (7.4) 66.6
Effective portion
of changes in
fair value of
cash flow hedges - - - - (280.4) - - - - - - (280.4) - (280.4)
Fair value of
cash flow hedges
transferred to
the income
statement - - - - 267.8 - - - - - - 267.8 - 267.8
Financial assets
at FVOCI - - - - - (0.4) - - - - - (0.4) - (0.4)
Current taxes - - - (5.1) - - -- - - - - (5.1) - (5.1)
Total
comprehensive
income/ (loss) - - - 68.9 (12.6) (0.4) - - - - 37.9 93.8 (80.0) 13.8
Transactions with owners of the Company, recognised directly in equity:
Shares issued on
equity placement
(net of issuance
costs) (Note 18) 16.1 1,933.2 - - - - - - - - (12.4) 1,920.8 - 1,920.8
Shares issued as
consideration
for the
combination with
TSG (Note 18) 65.3 5.1 6,189.5 - - - - - - - - 6,194.6 - 6,194.6
Acquisition of
non-controlling
interest in TSG
Australia (Note
18) 0.8 79.7 - - - - - - - - - 79.7 - 79.7
Present value of
FanDuel put
liability with
Fastball up to
termination of
option - - - - - - (846.0) - - - - (846.0) - (846.0)
Unwind of put
option on option
termination - - - - - - 846.0 - - - - 846.0 - 846.0
Acquisition of
non-controlling
interest in
FanDuel Group
(Note 18) 11.7 1.0 1,793.4 2.2 - - - - - - (3,263.7) (1,467.1) (78.9) (1,546.0)
Deal fees on
acquisition of
FanDuel - - - - - - - - - - (9.3) (9.3) - (9.3)
Shares issued on
exercise of
share options 1.5 34.3 - - - - - - - - - 34.3 - 34.3
Exercise of share
options (Note
18) - - - - - - - - - (107.7) 107.7 - - -
Equity-settled
transactions -
expense in
income statement - - - - - - - - - 70.2 - 70.2 - 70.2
Equity-settled
transactions -
vesting - - - - - - - - 0.3 (0.3) - - - -
Tax on
share-based
payments - - - - - - - - - - 5.4 5.4 - 5.4
Dividend paid to
non-controlling
interest - - - - - - - - - - - - (15.2) (15.2)
Dividends to
shareholders
(Note 19) 1.3 0.1 - - - - - - - - (0.1) - - -
Issue of
replacement
options (Note
11) - - - - - - - - - 58.0 - 58.0 - 58.0
Total
contributions by
and
distributions to
owners of the
Company 96.7 2,053.4 7,982.9 2.2 - - - - 0.3 20.2 (3,172.4) 6,886.6 (94.1) 6,792.5
Balance at 31
December 2020 177.0 2,481.7 7,982.9 49.6 (10.3) (0.4) 2.3 (40.7) (5.8) 100.8 405.0 10,965.1 30.8 10,995.9
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2019
Total
Number Issued Equity
of share Foreign Shares Share- attributable
ordinary capital exchange Cash held by based to Non-controlling
shares and translation flow Other Treasury employee payment Retained shareholders interest
in share reserve hedge reserves shares benefit reserve earnings of the GBPm Total
issu e premium GBPm reserve GBPm GBPm trust GBPm GBPm Company equity
millions GBPm GBPm GBPm GBPm GBPm
#
Balance at 1
January 2019 81.4 424.8 4.1 - 2.2 (40.7) (8.6) 86.1 3,530.1 3,998.0 213.3 4,211.3
Total comprehensive income for the year:
Profit for the
year - - - - - - - - 144.0 144.0 (32.1) 111.9
Foreign
exchange
translation
(Note 7) - - (25.6) - - - - - - (25.6) (7.5) (33.1)
Net change in
fair value of
cash flow
hedge reserve - - - 2.3 - - - - - 2.3 - 2.3
Total
comprehensive
income/ (loss) - - (25.6) 2.3 - - - 144.0 120.7 (39.6) 81.1
Transactions with owners of the Company, recognised directly in equity:
Shares issued 0.3 3.6 - - - - - - - 3.6 - 3.6
Business
combinations - - - - - - - - - - 31.2 31.2
Own shares
acquired by
the Group (1.4) (0.1) - - 0.1 - - - - - - -
Equity-settled
transactions -
expense
recorded in
income
statement - - - - - - - 17.1 - 17.1 - 17.1
Equity-settled
transactions -
vesting - - - - - - 2.5 (2.3) (0.2) - - -
Tax on
share-based
payments - - - - - - - - 1.5 1.5 - 1.5
Transfer to
retained
earnings on
exercise of
share options
(Note 18) - - - - - - - (20.3) 20.3 - - -
Dividends to
shareholders
(Note 19) - - - - - - - - (156.2) (156.2) - (156.2)
Total
contributions
by and
distributions
to owners of
the Company (1.1) 3.5 - - 0.1 - 2.5 (5.5) (134.6) (134.0) 31.2 (102.8)
Balance at 31
December 2019 80.3 428.3 (21.5) 2.3 2.3 (40.7) (6.1) 80.6 3,539.5 3,984.7 204.9 4,189.6
Notes 1 to 22 form an integral part of these condensed
consolidated financial statements .
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General information
Flutter Entertainment plc (the "Company") and its subsidiaries
(together referred to as the "Group") is a global sports betting
and gaming group, whose headquarters are in Dublin, Ireland.
Following a combination with The Stars Group ("TSG") the Group
operated during 2020 across five divisions; (i) PPB which included
both the PPB online and retail product offerings, under the Paddy
Power, Betfair and Adjarabet brands; (ii) PokerStars which included
online poker, gaming and betting product offerings under the
Pokerstars, BetStars and Full Tilt brands; (iii) Sky Betting and
Gaming which included betting and gaming product offering (iv)
Australia, consisting of Sportsbet, the market leader in the
fast-growing Australian online betting market; and (v) the US,
consisting of FanDuel, FOX Bet, TVG and Betfair online Casino.
During the year, the Company completed an all share Combination
with TSG (the "Combination") through an acquisition of all of the
issued and outstanding share capital of TSG by the Company. TSG is
a provider of technology- based product offering in the global
gaming and interactive entertainment industries, with millions of
registered customers globally and a leader in online and mobile
betting, poker and gaming-related offerings. TSG owns or licenses
gaming and related consumer businesses and brands, including
PokerStars, PokerStars Casino, BetStars, Full Tilt, FOX Bet, Sky
Bet, Sky Vegas, Sky Casino, Sky Bingo, Sky Poker and Oddscheckers.
The results of TSG prior to completion of the Combination are not
included in these consolidated financial statements. See Note 11
for further information on the Combination.
On 30 December 2020, the Group completed the acquisition of an
additional 37.2% of its 57.8% owned subsidiary FanDuel, bringing
the Group's holding in FanDuel to 95%. FanDuel's results and
financial position had been previously consolidated into the Group
. See Note 11 for further detail.
The Company is a public limited company incorporated and
domiciled in the Republic of Ireland and has its primary listing on
the London Stock Exchange under the symbol FLTR and a secondary
listing on the Irish Stock Exchange under the symbol FLTR.IR.
The financial information presented herein does not comprise
full statutory financial statements and therefore does not include
all of the information required for full annual financial
statements. Full statutory financial statements for the year ended
31 December 2020, prepared in accordance with International
Financial Reporting Standards ("IFRSs") as adopted by the European
Union ("EU") together with an unqualified audit report thereon
under Section 391 of the Companies Act 2014, will be annexed to the
annual return and filed with the Registrar of Companies.
The consolidated financial statements of the Group for the year
ended 31 December 2020 comprise the financial statements of the
Company and its subsidiary undertakings and were approved for issue
by the Board of Directors on 1 March 2021.
2. Recent accounting pronouncements
Adoption of new accounting standards
The IASB have issued the following standards, policies,
interpretations and amendments which were effective for the Group
for the first time in the year ended 31 December 2020:
-- Amendments to References to Conceptual Framework in IFRS Standards;
-- Amendments to IFRS 3: Definition of a Business;
-- Amendments to IAS 1 and IAS 8: Definition of Material;
-- Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform; and
-- Amendment to IFRS 16: Covid-19 Related Rent Concessions.
The Group applied Amendments to IFRS 3: Definition of a Business
to business combinations whose acquisition dates are after 1
January 2020 in assessing whether it had acquired a business or a
group of assets. See also Note 11 Business combinations, for
details on the Groups acquisitions during the year.
The Group applied the interest rate benchmark reform amendments
retrospectively to hedging relationships that existed at 1 January
2020 or were designated thereafter and that are directly affected
by interest rate benchmark reform. These amendments also apply to
the gain or loss accumulated in the cash flow hedging reserve that
existed at 1 January 2020.
The adoption of the remaining new standards and interpretations
did not have a significant impact on the Group's consolidated
financial statements.
2. Recent accounting pronouncements (continued)
Adopted IFRS not yet applied
The following IFRSs have been issued but have not been applied
in these financial statements. Their adoption is not expected to
have a material effect on the Group's consolidated financial
statements, other than IBOR reform which is disclosed in more
detail below:
-- Amendments to IFRS 9, IAS 39 and IFRS 7, IFRS 4 and IFRS 16:
Interest Rate Benchmark Reform - Phase 2 (effective date 1 January
2021);
-- Amendments to IAS 37: Onerous contracts - Cost of Fulfilling
a Contract (Effective date 1 January 2022);
-- Amendments to IAS 16: Property, Plant and Equipment: Proceeds
before Intended Use (effective 1 January 2022);
-- Amendment to IFRS 1, IFRS 9 and IAS 41: Annual Improvements
to IFRS Standards 2018-2020 (effective 1 January 2022);
-- Amendments to IFRS 3: Reference to the Conceptual Framework (effective 1 January 2022);
-- Amendments to IAS 1: Classification of Liabilities as Current
or Non -current (effective 1 January 2023);
-- IFRS 17 Insurance Contracts (effective date 1 January 2023); and
-- Amendments to IFRS 10 and IAS 28: Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture
(effective date to be confirmed)
IBOR Reform
In July 2017, the Financial Conduct Authority ("FCA"), which
regulates LIBOR, announced it intends to stop compelling banks to
submit rates for the calculation of LIBOR after 2021. As a result,
the Federal Reserve Board and the Federal Reserve Bank of New York
organised the Alternative Reference Rates Committee ("ARRC"), which
identified the Secured Overnight Financing Rate as its preferred
alternative rate for USD-LIBOR in derivatives and other financial
contracts. Other benchmark rates including GBP-LIBOR and the
EURIBOR are also impacted by this reform. The European Central Bank
has identified the Euro Short Term Rate as its preferred
alternative rate for EURIBOR in derivatives and other financial
contracts. The GBP-LIBOR benchmark rate is expected to be replaced
by SONIA at the end of 2021.
The Group is monitoring, evaluating and preparing for the
implications of adopting the IBOR reform, which encompasses changes
to systems, processes, risk and valuation models, as well as
managing related tax and accounting implications. It currently
anticipates that the areas of greatest change will be amendments to
the contractual terms of its IBOR borrowing facilities and IBOR
indexed interest rate swaps for risk free rates (RFRs) and updating
hedge accounting designations.
In September 2019, the IASB issued amendments to IFRS 9, IAS 39,
and IFRS 7 in order to provide relief in respect of the potential
impacts to hedge accounting following the uncertainties arising
from the impact of the Interbank offered rate ("IBOR") reform on
the timing and amount of designated future cash flows. The
amendments provide exceptions to the requirements of hedge
accounting during this period of uncertainty with the impact being
that existing and new hedge accounting designations will be
unaffected by the above noted uncertainties. The Company has
adopted the IASB amendments beginning 1 January 2020. Adopting
these amendments allowed the Group to continue hedge accounting
during the period of uncertainty arising from interest rate
benchmark reforms. The relief provided by the amendments in the
application hedge accounting are applied by the Group to the Swap
Agreements (as defined below). For all other derivative instruments
held by the Group, it does not apply hedge accounting.
In August 2020, the IASB issued Phase 2 relief of IBOR reform
'Interest Rate Benchmark Reform - Phase 2, Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16'. The amendments provide a
practical expedient when accounting for changes in the basis for
determining the contractual cash flows of financial assets and
liabilities to require the effective interest rate to be adjusted
and reliefs from discontinuing hedge relationships. The Phase 2
Amendments are effective for annual periods beginning on or after 1
January 2021 and early application is permitted. Given that none of
the derivatives (hedging instruments) or loans (hedged items) of
the Group have been amended for IBOR reform during the period, the
Group will not be early adopting the Phase 2 Amendments.
The Group is not able to predict when USD-LIBOR or EURIBOR will
cease to be available or when there will be sufficient liquidity in
the alternative markets. Any changes adopted by the FCA or other
governing bodies in the method used for determining USD-LIBOR,
GBP-LIBOR and EURIBOR may result in a sudden or prolonged increase
or decrease in reported USD-LIBOR, GBP-LIBOR and EURIBOR. If that
were to occur, the Group's interest payments could change. In
addition, uncertainty about the extent and manner of future changes
may result in interest rates and/or payments that are higher or
lower than if USD-LIBOR, GBP-LIBOR and EURIBOR were to remain
available in their current form.
The Group's GBP First Lien Term Loan A is indexed to GBP-LIBOR,
its USD First Lien Term Loan B, and certain of its cross-currency
interest rate swaps are indexed to USD-LIBOR, and its EUR First
Lien Term Loan B is indexed to EURIBOR. See
2. Recent accounting pronouncements (continued)
Notes 16 and 17 for details of the borrowings and hedging
derivatives notional amounts. The Group is monitoring and
evaluating the related risks, which include interest payments on
its borrowings, and amounts received on certain of its
cross-currency interest rate swaps. These risks arise in connection
with transitioning contracts to an alternative rate, including any
resulting value transfer that may occur. The fair value of the
financial instruments tied to USD-LIBOR, GBP-LIBOR and EURIBOR
could also be impacted if USD-LIBOR, GBP-LIBOR and EURIBOR are
limited or discontinued. Additional risk exists as the method of
transitioning to an alternative reference rate may be challenging
and requires agreement
with the respective counterparty about how to make the
transition.
