TIDMPTEC
RNS Number : 9227R
Playtech PLC
11 March 2021
Playtech plc
("Playtech", or the "Company", or the "Group")
Final results for the year ended 31 December 2020
Strategic progress and strong financial control deliver Adjusted
EBITDA of EUR310 million
Playtech (LSE: PTEC) today announces its final results for the
year ended 31 December 2020, together with a trading update for
January and February 2021.
Financial summary(1,2)
Numbers in table below are from continuing operations (i.e.
excluding Finalto and Casual & Social Gaming), unless otherwise
stated
FY 2020 FY 2019 Change Change (const.
(reported) currency)(5)
----------------------------- ------------- ------------ ------------ ---------------
Revenue EUR1,078.5m EUR1,440.5m -25% -24%
Adjusted EBITDA (including
Finalto)(2) EUR310.0m EUR383.1m -19% -19%
Adjusted EBITDA(3) EUR253.6m EUR375.3m -32% -32%
Adjusted post-tax profit(4) EUR27.3m EUR137.4m -80% -77%
Reported post-tax profit /
(loss)(4) -EUR73.0m EUR55.9m -231% -223%
44.6
Adjusted diluted EPS 8.8 EURc EURc -80% -78%
-24.5 18.1
Reported diluted EPS EURc EURc -235% -227%
Adjusted Gross Cash (excl.
RCF) (6) EUR342.2m EUR271.5m 26% n/a
Group highlights
-- Significant strategic and operational progress due to the
hard work, resilience and commitment of our people
-- Resilient financial performance with Adjusted EBITDA of
EUR310.0 million, driven by Finalto in H1, and Core B2B and
Snaitech in H2
-- Strong progress on US strategy with New Jersey and Michigan
licences, and launches with bet365 and Entain; multi-state
strategic agreement with Parx and additional licence applications
in progress
-- Strategic agreements signed in Guatemala, Costa Rica and Panama
-- Launch of ESG commitment, Sustainable Success, to consolidate
position as a global leader in safer products, data analytics and
player engagement solutions
-- Cash preservation and resilient operational performance leads
to strong balance sheet with Net debt/Adjusted EBITDA of 1.7x at 31
December 2020 (1.6x at 31 December 2019)
-- Simplification of Group; Casual Gaming business disposed and
Finalto discontinued, sale process ongoing
-- Migration of tax residency to UK completed in early January 2021
-- Brian Mattingley to become Chairman effective 1 June 2021
Divisional highlights
B2B Gambling
-- Expanded presence in the US and Latin America
-- Very strong online performance, which mitigated decline of retail due to pandemic
-- Significant growth continued from Caliente in Mexico; Wplay launched in Colombia
-- Continued diversification of B2B business with over 100 new brands added to SaaS offering
-- B2B Gambling Adjusted EBITDA of EUR125.8 million was down 40%
at constant currency versus 2019 due to retail closures, a decline
in Asia and significant hardware sales in the 2019 comparative
-- Very strong growth in Live Casino; significant operational
momentum with new signings, expanded presence with existing
licensees and new product launches
-- Asia impacted by government restrictions in response to the pandemic
B2C Gambling
-- Snaitech Adjusted EBITDA decreased to EUR132.0 million (2019:
EUR162.5 million) due to retail closures and cancellation of
sporting fixtures, partially offset by strong cost control and 58%
growth in online revenues versus 2019
-- Snaitech saw continued strong progress in Sports; achieved
number one market share position (retail and online combined,
measured by GGR) in Italy in 2020
-- Snaitech land sale completed with EUR49.5 million in cash received in 2020
-- HPYBET saw retail closures due to the pandemic, resulting in
a further impairment of the business
-- White label (including Sun Bingo) saw 8% revenue growth
versus 2019 to EUR55.0 million (2019: EUR51.1 million)
Finalto (formerly TradeTech Group)
-- Very strong H1 performance driven by exceptional market volatility and trading volumes
-- Finalto's revenues were EUR121.9 million in 2020,
representing growth of 80% versus 2019, and Adjusted EBITDA was
EUR56.4 million, up 623% versus 2019
-- Despite the strong performance in 2020, the Group continues
to execute its simplification strategy in order to focus on Core
Gambling businesses and remains in discussions regarding potential
sale of Finalto; presented as discontinued operation; EUR221.3
million impairment charge
Current trading and outlook
-- Good start to 2021 in January and February in context of
ongoing lockdowns in certain markets
-- B2B and B2C online businesses expected to continue to perform strongly
-- Lockdowns expected to remain in major markets into Q2,
therefore cautious about retail recovery
-- Increasing investment in US to capitalise on momentum from Parx and Novomatic deals
-- Continuing focus and commitment to returning capital to
shareholders whilst balancing the needs of the business and taking
a prudent approach to its capital structure and leverage
Medium-term outlook
-- Leading technology and strong balance sheet position Playtech
to emerge strongly from COVID-19 period and take advantage of
emerging opportunities in key territories
o Comprehensive product offering is ideally placed to capture
significant US market opportunity
o Opportunities for further material strategic agreements
-- Focus on extending Playtech's position as a global leader in
safer gambling products and leveraging its data analytics and
player engagement solutions
Mor Weizer, CEO, commented :
"The attitude and skill of our people, and the strength and
diversification of our technology-led business model has enabled us
to deliver a robust financial performance in spite of the
challenging backdrop.