If the Group's contracts are not transitioned to alternative
reference rates and USD-LIBOR, GBP-LIBOR and EURIBOR are
discontinued, the impact on our indexed financial instruments is
likely to vary by contract. If USD-LIBOR, GBP-LIBOR and EURIBOR are
discontinued or if the methods of calculating USD-LIBOR, GBP-LIBOR
and EURIBOR change from their current form, interest rates on our
current or future indebtedness may be adversely affected.
In October 2020, ISDA published its LIBOR Fallbacks Supplement
and IBOR Fallbacks Protocol enabling market participants to
incorporate standard fallback transition provisions to RFRs into
their derivative trades. The Group is still in consultation as to
whether it will adhere to the protocol. In December 2020,
regulators signalled that they may extend LIBOR transition for
certain USD LIBOR legacy contracts another 18 months from the end
of 2021 to the middle of 2023. This could extend the time needed
for the Group to transition its existing derivatives and loans to
RFRs.
The Group will continue to apply the amendments to IFRS 9/IAS 39
until the uncertainty arising from the interest rate benchmark
reforms with respect to the timing and the amount of the underlying
cash flows that the Group is exposed ends. The Group has assumed
that this uncertainty will not end until the Group's contracts that
reference IBORs are amended to specify the date on which the
interest rate benchmark will be replaced, the cash flows of the
alternative benchmark rate and the relevant spread adjustment.
3. Basis of preparation and summary of significant accounting
policies
The condensed consolidated financial statements are prepared in
accordance with the Transparency (Directive 2004/109/EC)
Regulations 2007 and the Transparency Rules of the Republic of
Ireland's Financial Regulator. The condensed consolidated financial
statements are prepared on the historical cost basis except for
derivative financial instruments (which includes betting
transactions), equity securities, certain financial assets which
have been designated as FVOCI, contingent deferred consideration
and share-based payments, all of which are stated at fair value
(grant date fair value in the case of share-based payments). The
consolidated financial
statements are presented in pounds sterling and are rounded to the nearest 0.1 million.
Further to IAS Regulation (EC1606/2002, 'Accounting standards
adopted for use in the EU'), EU law requires that the annual
consolidated financial statements of the Group be prepared in
accordance with International Financial Reporting Standards
("IFRS") adopted by the European Union ("EU"). These consolidated
financial statements have been prepared on the basis of IFRS
adopted by the EU and effective for accounting periods ending on or
after 1 January 2020.
The Group has introduced new accounting policies or expanded
existing policies as a result of the Combination. These policies do
not impact the Group's reported revenue, operating profit, or
amounts reported in the statement of financial position in
2019.
The accounting policies applied in the preparation of these
consolidated financial statements have been applied consistently
during the year and prior year, except as noted above and in Note 2
'Recent accounting pronouncements'.
Going concern
The Group reported a loss after tax of GBP34.7m for the year.
This includes a significant amount of non-cash related charges
against profit. The net cash generated from operating activities
during the year was GBP998.4m. The balance sheet at 31 December
2020 reported a net current liability position of GBP520.6m. The
Directors have considered the available financial resources which,
at 31 December 2020, included GBP603.4m of cash and cash
equivalents and a GBP450m Revolving Credit Facility with undrawn
capacity of GBP377m (see Note 16). Whilst there are certain loan
repayments due within the next 12 months of GBP50.8m, the Group's
lending facilities primarily fall due in 2025 and 2026 as set out
in more detail in Note 16. As a consequence, the Directors believe
that the Group is well placed to manage its business risks
successfully.
3. Basis of preparation and summary of significant accounting
policies (continued)
The Group's forecasts for 2021 and beyond indicate that it will,
have significant financial resources, continue to settle its debts
as they fall due and operate well within its banking covenants as
outlined in Note 16 for at least a period of 12 months from the
date of these financial statements. Various downside scenarios over
and above those already included in the base case model on the
potential impact of further reductions to cashflows due to ongoing
litigation in the State of Kentucky (see Note 15), and enhanced
regulation have also been considered in respect of these forecasts.
In the event that it were necessary to draw down additional debt
funding the Directors have a reasonable expectation that this could
be achieved within the confines of its existing debt facilities and
financial covenant requirements.
Having given regard to the above, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for a period of at least 12
months from the date of approval of these consolidated financial
statements, and therefore they continue to adopt the going concern
basis of accounting in preparation of its consolidated financial
statements.
Basis of consolidation
The Group's financial statements consolidate the financial
statements of the Company and its subsidiary undertakings based on
accounts made up to the end of the financial year. A subsidiary is
an entity controlled by the Company. The Group controls an entity
when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those
returns through its power over the entity. Intra-group balances and
any unrealised gains and losses or income and expenses arising from
intra-group transactions are eliminated on consolidation except to
the extent that unrealised losses provide evidence of
impairment.
4. Judgements and estimates
The preparation of Annual financial statements in conformity
with IFRS requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an on-going
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
Judgements
In the course of preparing these Consolidated Financial
Statements, the significant judgements in applying the Group's
accounting policies and the key sources of estimation uncertainty
are detailed below:
Kentucky proceedings
Prior to the Combination, the Commonwealth of Kentucky filed
legal proceedings in 2010 - 2011 against various operators
including certain companies that later became subsidiaries of The
Stars Group ("TSG"). The suit sought recovery of alleged losses
incurred by Kentucky residents playing real-money poker on the
PokerStars platform during a period between 2006 and 2011. The
gross gaming revenues that TSG generated in Kentucky on the
PokerStars platform during the relevant period were approximately
US$18m. In 2015, a Kentucky trial court judge entered judgment
against two TSG Isle of Man subsidiaries, Stars Interactive
Holdings (IOM) Ltd ("SIHL") and Rational Entertainment Enterprises
Ltd ("REEL") and awarded damages to the Commonwealth of Kentucky of
approximately US$870m plus post judgment interest. In 2018, this
ruling was vacated in its entirety by the Kentucky Court of
Appeals.
On 17 December 2020, the Kentucky Supreme Court reinstated the
full 2015 award of damages, including post judgment interest,
against SIHL and REEL. A rehearing petition was filed before the
Kentucky Supreme Court on 6 January 2021 and the Group is awaiting
a decision. Together with its legal advisers, Flutter strongly
disputes the basis of this judgment and is currently reviewing its
position. Flutter is confident that any amount it is ultimately
liable to pay will be a limited proportion of the reinstated
judgment. No liability was previously recognised by either TSG or
Flutter prior to this judgment.
Based on the opinion and views of legal counsel and advisers as
to the likely payout outcomes, the Group has recognised a provision
of US$100m (GBP73m) as part of TSG combination fair value
acquisition accounting in respect of this litigation, which
reflects the value of the supersedes bond in place since February
2016. This assessment relies on estimates and assumptions and
involves a series of judgments about future events.
4. Judgements and estimates (continued)
Contingent liabilities
The Group reviews its legal proceedings following developments
in the same at each balance sheet date, considering, among other
things: the nature of the litigation, claim or assessment; the
legal processes and potential level of damages in the jurisdiction
in which the litigation, claim or assessment has been brought; the
progress of the case (including progress after the date of the
consolidated financial statements but before those statements are
issued); the opinions or views of legal counsel and other advisors;
experience of similar cases; and any decision of the Group's
Management as to how it will respond to the litigation, claim or
assessment. The Group assesses the probability of an outflow of
resources to settle the alleged obligation as well as if the
outflow can be reliably measured. If these conditions are not met,
no provision will be recorded, and the relevant facts will be
disclosed as a contingent liability. See Note 20 - Commitments and
Contingencies for further detail.
FOX equity option
As part of the Combination, the Group acquired the following
agreement in relation to TSG's US business.
On 8 May 2019, TSG and FOX Sports ("FOX Sports"), a unit of Fox
Corporation, announced plans to launch FOX Bet, the first-of-its
kind national media and sports wagering partnership in the United
States and entered into a commercial agreement of up to 25 years.
As part of the transaction, FOX Sports will receive certain brand
license, integration and affiliate fees. In addition, during the
term of the commercial agreement, TSG has agreed to a minimum
annual advertising commitment on certain FOX media assets. Prior to
the tenth anniversary of the commercial agreement, and subject to
certain conditions and applicable gaming regulatory approvals, FOX
Sports has the right to acquire up to a 50% equity stake in TSG's
U.S. business. In accordance with IFRS 2, Share-based payment based
on the judgment of management, this right granted to FOX Sports is
considered a contingently cash-settled share-based payment because
FOX Sports, subject to receiving regulatory approvals and meeting
certain other conditions, has discretion to exercise the right.
During the year ended 31 December 2020, the Group recorded GBP6.6m
to sales and marketing expense in relation to the commercial
agreement and at 31 December 2020 the total fair value liability
due was GBP4.0m.
Management has made certain judgments in the recognition and
measurement of liabilities in relation to this commercial agreement
and associated right of FOX Sports to acquire equity, including its
judgement as to the probable method of settlement. The right has
been valued using a discounted cash flow model and as it represents
a contingent cash-settled share-based payment, will be recorded at
fair value at each reporting period.
Estimates
Determining the fair value of some assets and liabilities
requires estimation of the effects of uncertain future events on
those assets and liabilities at the end of the reporting period.
The following discussion sets forth key sources of estimation
uncertainty at the end of the reporting period that management
believes have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year.
Acquisition accounting and value of acquired assets and
liabilities
The acquisition method of accounting is used to account for all
business combinations. Identifiable assets acquired and liabilities
assumed in a business combination are measured initially at their
fair values at the acquisition date. Judgement and estimation are
required in particular in the identification and valuation of
separable intangible assets, future cashflows, appropriate discount
rates and determining appropriate useful economic lives for these
assets. The discount rates used ranged from 8.45% to 12.25% for the
various segments and the terminal growth rates were between 1.75%
and 2.75%. If the purchase consideration exceeds the fair value of
the net assets acquired, then the difference is recognised as
goodwill.
The Group has one year from the acquisition date to re-measure
the fair values of the acquired assets and liabilities and the
resulting goodwill if new information is obtained relating to
conditions that existed at the acquisition date. Acquisition
related costs are expensed as incurred. The business combinations
entered into during the year are disclosed in Note 11.
Measurement of the recoverable amounts of cash generating units
containing goodwill and indefinite life licences and brands
intangible assets
The Group reviews the carrying value of goodwill for impairment
annually (or more frequently if there are indications that the
value of goodwill may be impaired) by comparing the carrying values
of these cash generating units with their recoverable amounts
(being the higher of value in use and fair value less costs to
sell).
The impairment review is performed on a "value-in-use" basis,
which requires estimation of future net operating cash flows, the
time period over which they will occur, an appropriate discount
rate and an appropriate growth rate. Certain of 4. Judgements and
estimates (continued)
these estimates and assumptions are subjective in nature.
The retail cash generating units ("CGUs") were impacted
significantly due to the temporary suspension of the activities of
shops for a period leading to shorter term impacts such as social
distancing as well as longer term uncertainty in respect of
customer behaviours.
For the Group's various Online CGUs which generate income from
sportsbook, the impact of COVID-19 has not been as significant due
to greater substitution possibilities and they also benefit from
the ongoing retail to online migration. While no impairments have
arisen in the Group's Online CGUs during the year ended 31 December
2020, there is economic uncertainty in the global economy due to
the ongoing COVID-19 global pandemic and this could be a potential
future risk.
Valuation of tax provisions and liabilities and associated
receivables
Taxation within the Group includes both Income Taxes and Gaming
Taxes. Judgement and estimation are required to interpret
international tax laws and the way these taxes interact within each
jurisdiction, to identify and value provisions in relation to
gaming and income taxes as applicable. The liabilities for
uncertain tax positions reflected within current tax payable and
provisions in the Consolidated Statement of Financial Position are
comprised of a number of individually immaterial uncertain tax
positions relating to the risks assessed in various jurisdictions
by Management. Uncertainties have been measured using the best
estimate of the likely outcome. This assessment relies on estimates
and assumptions and may involve a series of judgements about future
events.
New information may become available that causes the Group to
change its judgement regarding the adequacy of existing tax
liabilities; such changes to tax liabilities will impact the income
tax or gaming tax expense in the period in which such a
determination is made. Management uses in-house tax experts,
professional firms and previous experience when assessing tax risks
and the Group believes that the accrual for all tax liabilities at
31 December 2020 is adequate and the tax receivables are
recoverable for all uncertain tax positions based on its assessment
of the range of factors outlined above. Further information in
relation to the judgement relating to the disputed legacy German
and Greek tax assessments is outlined in Note 12.
Valuation of Embedded Derivative on Senior Notes
The Senior Notes (as defined in Note 16) include certain
embedded features allowing the Group to redeem the Senior Notes or
allowing the holders to require a redemption of the Senior Notes.
These features were bifurcated from the carrying value of the
Senior Notes. Management used estimates, including an implied
credit spread of 2.77% as at 31 December 2020 (5 May 2020 - 5.1%),
in determining the fair value of the Embedded Derivative. The
implied credit spread represents Management's estimate of the
Group's creditworthiness as implied by the market value of the
Senior Notes. During the year ended 31 December 2020 a gain of
GBP78.5m was recorded through financial income in relation to the
re-measurement of this Embedded Derivative .