"Playtech also made significant strategic and operational
progress by adding new brands, expanding existing relationships and
entering new markets. We are particularly pleased with the
excellent progress we have made in the US market, launching with
bet365 and Entain in 2020, and signing milestone agreements with
the Greenwood companies in 2021 to license our products in
Michigan, Indiana, New Jersey and Pennsylvania.
"Snaitech has continued to excel in Italy despite the retail
closures in 2020. Snai achieved the number one market share
position in Italy across online and retail sports betting and grew
its overall online revenue by 58% in 2020. Italy continues to offer
significant growth potential, and Snaitech is ideally positioned to
capitalise on this opportunity.
"As the leading technology company in the gambling industry, our
licensees look to us to deliver innovation that changes the way
players experience gambling entertainment. Key to this approach is
Sustainable Success, our ESG commitment launched in 2020, which
will consolidate our position as a global leader in safer products,
data analytics and player engagement solutions and commits to grow
our business in a way that benefits our people, our communities,
the environment and our industry.
"The significant strategic and operational progress we achieved
in 2020 has placed us in a strong position to capture the exciting
market opportunities ahead."
- Ends -
For further information contact:
Playtech plc +44 (0) 20 3805
Mor Weizer, Chief Executive Officer 4822
Andrew Smith, Chief Financial Officer
c/o Headland
Chris McGinnis, Director of Investor Relations
and Strategic Analysis +44 (0) 20 3805
James Newman, Director of Corporate Affairs 4822
Headland (PR adviser to Playtech) +44 (0) 20 3805
Lucy Legh, Stephen Malthouse, Jack Gault 4822
(1) 2019 numbers are restated to reflect the disposed Casual and
Social Gaming business and discontinued Finalto business for the
purposes of comparison. Totals in tables throughout this statement
may not exactly equal the components of the total due to
rounding.
(2) Adjusted EBITDA (including Finalto) has been included as a
metric because it is the most comparable to market consensus
estimates by the equity research analysts that follow the Company.
The reconciliation between this metric and Adjusted EBITDA is
simply the inclusion of Finalto numbers. Finalto has been
classified as a discontinued operation.
(3) Adjusted numbers relate to certain non-cash and one-off
items. The Board of Directors believes that the adjusted results
represent more closely the consistent trading performance of the
business. A full reconciliation between the actual and adjusted
results is provided in Note 10.
(4) Adjusted Profit refers to post-tax Profit from continuing
operations attributable to the owners of the Company after the
relevant adjustments as detailed above. Reported Profit refers to
post-tax Profit from continuing operations attributable to the
owners of the Company before adjustments.
(5) Constant currency numbers exclude the exchange rate impact
on the results by using previous period relevant exchange rate and
exclude the total cost/income of exchange rate differences
recognised in the period.
(6) For comparison purposes, adjusted gross cash in 2020 and
2019 excludes the drawn down RCF.
Conference call and presentation
A presentation will be held today at 9.00 am via a live audio
webcast accessible using this link:
https://www.investis-live.com/playtech/5f5f7059f90d370c00358325/wrts
Analysts and investors can also dial into the call using the
following details:
United Kingdom: 0800 640 6441
USA: 1 855 9796 654
USA (Local): 1 646 664 1960
All other locations: +44 20 3936 2999
Access code: 903278
There will also be a replay available for one week after the
live conference call, available at:
UK: 020 3936 3001
USA (Local): 1 845 709 8569
USA (Toll Free): 1 855 762 8306
All other locations: +44 20 3936 3001
Access Code: 687052
The presentation slides will be available today from 8.30 am at:
http://www.investors.playtech.com/results-centre/presentations/2020.aspx
Forward looking statements
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". By their nature,
forward-looking statements involve risk and uncertainty since they
relate to future events and circumstances. Actual results may, and
often do, differ materially from any forward-looking
statements.
Any forward-looking statements in this announcement reflect
Playtech's view with respect to future events as at the date of
this announcement. Save as required by law or by the Listing Rules
of the UK Listing Authority, Playtech undertakes no obligation to
publicly revise any forward-looking statements in this announcement
following any change in its expectations or to reflect events or
circumstances after the date of this announcement.
About Playtech
Founded in 1999 and premium listed on the Main Market of the
London Stock Exchange, Playtech is a technology leader in the
gambling and financial trading industries with over 6,400 employees
across 24 countries.
Playtech is the gambling industry's leading technology company
delivering business intelligence driven gambling software,
services, content and platform technology across the industry's
most popular product verticals, including, casino, live casino,
sports betting, virtual sports, bingo and poker. It is the pioneer
of omni-channel gambling technology through its integrated platform
technology, Playtech ONE. Playtech ONE delivers data driven
marketing expertise, single wallet functionality, CRM and
responsible gambling solutions across one single platform across
product verticals and across retail and online.