5. Operating segments
Reportable business segment information
Subsequent to the Combination, the Group's reportable segments
during 2020 were as follows:
* PPB;
* PokerStars;
* Sky Betting and Gaming;
* Australia; and
* US
These reportable segments reflect the way financial information
was reviewed by the Group's Chief Operating Decision Maker (the
Board of Directors, "CODM") subsequent to the Combination during
2020. The Group has restated the operating segment information for
the year ended 31 December 2019 accordingly.
As a result of internal restructuring and integration
initiatives, the Group expects to move into a four segment
operating model in 2021:
-- UK & Ireland;
-- International;
-- Australia; and
-- US
The previous reportable segments of PPB Online and PPB Retail
have been aggregated in the PPB segment due to the similar
products, markets and regulatory environment that both segments
operate in.
The PPB segment derives its revenues primarily from sports
betting (sportsbook and the exchange sports betting product) and
gaming (games, casino, bingo and poker) services for the Paddy
Power and Betfair brands and some business-to-business ("B2B")
services globally. Services are delivered through the internet and
through licensed bookmaking shop estates in the UK and Ireland with
a small proportion delivered through the public telephony
system.
The PokerStars segment derives its revenues primarily from
poker, gaming and sports betting for the PokerStars, BetStars, Full
Tilt and their related brands mainly via the internet.
The Sky Betting and Gaming segment derives its revenues
primarily from sportsbook and gaming (games, casino, bingo and
poker) for Sky Bet and its related brands via the internet as well
as from Oddschecker, the UK's leading odds comparison website.
The Australia segment comprising the Sportsbet and BetEasy
brands earns its revenues from sports betting services provided to
Australian customers using primarily the internet with a small
proportion using the public telephony system.
The US segment comprising the FanDuel, TVG, Betfair, PokerStars
and FOX Bet brands earns its revenues from sports betting, daily
fantasy sports and gaming services provided to US customers using
primarily the internet with a proportion of US sports betting
services also provided through a small number of retail
outlets.
Corporate administrative costs (Board, Finance, Legal, Internal
Audit, HR, Property and other central functions) cannot be
readily allocated to individual operating segments and are not
used by the CODM for making operating and resource allocation
decisions. These are shown in the reconciliation of reportable
segments to Group totals.
Assets and liabilities information is reported internally in
total and not by reportable segment and, accordingly, no
information is provided in this note on assets and liabilities
split by reportable segment.
5. Operating segments (continued)
Reportable business segment information for the year ended 31
December 2020:
Sky Betting
PPB PokerStars and Gaming Australia US Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from external
customers before VAT
refund 1,293.9 757.0 685.4 988.8 672.9 - 4,398.0
Cost of sales (382.2) (186.2) (199.7) (468.7) (302.2) - (1,539.0)
Gross profit 911.7 570.8 485.7 520.1 370.7 - 2,859.0
Operating costs excluding
depreciation and amortisation (640.9) (289.7) (211.8) (213.2) (519.0) (95.2) (1,969.8)
Adjusted EBITDA (1) 270.8 281.1 273.9 306.9 (148.3) (95.2) 889.2
Depreciation and amortisation (94.4) (31.6) (19.5) (28.2) (34.8) (4.7) (213.2)
Adjusted reportable
segment profit / (loss)
before separately disclosed
items 176.4 249.5 254.4 278.7 (183.1) (99.9) 676.0
Amortisation of acquisition
related intangible
assets (Note 6) (51.2) (206.2) (127.5) (18.7) (28.7) - (432.3)
Impairment (12.1) (4.4) - (2.0) - (4.1) (22.6)
VAT refund (Note 6) 11.2 - - - - - 11.2
Reportable segment
profit / (loss) after
amortisation of acquisition
related intangibles,
impairment and VAT
refund 124.3 38.9 126.9 258.0 (211.8) (104.0) 232.3
Acquisition fees &
associated costs(2) (32.7)
Restructuring and integration
costs(2) (96.1)
Operating profit 103.5
Reportable business segment information for the year ended 31
December 2019:
Sky Betting
PPB PokerStars and Gaming Australia US Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from external
customers 1,317.9 - - 445.8 376.3 - 2,140.0
Cost of sales (352.9) - - (181.5) (115.8) - (650.2)
Gross profit 965.0 - - 264.3 260.5 - 1,489.8
Operating costs excluding
depreciation and amortisation (575.9) - - (136.8) (296.7) (55.0) (1,064.4)
Adjusted EBITDA(1) 389.1 - - 127.5 (36.2) (55.0) 425.4
Depreciation and amortisation (92.9) - - (23.8) (23.8) (4.3) (144.8)
Adjusted Reportable
segment profit/ (loss)
before separately disclosed
items 296.2 - - 103.7 (60.0) (59.3) 280.6
Amortisation of acquisition
related intangible
assets (Note 6) (77.2) - - - (35.9) - (113.1)
Reportable segment
profit/ (loss) after
amortisation of acquisition
related intangibles 219.0 - - 103.7 (95.9) (59.3) 167.5
Acquisition fees and
associated costs (17.6)
Operating profit 149.9
(1) Adjusted EBITDA which is a non-GAAP measure in the above segment note is defined as profit
for the period before separately disclosed items, depreciation, amortisation and impairment,
financial income, financial expense and tax expense / credit. It is considered by the Directors
to be a key measure of the Group's financial performance.
(2) The Group does not allocate acquisition fees and restructuring and integration costs to reportable
segments.
5. Operating segments (continued)
Reconciliation of reportable segments to Group totals:
2020 2019
GBPm GBPm
Revenue
Total revenue from reportable segments, being total
Group revenue before VAT refund 4,398.0 2,140.0
VAT refund 15.9 -
Total revenue from reportable segments, being total
Group revenue 4,413.9 2,140.0
Profit and loss
Operating profit 103.5 149.9
Unallocated amounts:
Financial income 79.9 1.0
Financial expense (182.3) (15.2)
Profit before tax 1.1 135.7
Disaggregation of revenue under IFRS 15
Group revenue after the VAT refund (see Note 6) disaggregated by
product line for the year ended 31 December 2020:
Sky Betting
PPB PokerStars and Gaming Australia US Total
GBPm GBPm GBPm GBPm GBPm GBPm
Sports revenue(1) 812.8 45.5 421.3 988.8 457.0 2,725.4
Gaming revenue(2) 497.0 711.5 264.1 - 215.9 1,688.5
Total Group revenue 1,309.8 757.0 685.4 988.8 672.9 4,413.9
Group revenue disaggregated by product line for the year ended
31 December 2019:
Sky Betting
PPB PokerStars and Gaming Australia US Total
GBPm GBPm GBPm GBPm GBPm GBPm
Sports revenue(1) 895.9 - - 445.8 325.0 1,666.7
Gaming revenue(2) 422.0 - - - 51.3 473.3
Total Group revenue 1,317.9 - - 445.8 376.3 2,140.0
(1) Sports revenue comprises sportsbook, exchange sports
betting, daily fantasy sports and pari-mutuel betting.
(2) Gaming revenue includes Games, Poker, Casino and Bingo and
in PPB includes the VAT refund (see Note 6).
5. Operating segments (continued)
Group revenues after the VAT refund (see Note 6) disaggregated
by geographical segment for the year ended 31 December 2020:
Sky Betting
PPB PokerStars and Gaming Australia US Total
GBPm GBPm GBPm GBPm GBPm GBPm
UK 873.4 60.2 678.0 - - 1,611.6
Australia - - - 988.8 - 988.8
US - - - - 672.9 672.9
Ireland 202.5 7.4 7.4 - - 217.3
Rest of World 233.9 689.4 - - - 923.3
Total Group revenue 1,309.8 757.0 685.4 988.8 672.9 4,413.9
Group revenues disaggregated by geographical segment for the
year ended 31 December 2019:
Sky Betting
PPB PokerStars and Gaming Australia US Total
GBPm GBPm GBPm GBPm GBPm GBPm
UK 844.7 - - - - 844.7
Australia - - - 445.8 - 445.8
US - - - - 376.3 376.3
Ireland 236.6 - - - - 236.6
Rest of World 236.6 - - - - 236.6
Total Group revenue 1,317.9 - - 445.8 376.3 2,140.0
Revenues are attributed to geographical location on the basis of
the customer's location.
Non-current assets (property, plant and equipment, intangible
assets and goodwill) by geographical segment are as follows:
31 December 31 December
2020 2019
GBPm GBPm
UK 8,882.6 3,720.7
Ireland 154.9 157.3
Australia 696.4 108.9
US 856.1 805.0
Rest of World(1) 4,816.4 185.1
Total 15,406.4 4,977.0
(1) Relates mainly to goodwill and fair value adjustments on
acquisition intangibles relating to the PokerStars segment.
6. Separately disclosed items
2020 2019
GBPm GBPm
Amortisation of acquisition related intangible
assets (432.3) (113.1)
Acquisition fees and associated costs (32.7) (17.6)
Restructuring and integration costs (96.1) -
Impairment (22.6) -
VAT refund 11.2 -
Operating profit impact of separately disclosed
items (572.5) (130.7)
Financial Income 78.5 -
Financial Expense (71.1) -
Profit before tax impact of separately disclosed
items (565.1) (130.7)
Tax credit on separately disclosed items 58.4 18.6
Total separately disclosed items (506.7) (112.1)
Attributable to:
Equity holders of the Company (483.8) (94.4)
Non-controlling interest (22.9) (17.7)
(506.7) (112.1)
Amortisation of acquisition related intangible assets
Non-cash amortisation of GBP432.3m has been incurred in the
period (2019: GBP113.1m) as a result of intangible assets
separately identified under IFRS 3 as a result of the Merger with
Betfair in 2016, the acquisitions of FanDuel Limited in 2018 and
Adjarabet in 2019 and the Combination with TSG in 2020.
Acquisition fees and associated costs
Acquisition fees and associated costs of GBP32.7m relate to
costs incurred in the period primarily as a result of the
Combination. This does not include any professional fees incurred
by TSG prior to the Combination.
Restructuring and integration costs
This relates to incremental, one-off costs of GBP96.1m which
were incurred during the year ended 31 December 2020, as a result
of significant restructuring and integration initiatives due to the
Combination with TSG. No such costs were incurred in 2019.
Restructuring and integration costs include share-based payments
costs of GBP18.1m.
Impairment
During the year, the Group recognised impairments of GBP22.6m.
GBP12.1m of this relates to the impairment of Northern Ireland
retail indefinite life licences. The remaining GBP10.5m is mainly
as a result of various restructuring and integration decisions
resulting from the TSG Combination with GBP4.4m relating to
capitalised development expenditure and GBP6.1m relating to various
property assets.
VAT refund
In May 2020, HMRC confirmed it would not appeal the ruling of
the Upper Tier Tribunal in the cases of Rank Group Plc and Done
Brothers (Cash Betting) Ltd (trading as Betfred) that VAT was
incorrectly applied to revenues earned from certain gaming machines
prior to 2013. The Group submitted protective claims for the period
and requested repayment from HMRC . In December 2020, the Group
received the refund from the HMRC and it has recognised income, net
of the associated third party costs incurred as a result of the
refund. The refund of VAT due from HMRC of GBP15.9m has been booked
as revenue with associated third-party costs of GBP2.7m and GBP2.0m
recorded in cost of sales and operating expenses respectively.
Financial Income
As detailed in Note 7, this comprises the gain of GBP78.5m on
the remeasurement of the Embedded Derivative.
Financial expense
As detailed in Note 7, this comprises the loss of GBP22.2m on
the remeasurement of the HRTV contingent consideration (see Note
14), a loss of GBP31.0m relating to accelerated debt repayments,
foreign exchange loss of GBP12.9m on financial instruments
associated with financing activities and GBP5.0m relating to
non-recurring financing related fees not eligible for
capitalisation.
Acquisition fees and associated costs and restructuring and
integration costs are included in the Consolidated Income Statement
within operating costs excluding depreciation, amortisation and
impairment. Amortisation of acquisition related intangible assets
is included within depreciation and amortisation.
7. Financial income and expense
2020 2019
GBPm GBPm
Recognised in profit or loss:
Financial income:
Gain on remeasurement of embedded derivative (Note
6) 78.5 -
On financial assets at amortised cost
Interest income 1.4 1.0
Total 79.9 1.0
Financial expense:
Change in fair value of contingent consideration (Note
6) 22.2 -
Foreign exchange loss on financing instruments associated
with financing activities(1) (Note 6) 12.9 -
Financing related fees not eligible for capitalisation
(Note 6) 5.0 -
Accelerated accretion on debt repayments (Note 6 and
Note 16) 31.0 -
Movement in the fair value of investments 1.5 -
On financial liabilities at amortised cost
Interest on borrowings, bank guarantees and bank facilities 95.6 8.0
Interest on lease liabilities 5.7 5.0
Other interest 8.4 2.2
Total 182.3 15.2
2020 2019
GBPm GBPm
Recognised in other comprehensive income / (loss)
:
Effective portion of changes in fair value of cash
flow hedges (280.4) 2.6
Fair value of cash flow hedges transferred to income
statement 267.8 (0.3)
Net change in fair value of cash flow hedge reserve (12.6) 2.3
Foreign exchange gain / (loss) on translation of the
net assets of foreign currency denominated entities 66.6 (33.1)
Financial assets at FVOCI (0.4) -
Total 53.6 (30.8)
(1) A gain of GBP0.2m was recorded in the income statement in
respect of ineffective cash flow hedges in 2020 (2019: GBPnil).
8. Tax expense
2020 2019
GBPm GBPm
Recognised in profit or loss:
Current tax charge 82.6 47.7
Prior year over provision (1.8) (2.5)
Total current tax 80.8 45.2
Deferred tax credit (45.8) (20.5)
Prior year under/(over) provision 0.8 (0.9)
Decrease in net deferred tax liability (45.0) (21.4)
Total tax expense in income statement 35.8 23.8
The difference between the total tax expense shown above and the
amount calculated by applying the standard rate of corporation tax
to the profit before tax is as follows:
2020 2019
GBPm GBPm
Profit before tax 1.1 135.7
Tax on Group profit before tax at the standard
Irish corporation tax rate of 12.5% 0.1 17.0
Depreciation on non-qualifying property, plant
and equipment (4.7) 0.9
Effect of different statutory tax rates in
overseas jurisdictions 2.1 (2.8)
Non-deductible expenses 5.9 4.1
Non-taxable income (7.3) (2.5)
Effect of changes in statutory tax rates 1.2 (0.1)
Movement on deferred tax balances not recognised 39.5 10.5
Over provision in prior year (1.0) (3.3)
Total tax expense 35.8 23.8
Total tax expense for 2020 includes a credit for separately
disclosed items amounting to GBP58.4m (2019: GBP18.6m) (see Note
6).
Tax rates
The Group's consolidated effective tax rate on profits including
separately disclosed items for 2020 is 3,254.5% (2019: 17.5%). The
separately disclosed items impacting the consolidated tax rate
include the unwind of deferred tax liabilities recognised in
respect of acquisition related intangibles.
The Group's adjusted effective tax rate of 16.6% (2019: 15.9%)
is materially impacted by the geographic mix of profits and
reflects a combination of higher and lower headline rates of tax in
the various jurisdictions in which the Group operates when compared
with the Irish standard rate of corporation tax of 12.5%.
The Group's adjusted effective tax rate is also materially
impacted by the movement on deferred tax balances which remain
unrecognised due to the doubt over the future recoverability of
those assets, as well as the effect of expenses which are not
deductible for tax purposes.
The future effective tax rate of the Group is principally
affected by the ongoing geographic mix of profits in accordance
with the OECD guidelines in relation to Base Erosion and Profit
Shifting.
9. Earnings per share
The Group presents basic and diluted earnings per share ("EPS")
data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares
outstanding during the year. The weighted average number of shares
has been adjusted for amounts held as Treasury Shares and amounts
held by the Group's Employee Benefit Trust ("EBT").
Diluted EPS is determined by adjusting the weighted average
number of ordinary shares outstanding for the effects of all
dilutive potential ordinary shares.
Adjusted EPS is determined by adjusting the profit attributable
to ordinary shareholders for the impact of separately disclosed
items.
The calculation of basic, diluted and adjusted EPS is as
follows:
Restated(1)
2020 2019
Numerator in respect of basic and diluted earnings
per share (GBPm):
Profit attributable to equity holders of the
Company 37.9 144.0
Numerator in respect of adjusted earnings per
share (GBPm):
Profit attributable to equity holders of the
Company 37.9 144.0
Separately disclosed items (Note 6) 483.8 94.4
Profit for adjusted earnings per share calculation 521.7 238.4
Weighted average number of ordinary shares
in issue during the year (in 000's) 129,558 79,901
Basic earnings per share GBP0.293 GBP1.802
Adjusted basic earnings per share GBP4.027 GBP2.984
Adjustments to derive denominator in respect of diluted
earnings per share
(in 000's):
Weighted average number of ordinary shares
in issue during the year 129,558 79,901
Dilutive effect of share options and awards
on issue 3,291 426
Adjusted weighted average number of ordinary
shares in issue during the year(1) 132,849 80,327
Diluted earnings per share GBP0.285 GBP1.793
Adjusted diluted earnings per share GBP3.927 GBP2.968
(1) The 2019 earnings per share figures have been restated to
incorporate the 1,312,260 new Flutter ordinary shares that were
issued in May 2020 as payment of the 2019 final dividend. The
weighted average number of shares in issue during the period was
adjusted to include these bonus shares as if they were issued 1
January 2019.
The average market value of the Company's shares of GBP108.80
(2019: GBP68.25) was used to calculate the dilutive effect of share
options based on the market value for the period that the options
were outstanding.
The number of options excluded from the diluted weighted average
number of ordinary shares calculation due to their effect being
anti-dilutive is 345,673 (2019: 464,380).
10. Goodwill
The following cash generating units ('CGU'), being the lowest
level of asset for which there are separately identifiable cash
flows, have the following carrying amounts of goodwill:
PPB UK Irish Sky Betting
Online Retail Retail PokerStars and Gaming Australia US Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
January
2019 3,432.7 18.9 20.7 - - 42.5 560.5 4,075.3
Arising on
acquisitions
during the
year
(Note 11) 69.6 - - - - - - 69.6
Foreign
currency
translation
adjustment (5.9) - - - - (1.4) (17.3) (24.6)
Balance at 31
December
2019 3,496.4 18.9 20.7 - - 41.1 543.2 4,120.3
Arising on
acquisitions
during the
year
(Note 11) - - - 2,025.1 2,848.7 423.2 40.6 5,337.6
Foreign
currency
translation
adjustment (9.3) - - 45.5 - 43.4 (20.8) 58.8
Balance at 31
December
2020 3,487.1 18.9 20.7 2,070.6 2,848.7 507.7 563.0 9,516.7
The Group reviews the carrying value of goodwill for impairment
annually (or more frequently if there are indications that the
value of goodwill may be impaired) by comparing the carrying values
of these cash generating units with their recoverable amounts
(being the higher of value in use and fair value less costs to
sell). The impact of COVID-19 on the performance of the Group and
its individual business units was incorporated into the underlying
assumptions used in the annual impairment assessment.
The following cash generating units, being the lowest level of
asset for which there are separately identifiable cash flows, have
the following goodwill.
The PPB Online segment goodwill amount arose from the
acquisition of CT Networks Limited ("Cayetano"), a games developer
based in the Isle of Man and Bulgaria, in 2011, the acquisition of
the Betfair online business (excluding operations in the US)
acquired as part of the all-share merger with Betfair Group plc in
2016 and on 1 February 2019, the acquisition of an initial 51%
controlling stake in Adjarabet, the market leader in online betting
and gaming in the regulated Georgian market (see Note 11).
Goodwill in UK Retail arose from the acquisition of two London
bookmaking businesses in 2004, the acquisition of a retail
bookmaking company in Northern Ireland in 2008 and the acquisition
of a number of retail bookmaking shop properties since 2010.
Goodwill in Irish Retail arose from the amalgamation of three
bookmaking businesses to form Paddy Power plc in 1988 and the
acquisition of a number of retail bookmaking shop properties since
2007.
The PokerStars and Sky Betting and Gaming goodwill amount arose
from the combination with TSG in 2020 as part of the all-share
merger (see Note 11).
The Australia segment goodwill amount arose from the acquisition
of an initial 51% interest in Sportsbet Pty Limited ("Sportsbet"),
the subsequent acquisition of International All Sports Limited
("IAS") by Sportsbet, both in 2009, and goodwill arising from
BetEasy through the 2020 combination with TSG. (see Note 11)
The US segment goodwill amount arose from the acquisition of the
US business acquired as part of the all-share merger with Betfair
Group plc in 2016, the acquisition of FanDuel Limited a market
leading operator in the daily fantasy sports market in the United
States, in 2018 and goodwill arising on FoxBet through the
combination with TSG in 2020 (see Note 11).
Impairment tests for cash generating units containing goodwill
and indefinite life intangible assets
In accordance with accounting requirements, the Group performs
an annual test for impairment of its cash generating units. The
most recent test was performed at 31 December 2020. Based on the
reviews as described above, with the exception of a GBP12.1m
impairment in 2020 of the Northern Ireland retail indefinite life
licences described in more detail in Note 6 , USD35.3m (GBP26.5m)
in 2018 of the US DFS business acquired in 2017 and the IAS brand
impairment of AUD6.9m initially provided for in 2011, no impairment
has arisen.
11. Business combinations
Year ended 31 December 2020
Combination with The Stars Group Inc.
On 5 May 2020, Flutter completed an all share Combination with
The Stars Group Inc. (the "Combination") resulting in existing
Flutter shareholders owning 54.64% and TSG shareholders owning
45.36% of Flutter (the "Company", together with its subsidiaries,
the "Group"), on a fully diluted basis (excluding any out of the
money options). Post-Combination, the Company is the Ultimate
Parent of TSG.
Under the terms of the Combination, holders of TSG shares
received 0.2253 ordinary shares with nominal value of EUR 0.09 each
in the Company ("ordinary shares") in exchange for each outstanding
TSG share (the "Exchange Ratio"). Accordingly, the Company issued a
total of 65,316,588 ordinary shares in exchange for 289,909,400
shares in TSG. The fair value of the ordinary shares issued was
GBP94.84 per share at this date.
In addition: (i) each TSG Option outstanding at 5 May 2020,
under the TSG Share Plans will be exchanged for an option to
purchase such number of New Flutter Shares calculated in accordance
with the Exchange Ratio; and (ii) each TSG restricted share unit
("RSU"), TSG performance share unit ("PSU") and TSG deferred share
unit ("DSU") outstanding at the Effective Time under the TSG Equity
Plan will be amended so as to substitute for the TSG Shares,
subject to such equity awards, a number of Flutter Shares
calculated in accordance with the Exchange Ratio but subject to any
adjustment required to that award by the TSG Equity Plan or grant
documentation as a result of the Plan of Arrangement.
TSG is a global leader in the online and mobile gaming and
interactive entertainment industries, entertaining millions of
customers across its online real- and play-money poker, gaming and
betting product offerings. TSG offers these products directly or
indirectly under several ultimately owned or licensed gaming and
related consumer businesses and brands, including, among others,
PokerStars, PokerStars Casino, BetStars, Full Tilt, FOX Bet,
BetEasy, Sky Bet, Sky Vegas, Sky Casino, Sky Bingo, Sky Poker, and
Oddschecker, as well as live poker tour and events brands,
including the PokerStars Players No Limit Hold'em Championship,
European Poker Tour and Asia Pacific Poker Tour. TSG is one of the
world's most licensed online gaming operators with its subsidiaries
collectively holding licenses or approvals in 22 jurisdictions
throughout the world, including in Europe, Australia and the
Americas.
The main drivers for the Combination were to accelerate delivery
against each of the components of Flutter's four pillar strategy;
create a highly diversified business from a geographic, product and
brand perspective with an enhanced global platform; deliver
significant value for shareholders through the realisation of
material cost synergies; reinforce a robust financial profile which
will facilitate strategic flexibility as well as generate
sustainable long-term shareholder returns; and maintain a leading
role in the promotion of responsible gambling through an enlarged
global footprint.
Since the date of combination to 31 December 2020, TSG has
contributed GBP1,625m of revenue and GBP461m of operating profit
before separately disclosed items to the results of the
consolidated Group.
If the TSG combination had occurred on 1 January 2020, then
their contribution to revenue and operating profit before
separately disclosed items would have been GBP2,491m and GBP775m
respectively for the year ended 31 December 2020. Combination costs
in respect of this transaction are disclosed within acquisition
fees and associated costs in Note 6.
Included within the intangible assets were GBP5,316.4m of
separately identifiable intangibles comprising brands, customer
relations and technology acquired as part of the combination , with
the additional effect of a deferred tax liability of GBP527m
thereon. These intangible assets are being amortised over their
useful economic lives of up to 20 years. Receivables acquired
amounted to GBP114.6m. The book value equated to the fair value as
all amounts are expected to be received. See Note 15 for further
detail on the Kentucky provision recognised as part of the fair
value acquisition accounting. The main factors leading to the
recognition of goodwill (none of which is deductible for tax
purposes) is growth by combining business activities, a strong
workforce, leveraging existing products and synergy savings of the
merged operations. The goodwill associated with the PokerStars and
Sky Betting and Gaming businesses has been allocated to separate
CGUs.
The goodwill associated with the Australia and US businesses has
been allocated to the respective existing Australia and US CGUs and
it has been deemed that separate CGUs are not appropriate.
11. Business combinations (continued)
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill are as follows:
Fair values as at
5 May 2020
GBPm
Assets
Property, plant and equipment 105.5
Intangible assets 5,316.4
Deferred tax asset 8.3
Non-current tax receivable 19.1
Derivative financial assets 79.2
Investments 4.0
Other receivables 26.2
Financial assets - restricted cash 8.9
Total non-current assets 5,567.6
Trade and other receivables 88.4
Current tax receivable 28.7
Financial assets - restricted cash 292.4
Current investments - customer deposits 89.7
Cash and cash equivalents 445.2
Total current assets 944.4
Total assets 6,512.0
Liabilities
Trade and other payables 498.8
Customer balances 376.7
Derivative financial liabilities 10.0
Provisions 1.4
Current tax payable 15.1
Lease liabilities 16.4
Borrowings 59.7
Total current liabilities 978.1
Trade and other payables 3.1
Derivative financial liabilities 56.9
Provisions 149.1
Non-current tax payable 22.3
Deferred tax liabilities 487.5
Lease liabilities 26.1
Borrowings 3,873.9
Total non-current liabilities 4,618.9
Total liabilities 5,597.0
Net assets acquired 915.0
Goodwill 5,337.6
Consideration 6,252.6
Consideration satisfied by:
Issue of 65,316,588 Flutter Entertainment plc
ordinary shares 6,194.6
Issue of replacement share options and awards 58.0
Consideration 6,252.6
The acquisition accounting remains provisional for one year from
the acquisition date and may change if new information is obtained
relating to conditions that existed at the acquisition date.
11. Business combinations (continued)
Acquisition of additional shares of TSG Australia Pty Ltd
On 13 May 2020, the Group exercised its option to acquire the
remaining 20% of the outstanding share capital of TSG Australia Pty
Ltd (TSG Australia), bringing the Group's holding in TSG Australia
to 100%, up from the previous 80%. The acquisition was satisfied by
the issuance of 819,230 new ordinary shares of the Company,
settling a liability of A$151.4m (GBP79.7m)
Acquisition of additional shares of FanDuel
On 30 December 2020, the Group acquired an additional 37.2% of
the outstanding shares of FanDuel in exchange for GBP3.340bn,
satisfied by a cash payment of $2.088bn (GBP1.546bn) and the
issuance of 11,747,205 new ordinary shares of the Company
(GBP1,794.4m). The acquisition brings the Group's holding in
FanDuel to 95%, up from the previous controlling interest of 57.8%.
As FanDuel's results and financial position had been previously
consolidated into the Group, the excess of the purchase price over
the carrying value of the non-controlling interest acquired was
recognised directly within equity in retained earnings. The initial
goodwill and non-controlling interest were recorded initially using
the proportionate interest method and a transfer from
non-controlling interest to retained earnings and foreign currency
translation reserve has been made.
As outlined previously, as a result of the acquisition of
FanDuel Limited in 2018, call and put options were put in place for
the Group to acquire a further 37.2% of FanDuel at prevailing
market valuations three and five years after the July 2018
acquisition. The Group had the discretion as to whether these
options are settled by the issuance of Flutter Entertainment plc
shares or via cash. These options terminated on the acquisition of
37.2% additional FanDuel shares on 30 December 2020.
The put and call agreement stated that the number of shares to
be issued as consideration for the settlement of the put/call could
not exceed 10% of the Flutter Entertainment plc shares in issue
with any excess paid in cash. Due to the growth in value of FanDuel
to 30 December 2020, this resulted in the Group recognising a
liability of GBP846m which was derecognised on 30 December 2020 as
part of the above acquisition.
FOX/ Fastball & Boyd agreements
As announced on 2 October 2019, in order to achieve economic
alignment of Flutter's and TSG's strategic third-party
relationships across their respective US businesses, the Group
entered into arrangements conditional on completion of the
Combination with FOX (TSG's US media partner for FOX Bet), Fastball
and Boyd (together Flutter's co-shareholders in FanDuel Group)
pursuant to which:
-- FSG Services, a wholly-owned subsidiary of FOX Sports will
have the right to acquire an approximate 18.5% equity interest in
FanDuel Group at the market value in July 2021 (structured as a
10-year option from 2021, subject to a carrying value adjustment).
As a result of the exercise limitation of the option derivative,
which is only exercisable at fair value, it was determined that the
fair value was not material and was close to nominal value; and
-- Fastball and Boyd would receive a total payment of the 12.5%
of the increase in FOX Bet's market value between completion of the
Combination and the exercise of Flutter's option to acquire
Fastball's remaining equity interest in July 2023 (also subject to
a carrying value adjustment). Following the acquisition by the
Group of Fastball's entire non-controlling interest on 30 December,
they no longer have any rights to this potential payment.
Discussions are currently ongoing with the relevant parties in
respect of the future operating model for the FOX Bet business and
any payment due to Boyd in respect of this is not expected to be
significant.
Year ended 31 December 2019
Acquisition of Adjarabet
On 1 February 2019, the Group completed the acquisition of an
initial 51% controlling stake in Adjarabet, the market leader in
online betting and gaming in the regulated Georgian market. The
Group, through agreed option agreements, expects to acquire the
remaining 49% after three years.
The initial cash consideration being paid by the Group for the
51% stake was GBP102m. A mechanism has also been agreed, consisting
of call and put options, which enables the Group to acquire the
remaining 49% after three years at a valuation equivalent to 7
times the 2021 EBITDA. The call/put option consideration can be
settled, at the Group's election, in cash or shares. As a
consequence of both the put and call options being only exercisable
at fair value being the future EBITDA and earnings multiple which
are considered to be two key inputs into valuing the option, it was
determined that the fair value was not material and was close to
nominal value.
11. Business combinations (continued)
Included within the intangible assets were GBP74.4m of
separately identifiable intangibles comprising brand and customer
relations acquired as part of the acquisition, with the additional
effect of a deferred tax liability of GBP11.1m thereon. These
intangible assets are being amortised over their useful economic
lives of up to ten years. Receivables acquired amounted
to GBP1.2m. The book value equated to the fair value as all
amounts are expected to be received.
The main factors leading to the recognition of goodwill (none of
which is deductible for tax purposes) is growth by combining
business activities, a strong workforce, leveraging existing
products and synergy savings. The goodwill has been allocated to
the existing PPB Online CGU and it has been deemed that a separate
CGU is not appropriate.
Fair values as
at
1 February 2019
GBPm
Assets
Property, plant and equipment 2.6
Intangible assets 75.6
Total non-current assets 78.2
Trade and other receivables 2.7
Financial assets - restricted cash 1.6
Cash and cash equivalents acquired 0.2
Total current assets 4.5
Total assets 82.7
Liabilities
Trade and other payables 5.7
Customer balances 1.6
Total current liabilities 7.3
Trade and other payables 0.7
Deferred tax liabilities 11.1
Total non-current liabilities 11.8
Total liabilities 19.1
Net assets acquired 63.6
Goodwill 69.6
Non-controlling interest measured at the fair value
of net assets identified (31.2)
Consideration 102.0
The consideration is analysed as:
Consideration satisfied by cash 102.0
Consideration 102.0
11. Business combinations (continued)
Net cash outflow/(inflow) from purchase of businesses
31 December 31 December 2019
2020
GBPm GBPm
Cash consideration - acquisitions
in the year - 102.0
Cash acquired - acquisitions in the
year (445.2) (0.2)
Cash consideration - acquisitions
in previous years 7.2 4.8
Total (438.0) 106.6
Analysed for the purposes of the statement
of cash flows as:
Purchase of businesses - 102.0
Cash acquired from acquisitions (445.2) (0.2)
Payment of contingent deferred consideration 7.2 4.8
Total (438.0) 106.6
During the year the Group settled in cash deferred consideration
liabilities of GBP7.2m in relation to Betfair's historical
acquisition of HRTV, a horseracing television network based in the
US.
Also as noted above, the Group settled a liability of A$151.4m
(GBP79.7m) with respect to its option to acquire the remaining 20%
of the outstanding share capital of TSG Australia Pty Ltd (TSG
Australia) through the issuance of share capital of the
Company.
12. Investments and trade and other receivables
Non-current assets
31 December 31 December
2020 2019
GBPm GBPm
Investments - FVTPL 3.0 0.1
Investments relate to a small number of individually immaterial
equity investments in various companies.
31 December 31 December
2020 2019
GBPm GBPm
Other receivables
Other receivables 13.0 2.6
Prepayments 16.7 9.0
Deferred financing costs on Revolving Credit
Facility 4.6 -
Amounts paid in respect of legacy German and
Greek tax assessments 40.9 38.8
75.2 50.4
Other receivables
Other receivables are comprised primarily of deposits for
licences and property.
Deferred financing costs on Revolving Credit Facility
During the year, the Group entered into a new Revolving credit
facility agreement as part of its new financing agreements. The
Group incurred GBP5.3m of transaction costs and fees relating to
the revolving credit facility, which have been capitalised and
included within non-current receivables, net of accretion, on the
consolidated statement of financial position. As at 31 December
2020, no loan amounts were drawn under the Revolving Credit
Facility. See also Note 16.
12. Investments and trade and other receivables (continued)
Amounts paid in respect of legacy German and Greek tax
assessments
On 13 February 2019, the Group provided an update on two
separate disputed legacy tax assessments. The first relates to the
Betfair Exchange in Germany, which operated there until November
2012, and the second relates to the paddypower.com business in
Greece.
The Hessen Fiscal Court provided the Group with its decision
relating to the Group's appeal of a 2012 German tax assessment
relating to the Betfair Exchange, which operated in Germany until
November 2012. The Fiscal Court found against the Group and deemed
that a tax liability of approximately EUR40m (GBP36m) is payable
(including accrued interest of EUR9.4m). This represents a multiple
of the revenues generated by the Exchange during the assessment
period.
Separately, the Group was issued with a Greek tax assessment for
financial years 2012, 2013 and 2014, relating to paddypower.com's
Greek interim licence. This assessment concluded that the Group is
liable to pay EUR15.0m (GBP13.5m) in taxes including penalties and
interest. This is substantially higher (by multiples) than the
total cumulative revenues ever generated by paddypower.com in
Greece. There is potential that the periods after 2014 could also
be subject to further challenge by the Greek tax authorities.
The Group strongly disputes the basis of these assessments, and
in line with the legal and tax advice it received, is confident in
its grounds to successfully appeal them. The appeals process is
ongoing in both cases. Accordingly, the Group does not consider
these amounts to represent liabilities for the Group and no
provision has been made for amounts assessed or potential further
assessments. This involves a series of judgements about future
events and ultimately the court judgements and therefore the
directors may need to re-assess the accounting treatment as matters
develop further. Pending the outcome of these appeals, in 2019 the
Group paid the total Greek tax assessment (including the penalties
and interest) of EUR15.0m and the EUR30.6m German tax assessment
principal, with the late payment interest to be paid when
assessed.
Current assets
31 December 31 December
2020 2019
GBPm GBPm
Trade receivables 11.9 8.5
Other receivables 28.5 8.4
Value-added tax and goods and services tax 2.2 1.9
Prepayments 96.9 45.8
Total 139.5 64.6
Trade and other receivables are non-interest bearing.
13. Current investments, Financial assets - restricted cash and
Cash and cash equivalents
31 December 31 December
2020 2019
GBPm GBPm
Non-current:
Financial assets - restricted cash 6.9 -
Current:
Investments - customer deposits 82.8 -
Financial assets - restricted cash 587.9 189.1
Cash and cash equivalents 603.4 108.1
-----------------
Total 1,281.0 297.2
-----------------
Financial assets
Financial assets - restricted cash included:
-- customer funds balances securing player funds held by the
Group. These customer funds are matched by liabilities of equal
value.
-- amounts required to be held as to guarantee third party letter of credit facilities, and
-- cash held as collateral for the Kentucky proceedings (see also Note 15).
The effective interest rate on bank deposits at 31 December 2020
was 0.1% (2019: 0.6%); these deposits have an average original
maturity date of 1 day (2019: 1 day). The bank deposits also have
an average maturity date of 1 day from 31 December 2020 (2019: 1
day). The Directors believe that all short-term bank deposits can
be withdrawn without significant penalty.
Investments - customer deposits
Investments relate to customer deposits, and are held in
accounts segregated from investments held for operational purposes.
Investments held in relation to customer deposits are liquid
investments in short duration corporate and government bonds and
are classified as current assets consistent with the current
classification of customer deposits to which the investments
relate. Management's investment strategy for the portfolio results
in the majority of the bonds being held to maturity. Bonds are
classified as FVOCI.
Current Investments, financial assets - restricted cash,
customer deposits and cash and cash equivalents are analysed by
currency as follows:
31 December 31 December
2020 2019
GBPm GBPm
GBP 289.9 12.9
EUR 283.8 38.2
AUD 158.0 65.1
USD 506.5 154.0
Other 42.8 27.0
Total 1,281.0 297.2
As at 31 December 2020, GBP379.3m (31 December 2019: GBP318.2m)
was held in trust in The Sporting Exchange (Clients) Limited on
behalf of the Group's customers and is equal to the amounts
deposited into customer accounts. Neither cash and cash equivalents
or restricted cash include these balances on the basis that they
are held on trust for customers and do not belong to and are not at
the disposal of the Group.
14. Trade and other payables
Current liabilities
31 December 31 December
2020 2019
GBPm GBPm
Trade and other payables
Trade payables 79.7 25.3
PAYE and social security 14.8 9.7
Value-added tax and goods and services
tax 10.7 3.0
Betting duty, data rights, and product
and racefield fees 208.0 60.1
Employee benefits 136.4 52.3
Contingent deferred consideration - business
combinations 25.3 7.4
Accruals and other liabilities 558.1 211.8
-----------
Total 1,033.0 369.6
Non-current liabilities
31 December 2020 31 December 2019
GBPm GBPm
Trade and other payables
Employee benefits 1.1 0.5
Contingent deferred consideration - business combinations 12.8 11.0
Accruals and other liabilities 0.7 -
Total 14.6 11.5
Contingent deferred consideration - business combinations
The Group's deferred consideration liabilities amounted to
GBP38.1m at 31 December 2020 (2019 - GBP18.4m) and relate to the
following:
-- contingent and deferred consideration of GBP33.2m due to
Betfair's historical acquisition of HRTV, a horseracing television
network based in the United States, with GBP20.6m due within the
next 12 months and GBP12.6m due after one year from the reporting
date;
-- deferred consideration of GBP4.6m in respect of Diamond Game
Enterprises, assumed as part of the combination with TSG; and
-- deferred consideration of GBP0.3m in respect of other
investments assumed as part of the combination with TSG.
15. Provisions
Provisions balances at 31 December and movements throughout the
year are outlined below:
Employee
benefits
(Long
service Onerous Gaming Other
leave) contracts tax Kentucky legal Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2019 1.5 1.3 2.6 - - 0.2 5.6
Transfer to IFRS 16 lease
liability - (1.3) - - - - (1.3)
Additional provisions
recognised 0.4 - - - - 0.1 0.5
Amounts used during the
year (0.2) - (0.6) - - - (0.8)
Balance at 31 December
2019 1.7 - 2.0 - - 0.3 4.0
Acquired on business combination 1.1 5.0 7.2 80.4 56.8 - 150.5
Additional provisions
recognised 1.1 10.5 1.3 - - 0.2 13.1
Amounts used during the
year (0.8) - (0.4) - - - (1.2)
Foreign currency translation (0.1) 0.5 0.4 (7.1) (0.8) - (7.1)
Balance at 31 December
2020 3.0 16.0 10.5 73.3 56.0 0.5 159.3
Current portion 31 December
2019 0.9 - 2.0 - - - 2.9
Non-current portion 31
December 2019 0.8 - - - - 0.3 1.1
Current portion 31 December
2020 1.6 9.9 2.7 - - 0.1 14.3
Non-current portion 31
December 2020 1.4 6.1 7.8 73.3 56.0 0.4 145.0
Employee benefits (Long service leave)
The timing and amount of long service leave cash outflows are
primarily dependent on when staff employed at the reporting date
avail of their entitlement to leave and their expected salaries at
that time. As of 31 December 2020, it was expected that cash
outflows would occur primarily within the following five years
(2019: within the following five years).
Onerous contracts
The onerous contracts provision at 31 December relates to
various marketing and minimum guarantee contracts where the cost of
fulfilling these contracts exceeds the expected economic benefits
to be received from them.
Gaming tax
Separate to the amounts highlighted in Note 12, there are other
gaming tax provisions relating to amounts provided for taxes in
certain jurisdictions where the interpretation of tax legislation
is uncertain. When the Group disagrees with the application of
unclear tax legislation, for example when it is applied
retrospectively and / or results in a one-off disproportionate tax
equivalent to many times the profit derived by the Group from its
historic activities in that jurisdiction, the Group continues to
challenge these interpretations.
Whilst the maximum potential obligation for all ongoing cases
could be greater than the recognised provision, and the outcomes
may not be known for some time, a liability has been recorded for
the Directors' best estimate of the cash outflows that will
ultimately be required in respect of each claim. Management have
not provided a sensitivity for this provision as the range is not
considered to be material. Management note this is a key estimate,
however it is not a key judgement that will have a material impact
in the coming year.
Kentucky proceedings
Prior to the Combination, the Commonwealth of Kentucky filed
legal proceedings in 2010 - 2011 against various operators
including certain companies that later became subsidiaries of The
Stars Group ("TSG"). The suit sought recovery of alleged losses
incurred by Kentucky residents playing real-money poker on the
PokerStars platform during a period between 2006 and 2011. The
gross gaming revenues that TSG generated in Kentucky on the
PokerStars platform during the relevant period were approximately
US$18m. In 2015, a Kentucky trial court judge entered judgment
against two TSG Isle of Man subsidiaries, Stars Interactive
Holdings (IOM) Ltd ("SIHL") and Rational Entertainment Enterprises
Ltd ("REEL") and awarded damages to the Commonwealth of Kentucky of
approximately US$870m plus post judgment interest. In 2018, this
ruling was vacated in its entirety by the Kentucky Court of
Appeals.
On 17 December 2020, the Kentucky Supreme Court reinstated the
full 2015 award of damages, including post judgment interest,
against SIHL and REEL. A rehearing petition was filed before the
Kentucky Supreme Court on 6 January 2021 and the Group is awaiting
a decision. Together with its legal advisers, Flutter strongly
disputes the basis of this judgment and is currently reviewing its
position. Flutter is confident that any amount it is ultimately
liable to pay will be a limited
15. Provisions (continued)
proportion of the reinstated judgment. No liability was
previously recognised by either TSG or Flutter prior to this
judgment.
Based on the opinion and views of legal counsel and advisers as
to the likely payout outcomes, the Group has recognised a provision
of US$100m (GBP73m) as part of TSG combination fair value
acquisition accounting in respect of this litigation, which
reflects the value of the supersedes bond in place since February
2016. This assessment relies on estimates and assumptions and
involves a series of judgments about future events.
Other legal
Other legal provisions generally consist of payments for various
future legal settlements where based on all available information,
Management believes it is probable that there will be a future
outflow. Further disclosure in respect of these provisions has not
been provided as such information would be expected to be
prejudicial to the Group's position in such matters.
16. Borrowings
The following is a summary of borrowings, including accrued
interest, outstanding as at 31 December 2020 and 31 December
2019:
31 December 31 December 31 December
2020 31 December 2019 2019
Principal 2020 Principal Carrying
outstanding Carrying outstanding amount
balance amount balance in (including
Contractual in (including currency accrued
interest currency accrued of interest)
rate of borrowing interest) borrowing
Local currency GBPm(1) Local currency GBPm(1)
% m m
GBP First Lien Term 1.84 and
Loan A 1.93 GBP950.0 940.4 - -
USD First Lien Term
Loan B 3.72 $1,456.3 1,042.9 - -
EUR First Lien Term
Loan B 3.75 EUR507.2 449.1 - -
Senior Notes(2) 7.00 $1,000.0 706.5 - -
Previous GBP Term
Loan 1.51 - - GBP250.0 249.7
Previous GBP RCF 1.80 and
- GBP 1.81 - - GBP79.0 78.1
Previous GBP RCF 0.63 and
- Euro 0.65 - - EUR45.0 37.9
Overdraft facility 0.50 - - GBP5.0 5.0
Total borrowings 3,138.9 370.7
Current portion 50.8 255.0
Non-current portion 3,088.1 115.7
(1) The carrying amounts include accrued interest as at 31
December 2020 and 31 December 2019 of GBP24.6m and GBP0.5m,
respectively and is included within the current portion of
borrowings above.
(2) The carrying amount includes an asset of GBP98.0m relating
to the embedded derivative on the Senior Notes. See below in this
note for further detail.
16. Borrowings (continued)
During the year ended 31 December 2020, the Group incurred the
following interest on its then outstanding borrowings:
Effective Interest
interest Interest(2) accretion(3) Total interest
rate(1)
% GBPm GBPm GBPm
GBP First Lien Term Loan
A 2.03 10.6 1.4 12.0
USD First Lien Term Loan
B 4.48 40.7 30.9 71.6
EUR First Lien Term Loan
B 4.19 12.8 4.0 16.8
Senior Notes 5.70 35.4 (4.8) 30.6
Previous GBP Term Loan 1.63 1.4 0.5 1.9
Previous GBP RCF - GBP 2.36 0.7 1.1 1.8
Previous GBP RCF - Euro 0.81 0.1 0.5 0.6
101.7 33.6 135.3
(1) The effective interest rate calculation excludes the impact
of the accelerated interest accretion expense due to prepayments as
well as the impact of the Swap Agreements (as defined below).
(2) In addition to the amount included above, the Group incurred
GBP3.0m of interest expense relating to commitment, utilisation,
and fronting fees associated with its Revolving Credit Facility and
its Previous GBP RCF.
(3) Interest accretion for the year ended 31 December 2020
includes GBP31.0m included within financial expenses in respect of
prepayments of the Group's First Lien Term Loans B and its Previous
GBP Term Loan and previous GBP RCF.
The Group's change in borrowings from 31 December 2019 to 31
December 2020 was as follows:
Adjustments Gain
to on
Opening Principal amortised Interest embedded FX Closing
balance New debt payments costs(1) accretion(2) derivative translation balance
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
GBP First
Lien
Term Loan A - 950.0 - (11.9) 1.4 - - 939.5
USD First
Lien
Term Loan B - 2,329.5 (1,193.1) (6.0) 30.9 - (118.4) 1,042.9
EUR First
Lien
Term Loan B - 738.2 (307.9) (1.9) 4.0 - 16.7 449.1
Senior Notes - 834.9 - - (4.8) (78.5) (68.8) 682.8
Previous GBP
Term
Loan 249.5 - (250.0) - 0.5 - - -
Previous GBP
RCF
- GBP and
Euro 115.7 130.0 (247.2) - 1.6 - (0.1) -
Overdraft 5.0 - (5.0) - - - - -
Total 370.2 4,982.6 (2,003.2) (19.8) 33.6 (78.5) (170.6) 3,114.3
Accrued
interest 0.5 24.6
Total
borrowings 370.7 3,138.9
Included in:
Current
liabilities 255.0 50.8
Non-current
liabilities 115.7 3,088.1
Total
Borrowings 370.7 3,138.9
(1) Adjustments to amortised costs include transactions costs
and fees incurred and capitalised in respect of the TLA Agreement
and the amendment to the Syndicated Facility Agreement.
(2) Interest accretion represents interest expense calculated at
the effective interest rate less interest expense calculated at the
contractual interest rate and is recorded in financial expenses in
the consolidated income statement. Interest accretion for the year
ended 31 December 2020 includes GBP31.0m included within financial
expenses in respect of prepayments of the Group's First Lien Term
Loans B and its Previous GBP Term Loan and Previous GBP RCF.
16. Borrowings (continued)
As at 31 December 2020, the contractual principal repayments of
the Group's outstanding borrowings, excluding accrued interest,
amount to the following:
<1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years
GBPm GBPm GBPm GBPm GBPm GBPm
GBP First Lien
Term Loan A - - - - 950.0 -
USD First Lien
Term Loan B 26.2 26.2 26.2 26.2 963.0 -
EUR First Lien
Term Loan B - - - - 455.2 -
Senior Notes - - - - - 733.3
Total 26.2 26.2 26.2 26.2 2,368.2 733.3
Revolving Credit Facility, First Lien Term Loans and Senior
Notes
On 11 March 2020, the Group, along with its subsidiaries PPB
Financing Unlimited Company and PPB Treasury Unlimited Company as
borrowers, entered into a Term Loan A and Revolving Credit Facility
Agreement (the "TLA Agreement"), contingent on the completion of
TSG Combination. The TLA Agreement comprised a term loan and
revolving credit facility totalling GBP1.3 billion. On 5 May 2020,
the Group completed the TSG Combination, assumed TSG's existing
indebtedness with an acquisition date fair value of approximately
GBP3,934m and terminated its then-existing revolving credit
facility under which there were no drawings. In addition, on 5 May
2020, an Incremental Facility Agreement was signed to increase
borrowing capacity under the TLA agreement by GBP100m to GBP1.4
billion, with all terms and conditions consistent with the TLA
Agreement. The Group also borrowed GBP950m under the GBP First Lien
Term Loan A in two tranches: GBP525m on 5 May 2020 and an
additional GBP425m on 11 June 2020. Each of the Group's facilities
are discussed below. During the twelve months ended 31 December
2020, the Group complied with all covenants related to its
borrowings under all facilities.
TLA Agreement - GBP First Lien Term Loan A
The TLA Agreement and subsequent Incremental Facility Agreement
described above provide a term loan facility in an aggregate amount
of GBP950m priced at GBP-LIBOR plus 1.75% (the "GBP First Lien Term
Loan A"), with a maturity date of 5 May 2025 and a GBP-LIBOR floor
of 0%. There is no amortisation on the GBP First Lien Term Loan A
and the principal is due at maturity. The Group incurred GBP11.9m
of transaction costs and fees which have been capitalised against
the principal of the debt and will be recorded as financial expense
over the term of the debt using the effective interest rate
method.
TLA Agreement - Revolving Credit Facility
The TLA Agreement and subsequent Incremental Facility Agreement
described above provide a multi-currency revolving loan facility in
an aggregate amount of GBP450 million (the "Revolving Credit
Facility"). Maturing on 5 May 2025, the Revolving Credit Facility
includes a margin of 1.75% for borrowings with a 0% interest rate
floor as well as a utilisation fee ranging from 0.1% to 0.4% based
on the proportion of drawings to the total commitment. The
commitment fee on the Revolving Credit Facility is 35% of the
margin and is payable in respect of available but undrawn
borrowings. The Revolving Credit Facility is available for general
corporate purposes including the refinancing of existing
borrowings. The Group incurred GBP5.3m of transaction costs and
fees which have been capitalised and will be recorded as financial
expense over the life of the facility using the straight-line
method. These capitalised costs have been included within
non-current receivables on the consolidated statement of financial
position.
As at 31 December 2020 no loan amounts were drawn under the
Revolving Credit Facility. The Group had GBP73 m of letters of
credit issued but undrawn against the Revolving Credit Facility as
of 31 December 2020 leaving undrawn capacity of GBP377 m.
16. Borrowings (continued)
The terms of the TLA Agreement limit the Group's ability to,
among other things, (i) incur additional debt, (ii) grant
additional liens on their assets and equity, (iii) distribute
equity interests and/or distribute any assets to third parties,
(iv) make certain loans or investments (including acquisitions),
(v) consolidate, merge, sell or otherwise dispose of all or
substantially all assets, (vi) pay dividends on or make
distributions in respect of capital stock or make restricted
payments, and (vii) modify the terms of certain debt or
organisational documents, in each case subject to certain permitted
exceptions.
Borrowings under the TLA Agreement are subject to the
satisfaction of customary conditions, including the absence of a
default and compliance with certain representations and warranties.
The TLA Agreement requires, subject to a testing threshold, that
the Company comply on a bi-annual basis with a maximum net total
leverage ratio of 5.1 to 1.0.
First Lien Term Loan B's
On 5 May 2020 the Group completed its Combination with TSG and
assumed its existing indebtedness which included a USD term loan
with an outstanding principal balance of US$2.96 billion priced at
LIBOR plus 3.50% (the "USD First Lien Term Loan B") and a EUR first
lien term loan with an outstanding principal balance of EUR850
million priced at EURIBOR plus 3.75% (the "EUR First Lien Term Loan
B" and, together with the USD First Lien Term Loan, the "First Lien
Term Loans B"), each with a maturity date of 10 July 2025 and a
LIBOR and EURIBOR floor, as applicable, of 0%. The USD First Lien
Term Loan requires scheduled quarterly principal payments in
amounts equal to 0.25% of the initial aggregate principal amount of
the USD First Lien Term Loan B of US$3,575m, with the balance due
at maturity. There is no amortisation on the EUR First Lien Term
Loan B and the principal is due at maturity.
On 15 June 2020, pursuant to the terms of an amendment agreement
in respect of the syndicated facility agreement that governs the
First Lien Term Loan B's (the "Syndicated Facility Agreement"),
certain amendments were incorporated to the Syndicated Facility
Agreement so that (i) the covenants and restrictions therein bind
the combined Flutter and TSG allowing it to operate and integrate
as such; and (ii) the reporting obligations under the Syndicated
Facility Agreement are synchronised with reporting of the
consolidated financial results of the Group to other of the Group's
stakeholders. The Group has also entered into a guarantee agreement
in respect of the obligations under the Syndicated Facility
Agreement. As part of this amendment, the Group made prepayments of
US$1.2 billion on its USD First Lien Term Loan B and EUR343m on its
EUR First Lien Term Loan A, each including accrued interest to the
date of repayment, using proceeds from the GBP First Lien Term Loan
A, the first Equity Placing and available cash on hand. The Group
made a cash payment of GBP2.8m to the lenders as a result of this
amendment. The amendment was treated as a non-substantial
modification under IFRS 9, Financial instruments and as a result
GBP6.7m of transaction costs and fees were capitalised and will be
recorded as financial expense over the term of the debt using the
effective interest rate method. In addition, accelerated interest
accretion of GBP23.5m was recorded in respect of the prepayments
noted above to reflect the new carrying amount of the financial
liability by discounting the cashflows under the renegotiated loan
term using the original EIR. On 31 October 2020, the Group also
made a prepayment of US$288.5m on its USD First Lien Term Loan B
including accrued interest to the date of repayment. Interest
accretion of GBP5.6m was recorded in respect of this
prepayment.
The Syndicated Facility Agreement limits Stars Group Holdings
B.V., as borrower, and its subsidiaries' ability to, among other
things, (i) incur additional debt, (ii) grant additional liens on
their assets and equity, (iii) distribute equity interests and/or
distribute any assets to third parties, (iv) make certain loans or
investments (including acquisitions), (v) consolidate, merge, sell
or otherwise dispose of all or substantially all assets, (vi) pay
dividends on or make distributions in respect of capital stock or
make restricted payments, (vii) enter into certain transactions
with affiliates, (viii) change lines of business, and (ix) modify
the terms of certain debt or organisational documents, in each case
subject to certain permitted exceptions. The agreement also
provides for customary mandatory prepayments, including a customary
excess cash flow sweep if certain conditions are met.
Senior Notes
Also assumed in connection with TSG Combination, are the 7.00%
Senior Notes due 2026 (the "Senior Notes") which were issued by
Stars Group Holdings B.V. and Stars Group (US) Co-Borrower, LLC
(the "Issuers"), on 10 July 2018 at par in an aggregate principal
amount of US$1 billion. The Senior Notes mature on 15 July 2026.
Interest on the Senior Notes is payable semi-annually on 15 January
and 15 July of each year. In connection with but prior to TSG
Combination, on 1 May 2020, the Issuers obtained the consent of the
requisite number of holders of the Senior Notes to amend certain
provisions of the indenture governing the Senior Notes (the "Senior
Notes Amendment") such that once effective (i) the covenants and
restrictions therein bind the entire combined Group consisting of
TSG and Flutter allowing it to operate as such; and (ii) the Stars
Group Holdings B.V.'s reporting obligations under the indenture are
synchronised with reporting of the
16. Borrowings (continued)
Combined Group's consolidated financial results to other
Combined Group stakeholders. The Group made a payment of GBP1.8m to
the holders of the Senior Notes that consented to the Senior Notes
Amendment and incurred other transaction costs and fees of GBP3.2m.
These amounts were recorded as a financial expense in the
consolidated income statement.
Prior to 15 July 2021, the Issuers may redeem some or all of the
Senior Notes at a redemption price equal to 100% of the principal
amount of the Senior Notes, plus accrued and unpaid interest, if
any, to (but not including) the applicable redemption date, plus an
applicable "make-whole" premium. On or after 15 July 2021, the
Issuers may redeem some or all of the Senior Notes at declining
redemption prices as set forth in the Indenture that governs the
Senior Notes. This redemption option represents an embedded
derivative that required bifurcation from the carrying value of the
Senior Notes upon their recognition on 5 May 2020. The fair value
of the redemption option as at 5 May 2020 and 31 December 2020 was
GBP25.8m and GBP98.0m , respectively. See Note 17.
The Senior Notes are guaranteed by each of the Group's
subsidiaries that guarantee the GBP First Lien Term Loan A, the
Revolving Credit Facility and the First Lien Term Loans B. The
Senior Notes are the Issuers' senior unsecured obligations and rank
pari-passu to all of the Issuers' existing and future senior
unsecured indebtedness. The Senior Notes include, among other terms
and conditions, limitations on the Group's ability to (i) create,
incur or allow certain liens; (ii) create, assume, incur or
guarantee additional indebtedness of certain of the Group's
subsidiaries; and (iii) consolidate or merge with, or convey,
transfer or lease all or substantially all of the Group's and their
subsidiaries' assets, to another person.
Previous GBP term loan and previous GBP revolving credit
facility
In 2015, the Group secured a committed revolving credit bank
loan facility (the "Previous GBP RCF") of EUR300m provided by a
syndicate of banks which was scheduled to expire in May 2020. In
2018, the Previous GBP RCF was amended to an amount of GBP450m and
was extended to expire in April 2023. In May 2019, the Group also
secured a term loan facility of GBP250m provided by a syndicate of
banks (the "Previous GBP Term Loan"). The term loan facility was
for an initial period of 18 months with an option to extend further
by up to 12 months. At 31 December 2019, GBP79m and EUR45m of the
Previous GBP RCF was drawn down and GBP250m of the Previous GBP
Term Loan was drawn down totalling to GBP367.3m. On 5 May 2020, the
Group repaid and extinguished the Previous GBP RCF and the Previous
GBP Term Loan using the proceeds of the GBP First Lien Term Loan.
As a result of the extinguishment, unamortised transaction costs of
GBP1.9m were recognised as an interest accretion expense included
within financial expense in the consolidated income statement.
Borrowings under the Previous GBP RCF and the Previous GBP Term
Loan were unsecured but were guaranteed by the Group and certain of
its operating subsidiaries. Borrowings under the Previous GBP RCF
incurred interest at GBP-LIBOR plus a margin of between 1.10% and
2.50%. A commitment fee, equivalent to 35% of the margin, was
payable in respect of available but undrawn borrowings. Borrowings
under the Previous GBP Term Loan incurred interest at LIBOR plus a
margin of between 0.60% and 2.40%.
Reconciliation to the statement of cash flows
Reconciliation of movements in borrowings to the statement of
cash flows:
2020
GBPm
Financing activities:
Proceeds from GBP First Lien Term Loan A and Previous
GBP Term Loan 950.0
Amounts borrowed on Previous GBP Revolving Credit
Facility 130.0
Amounts repaid on Previous GBP Revolving Credit
Facility (247.2)
Repayment of USD and EUR First Lien Term Loan B
and old GBP Term Loan Facility (1,751.0)
Amounts repaid on overdraft facility (5.0)
Interest paid (114.1)
17. Derivatives
Derivatives and Hedge Accounting
The Group uses derivative financial instruments for risk
management and mitigation purposes. As such, any change in cash
flows associated with derivative instruments is expected to be
offset by changes in cash flows related to the hedged position. On
5 May 2020 the Group completed TSG Combination and assumed the
existing hedging instruments held by TSG. Further, as part of
managing the Group's exposure to foreign exchange risk, the Group
entered into cross currency swap agreements in respect of the
Senior Notes. The Group's derivatives are discussed below.
Swap agreements
On 5 May 2020 the Group completed TSG Combination and assumed
the existing hedging instruments held by TSG consisting of (i)
USD-EUR amortising cross-currency interest rate swap agreements
(the "EUR Cross-Currency Interest Rate Swaps") with a remaining
notional amount of EUR1.96 billion, which fix the USD to EUR
exchange rate at 1.167 and fix the Euro interest payments at an
average interest rate of 3.6%, (ii) EUR-GBP amortising
cross-currency interest rate swap agreements (the "GBP
Cross-Currency Interest Rate Swaps") with a remaining notional
amount of GBP983m, which fix the EUR to GBP exchange rate at 0.889
and fix the GBP interest payments at an average interest rate of
5.4%, and (iii) an amortising USD interest rate swap agreement (the
"Interest Rate Swap") with a remaining notional amount of USD $600m
and swaps the USD three-month LIBOR to a fixed interest rate of
2.82%. The EUR Cross-Currency Interest Rate Swaps and GBP
Cross-Currency Interest Rate Swaps are in a hedging relationship
with and have a profile that amortises in line with the USD First
Lien Term Loan B and are set to mature in July 2023.
On 7 May 2020, a subsidiary of the Group entered into USD-EUR
cross-currency interest rate swap agreements (the "Cross-Currency
Swaps - Notes" and, collectively with the EUR Cross-Currency
Interest Rate Swaps, the GBP Cross-Currency Interest Rate Swaps,
and the Interest Rate Swap, the "Swap Agreements") with a total
notional amount of EUR927.1m, which fix the USD to EUR exchange
rate at 1.079 and fix the Euro interest payments at an average
interest rate of 6.16%. The cross-currency interest rate swaps are
in a hedging relationship with and have an interest payment profile
aligned with the Senior Notes and are set to mature on 15 July
2021.
Subsequent to TSG Combination, to align the Swap Agreements with
the changes to the structure of the Group's borrowings (see Note
16), the Group (i) terminated the Interest Rate Swap resulting in a
cash payment of GBP27.8m, (ii) terminated a notional amount of
EUR447m of the USD-EUR Cross-Currency Interest Rate Swaps resulting
in a cash receipt of GBP0.2m as well as (iii) terminated a notional
amount of US$287.6m of the USD-GBP Cross-Currency Interest Rate
Swaps reflecting the amount of USD debt repaid. The settlement was
made on a gross basis with a net cash outflow of GBP7.5m.
Embedded derivatives
See Note 16 for a discussion of the features embedded in the
Senior Notes that the Group bifurcated as it determined that the
features represented a derivative to be classified and recorded at
fair value through profit or loss.
The fair value of the redemption option included within the
Senior Notes as at 5 May 2020 and 31 December 2020 was an asset of
GBP25.8m and GBP98.0m , respectively. The fair value of this
embedded derivative was determined using an interest rate option
pricing valuation model. The key assumptions include the implied
credit spread of 5.1% at 5 May 2020 and 2.77% at 31 December 2020.
This embedded derivative is categorised as Level 3 within the fair
value hierarchy.
The Group did not account for the embedded derivative as a
qualifying hedge under IAS 39.
17. Derivatives (continued)
Sports betting open positions
Amounts received from customers on sportsbook events that have
not occurred by the balance sheet date are derivative financial
instruments and have been designated by the Group on initial
recognition as financial liabilities at fair value through profit
or loss.
The fair value of open sports bets at the year end has been
calculated using the latest available prices on relevant sporting
events. The carrying amount of the liabilities is not significantly
different from the amount that the Group is expected to pay out at
maturity of the financial instruments. Sports bets are non-interest
bearing. There is no interest rate or credit risk associated with
open sports bets.
It is primarily based on expectations as to the results of
sporting and other events on which bets are placed. Changes in
those expectations and ultimately the actual results when the
events occur will result in changes in fair value. There are no
reasonably probable changes to assumptions and inputs that would
lead to material changes in the fair value methodology, although
final value will be determined by future sporting results.
The following table summarises the fair value of derivatives as
at 31 December 2020 and 31 December 2019:
31 December 2020 31 December
2019
Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm
Derivatives held for hedging
Derivatives designated as cash
flow hedges
Cross currency swaps - current - 86.6 - -
Cross currency interest rate swaps
- non-current - 101.8 - -
Total derivatives designated as
cash flow hedges - 188.4 - -
Derivatives designated as net investment
hedges
Cross currency swaps - current - 14.8
Cross currency interest rate swaps
- current 16.9 - - -
Total derivatives designated as
net investment hedges 16.9 14.8 - -
Total derivatives held for hedging 16.9 203.2 - -
Derivatives held for risk management
and other purposes not designated
as hedges
Sports betting open positions-
current - 49.5 - 20.4
Sports betting open positions -
non-current - 0.5 - 0.7
Total derivatives held for risk
management and other purposes not
designated as hedges - 50.0 - 21.1
Derivatives included within Borrowings
Embedded derivatives 98.0 - - -
Hedge Accounting
Cash flow hedge accounting
In accordance with the Group's risk management strategy, the
Group acquired and entered into, as applicable, the Swap Agreements
to mitigate the risk of fluctuation of coupon and principal cash
flows due to changes in foreign currency rates and interest rates
related to the USD First Lien Term Loan B and the Senior Notes.
17. Derivatives (continued)
The Group assesses hedge effectiveness by comparing the changes
in fair value of a hypothetical derivative reflecting the terms of
the debt instrument issued due to movements in the applicable
foreign currency exchange rate and benchmark interest rate with the
changes in fair value of the cross-currency interest rate swaps and
cross-currency swaps used to hedge the exposure, as applicable. The
Group uses the hypothetical derivative method to determine the
changes in fair value of the hedged item. The Group has identified
and to the extent possible mitigated the following possible sources
of ineffectiveness in its cash flow hedge relationships:
-- the use of derivatives as a protection against currency and
interest rate risk creates an exposure to the derivative
counterparty's credit risk which is not offset by the hedged item.
This risk is minimised by entering into derivatives with high
credit quality counterparties;
-- difference in timing of settlement of the hedging instrument and hedged item; and
-- designation of off-market hedging instruments.
Certain of the EUR Cross-Currency Interest Rate Swaps in
combination with the GBP Cross-Currency Interest Rate Swaps are
designated in cash flow hedge relationships to hedge the foreign
exchange risk and interest rate risk on the USD First Lien Term
Loan B bearing a minimum floating interest rate of 3.5% (USD three
month LIBOR plus a 3.5% margin, with a LIBOR floor of 0%). The
remaining EUR Cross-Currency Interest Rate Swaps have been split
for hedge accounting purposes with a portion of the exposure
designated in a cash flow hedge relationship and the remaining
exposure designated in a net investment hedge relationship. The
Cross-Currency Swaps are designated in cash flow hedge
relationships to hedge the foreign exchange risk on the Senior
Notes.
As at 31 December 2020, GBP5.7m of accumulated other
comprehensive income is included in the cash flow hedging reserve
(see Note 18) related to de-designated cash flow hedges and is
reclassified to the consolidated income statement as the hedged
cash flows impact income/(loss).
Net investment hedge accounting
In accordance with the Group's risk management strategy, the
Group designates certain cross-currency interest rate swap
contracts in net investment hedging relationships to mitigate the
risk of changes in foreign currency rates with respect to the
translation of assets and liabilities of subsidiaries with foreign
functional currencies.
The Group assesses hedge effectiveness by comparing the changes
in fair value of the net assets designated, due to movements in the
foreign currency rate with the changes in fair value of the hedging
instruments used to hedge the exposure. The Group uses the
hypothetical derivative method to determine the changes in fair
value of the hedged item. The only source of ineffectiveness is the
effect of the counterparty and the Group's own credit risk on the
fair value of the derivative, which is not reflected in the fair
value of the hypothetical derivative.
The Group has also designated the carrying amount of the EUR
First Lien Term Loan as a hedge of the spot foreign exchange risk
of its net investment in its EUR functional subsidiaries. The Group
assesses hedge effectiveness using the forward rate method by
comparing the currency and the carrying amount of the EUR First
Lien Term Loan B with the currency and the net assets of its EUR
functional subsidiaries.
As at 31 December 2020, GBP11.5m of accumulated other
comprehensive loss is included in the foreign exchange translation
reserve (see Note 18) related to de-designated net investment
hedges and is reclassified to the consolidated income statement
upon disposal of the net investment in the applicable foreign
subsidiaries.
18. Share capital and reserves
Share capital
The total authorised share capital of the Company comprises
300,000,000 ordinary shares of EUR0.09 each (2019: 150,000,000
ordinary shares of EUR0.09 each). All issued share capital is fully
paid. The holders of ordinary shares are entitled to vote at
general meetings of the Company on a one vote per share held basis.
Ordinary shareholders are also entitled to receive dividends as may
be declared by the Company from time to time.
The movement in issued share capital during the year ended 31
December 2020 was as follows:
-- in May 2020, 1,312,260 new ordinary shares were issued as
consideration for the 2019 final dividend as outlined in Note
19;
-- on 5 May 2020, the Company issued a total of 65,316,588
ordinary shares in exchange for 289,909,400 shares of TSG in
respect of the all share Combination with TSG resulting in Flutter
Entertainment plc shareholders owning 54.64% and the TSG
shareholders owning 45.36% of Flutter, on a fully diluted basis
(excluding any out of the money options). Under the terms of the
Combination, holders of TSG shares received 0.2253 ordinary shares
with nominal value of EUR 0.09 each in the Company ("ordinary
shares") in exchange for each outstanding TSG share (the "Exchange
Ratio"). Post Combination, the Company is the ultimate parent of
The Stars Group Inc. This gave rise to a Merger Reserve under
Section 72 of the Companies Act 2014 of GBP6,189.5m (see also Note
11);
-- on 13 May 2020, 819,230 new Flutter ordinary shares were
issued as consideration for the acquisition of the remaining 20%
interest of TSG Australia Pty Ltd by Flutter. The value of shares
issued amounted to AUD$151.4m (GBP79.7m) (see also Note 11);
-- o n 29 May 2020, the Company issued 8,045,995 new ordinary
shares at a price of 10,100 pence per share in respect of an equity
placement announced on 28 May 2020, raising gross proceeds of
GBP812.6m giving rise to share capital of GBP0.7m and a share
premium of GBP811.9m. The proceeds raised net of issuance costs
amounted to GBP806.3m with the issuance costs of GBP6.3m recognised
in retained earnings. The Placing Shares represent approximately
5.5% of the Company's issued share capital immediately prior to the
Placing (excluding treasury shares). The Placing Price represents a
discount of approximately 4.7% to the closing price on 28 May
2020;
-- on 4 December 2020, the Company issued a total of 8,004,503
ordinary shares at a price of 14,000 pence per share in respect of
an equity placement announced on 3 December 2020, raising proceeds
of GBP 1,120.6m giving rise to share capital of GBP0.7m and a share
premium of GBP1,119.9m . The proceeds raised net of issuance costs
amounted to GBP1,114.6m with the issuance costs of GBP6.1m
recognised in retained earnings. The Placing Shares represent
approximately 5.2% of the Company's issued share capital
immediately prior to the Placing (excluding treasury shares). The
Placing Price represents a discount of approximately 2.1% to the
closing price on 3 December 2020;
-- on 30 December 2020, 11,747,205 new Flutter ordinary shares
were issued as partial consideration for the acquisition of an
additional 37.2% of the outstanding share of FanDuel, bringing the
Group's holding in FanDuel to 95%, up from the previous controlling
interest of 57.8%. The value of shares issued amounted to GBP1.0m
in share capital and gives rise to GBP1,793.4m of a Merger Reserve
under Section 72 of the Companies Act 2014 (see also Note 11);
and
-- during the year a total of 1,492,430 ordinary shares (2019:
279,096 ordinary shares) were issued as a result of the exercise of
employee share options giving rise to share capital and share
premium of GBP34.3m (2019: GBP3.6m).
18. Share capital and reserves (continued)
Equity Reserves
Equity reserves include the following classes of reserves:
Merger reserve
The Merger Reserve under Section 72 of the Companies Act 2014 of
GBP7,982.9m represents the premium over the par value of shares
issued as consideration for the Combination with TSG and as partial
consideration for the acquisition of a further 37.2% of FanDuel
Group.
Treasury shares
A total of 1,965,600 ordinary shares were held in treasury as of
31 December 2020 (2019: 1,965,600). All rights (including voting
rights and the right to receive dividends) in the shares held in
treasury are suspended until such time as the shares are reissued.
The Group's distributable reserves are restricted by the value of
the treasury shares, which amounted to GBP40.7m as of 31 December
2020 (2019: GBP40.7m). The cost of treasury shares held by the
Company at 31 December 2020 was GBP4.2m (2019: GBP4.2m), with a
further GBP36.5m of shares being held by the Company's subsidiaries
(2019: GBP36.5m).
Employee benefit trust
At 31 December 2020, the Paddy Power Betfair plc Employee
Benefit Trust ("EBT") held 67,320 (2019: 70,397) of the Company's
own shares, which were acquired at a total cost of GBP5.8m (2019:
GBP6.1m), in respect of potential future awards relating to the
Group's employee share plans. The Company's distributable reserves
at 31 December 2020 are restricted by this cost amount. In 2020,
3,077 shares with an original cost of GBP0.3m (2019: 29,344 shares
with an original cost of GBP2.5m) were transferred from the EBT to
the beneficiaries of the EBT.
Foreign exchange translation reserve
The foreign exchange translation reserve at 31 December 2020 had
a credit balance of GBP49.6m (2019: debit balance of GBP21.5m) and
arose from the retranslation of the Group's net investment in EUR,
AUD, USD and GEL functional currency entities. The movement in the
foreign exchange translation reserve for the year ending 31
December 2020 reflects mainly strengthening of AUD and EUR against
GBP in the year. As a result of the acquisition of a further 37.2%
of FanDuel Group shares in December 2020, GBP2.2m of foreign
currency translation was transferred from Non-controlling interest
to foreign exchange translation reserve.
Cash flow hedge reserve
The cash flow hedge reserve represents the effective portion of
the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that had not yet
occurred at that date.
Share-based payments reserve
In 2020, an amount of GBP107.7m (2019: GBP20.3m) in respect of
share options exercised during the year was transferred from the
share-based payment reserve to retained earnings. An amount of
GBP1.0m of deferred tax relating primarily to the Group's
share-based payments was charged to retained earnings in 2020
(2019: credit of GBP1.1m). An amount of GBP6.4m of current tax
relating to the Group's share-based payments was credited to
retained earnings in 2020 (2019: GBP0.4m).
Other reserves
Other reserves comprise undenominated capital. Undenominated
capital at 31 December 2020 of GBP2.3m (2019: GBP2.3m) relates to
the nominal value of shares in the Company acquired by the Company
of GBP2.1m (2019: GBP2.1m) and subsequently cancelled and an amount
of GBP0.2m (2019: GBP0.2m) which arose on the redenomination of the
ordinary share capital of the Company at the time of conversion
from Irish pounds to Euro.
Non-controlling interest
During the year, the Group paid dividends totalling GBP15.2m to
the Non-controlling interest in Adjarabet. Also, as result of the
acquisition of a further 37.2% of FanDuel Group shares in December
2020, GBP76.7m and GBP2.2m were transferred from Non-controlling
interest to retained earnings and foreign exchange translation
reserve, respectively.
19. Dividends paid on ordinary shares
Due to the impact of COVID-19, the Board paid the 2019 final
dividend in May 2020 through the issuance of ordinary shares rather
than by cash. This resulted in the Group issuing 1,312,260 Flutter
ordinary shares of EUR0.09 each.
The 2018 final dividend of GBP104.0m and the 2019 interim
dividend of GBP52.2m was settled in cash.
Given the impact of the current disruption caused by COVID-19
and the ambition for the Combined Group to de-lever, the Board
considers it prudent to suspend the dividend for the current
financial year ending 31 December 2020. The Board is committed to
reviewing dividend policy once the Group returns to its medium-term
leverage target of 1-2x.
20. Commitments, contingencies and Kentucky proceedings
Guarantees
The Company enters into financial guarantee contracts to
guarantee the indebtedness of other companies within the Group. The
Company considers these to be insurance arrangements and accounts
for them as such. The Company treats the guarantee contract as a
contingent liability until such time as it becomes probable that
the Company will be required to make a payment under the
guarantee.
The Group has uncommitted working capital overdraft facilities
of GBP16.6m (2019: GBP19.3m) with Allied Irish Banks p.l.c. These
facilities are secured by a Letter of Guarantee from Flutter
Entertainment plc.
The Group has bank guarantees: (1) in favour of certain gaming
regulatory authorities to guarantee the payment of player funds,
player prizes, and certain taxes and fees due by a number of Group
companies; and (2) in respect of certain third party rental and
other property commitments, merchant facilities and third party
letter of credit facilities. The maximum amount of the guarantees
at 31 December 2020 was GBP74.8m (2019: GBP12.5m). No claims had
been made against the guarantees as of 31 December 2020 (2019:
GBPNil). The guarantees are secured by counter indemnities from
Flutter Entertainment plc and certain of its subsidiary companies.
The value of cash deposits over which the guaranteeing banks hold
security was GBP12.9m at 31 December 2020 (2019: GBP2.6m).
As mentioned in Note 16, borrowings under the TLA Agreement,
Syndicated Facility Agreement and Senior Notes are guaranteed by
the Company and certain of its operating subsidiaries.
Contingent liabilitie s
The Group operates in an uncertain marketplace where many
governments are either introducing or contemplating new regulatory
or fiscal arrangements.
The Board monitors legal and regulatory developments and their
potential impact on the business, however given the lack of a
harmonised regulatory environment, the value and timing of any
obligations in this regard are subject to a high degree of
uncertainty and cannot always be reliably predicted. See Note 12
for details of legacy German and Greek tax assessments.
Prior to the Combination, the Board of TSG became aware of the
possibility of improper foreign payments by TSG or its subsidiaries
in certain jurisdictions outside of Canada and the United States
relating to its historical B2B business (which was never profitable
and effectively ceased operations in 2014). When this matter arose,
TSG contacted the relevant authorities in the United States and
Canada with respect to these matters and, following the
Combination, Flutter continues to cooperate with the United States
and Canada governmental authorities in respect of all inquiries
relating to such payments. Based on its review of these matters to
date, the Board of Flutter has not identified issues that it
believes would have a significant adverse effect on the Group's
financial position or business operations.
20. Commitments, contingencies and Kentucky proceedings
(continued)
Kentucky proceedings
As disclosed in Note 15, on 17 December 2020, the Kentucky
Supreme Court judgement reinstated the 2015 award of damages
against TSG for US$870m with compounding interest of 12% per
annum.
Together with its legal advisers Flutter is currently reviewing
its position and strongly disputes the basis of this judgement and
is confident that any amount it is ultimately liable to pay will be
a limited proportion of the reinstated judgement. No liability was
previously recognised by either TSG or Flutter prior to this
judgement.
Based on the opinion and views of legal counsel and advisers as
to the likely payout outcomes, the Group has recognised a provision
of US$100m as part of TSG Combination fair value acquisition
accounting in respect of this litigation, which reflects the value
of the supersedes bond in place since February 2016. This
assessment relies on estimates and assumptions and involves a
series of judgements about future events.
Capital commitments
Capital expenditure contracted for at the statement of financial
position date but not yet incurred was as follows:
31 December 2020 31 December
GBPm 2019
GBPm
Property, plant and equipment 14.3 0.4
Intangible assets 1.0 0.7
Total 15.3 1.1
21. Related parties
There were no transactions with related parties during the years
ended 31 December 2020 and 2019 that materially impacted the
financial position or performance of the Group
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
22. Events after the reporting date
Acquisition of Junglee Games
In January 2021, the Group completed the acquisition of an
initial 50.1% stake in Junglee Games ('Junglee'), an Indian online
rummy operator, for US$66.2m (GBP48m).
Junglee is a top 3 player in the legal Indian online rummy
market. Based on its December 2020 run-rate, Junglee would generate
annualised gross revenue of circa GBP50m in a full year. The Group
sees good potential to further develop Junglee's product offering,
including its recently launched daily fantasy sports product,
leveraging the Group's capabilities in this area. The Group has put
in place arrangements that could see its ownership in the business
increase to 100% in 2025.
The acquisition-date fair value accounting had not been
completed as at 1 March 2021.
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END
FR FLFITVDILIIL
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