Playtech partners with and invests in the leading brands in
regulated and newly regulated markets to deliver its data driven
gambling technology across the retail and online value chain.
Playtech provides its technology on a B2B basis to the industry's
leading retail and online operators, land-based casino groups and
government sponsored entities such as lotteries. Playtech directly
owns and operates Snaitech, the leading sports betting and gaming
company in online and retail in Italy.
Playtech's also owns Finalto, a technology leader in the CFD and
financial trading industry that operates both on a B2B and B2C
basis. Finalto has been classified as a discontinued operation as
at 31 December 2020.
Chairman's Statement
In May 2020, the Board asked me to take the role of Interim
Chairman. The Group's process of appointing a permanent Chairman
was severely obstructed by the COVID-19 pandemic, and the Board
tasked me with bringing stability and continuity to the Company at
a time of unprecedented challenge and change. It has been an
enormous privilege to be the Interim Chairman of Playtech over the
past 12 months and I thank the Board and the Playtech team for
their support, assistance, hard work and dedication.
On 3 March 2021, the Company announced that following an
extensive process, Brian Mattingley had been selected as
Non-Executive Chairman. Brian brings significant online gambling
sector experience and a track record of delivering high levels of
stakeholder engagement in highly regulated and fast-growing
industries. Brian will take up the role from 1 June 2021 and the
Board and I look forward to working with him to deliver the next
phase of Playtech's growth.
During my time as Chairman, the Board and I worked with the
Management team to focus the Company's efforts in three key areas.
Firstly, to ensure that we did everything we could to protect our
people and their livelihoods in the face of the immediate
challenges of the pandemic, and to ensure our customers were well
looked after. Secondly, to ensure that Playtech achieved its
strategic goals to secure future growth opportunities, particularly
in the US and Latin America. And finally, to continue Playtech's
corporate growth with the launch of Sustainable Success, our
commitment to grow Playtech in a way that benefits our people, our
communities, the environment and our industry - following the
events of 2020, this is now more important than ever.
Performance and COVID-19
Playtech enjoyed a strong start to the year before the onset of
the COVID-19 pandemic. In the face of an unprecedented trading
environment the Board is proud to report that Playtech delivered a
resilient financial performance, delivering against our strategic
priorities, whilst also laying the foundations for future growth.
Swift action to enact our business continuity plans and strong
engagement with employees and licensees allowed Playtech to
continue to deliver its software and services whilst being agile
enough to work with partners to launch new projects. Although parts
of our business remain adversely affected by the restrictions
imposed by the pandemic, the diversity and strength of Playtech's
business model in 2020 can give stakeholders confidence in our
resilience in the face of any continuing restrictions from the
COVID-19 pandemic.
Central to our strong performance during 2020 was the continued
professionalism and commitment of our people. Our number one
priority during this crisis has been the health and wellbeing of
Playtech's employees -we have worked to protect and support them
through our swift move to remote working and our global employee
wellbeing programme. The Board has been continually impressed and
inspired by our people's compassion -not only supporting each other
but also working to support their local communities during 2020. As
a global business, Playtech has offices in many locations impacted
by the crisis. Playtech and its people offered their skills,
charitable budgets, assets and technology to support local
communities, charities and not-for-profit organisations, and
licensees to help reduce the impact of COVID-19.
In order to support our communities and the industry to help
address the long-term challenges of the pandemic, in 2020 the Board
approved a GBP3 million COVID-19 Recovery and Resilience Fund. The
Fund aims to assist non-profit and social enterprise organisations
delivering mental health and wellbeing services in Playtech's end
markets and local communities. The Fund will prioritise support for
organisations delivering programmes to people affected by gambling
related harm, domestic abuse, and unemployment as well as at-risk
groups such as young people, frontline healthcare workers and first
responders. The Fund will be managed and distributed by the Charity
Aid Foundation (CAF).
Strategic Progress
The scale of our technology and breadth of our product offering
has continued to deliver strategic progress in key markets. In 2020
Playtech entered the US market with a transactional waiver in New
Jersey in H1 and has since launched with bet365 and Entain. This
was followed by regulatory approval in Michigan in December and a
strategic multi-state agreement with Parx Casino and the Greenwood
companies in early 2021. This was delivered alongside continued
growth in Latin America with Caliente in Mexico, new structured
agreements in Guatemala, Costa Rica and Panama as well as the
launch of Wplay in Colombia.
Further strategic progress was made in 2020 in disposing of
non-core assets and focusing the business on executing on its
strategic position as a leader in gambling technology. In early
2021 Playtech completed the disposal of its remaining Casual and
Social Gaming assets and remains in discussions regarding the sale
of Finalto.
Sustainable Success and Stakeholder Advisory Panel
Over the last 12 months, Playtech has worked with academics,
charities and thought leaders in the gambling sector to make
Sustainable Success a roadmap for Playtech utilising our scale,
reach and data capabilities to build a sustainable, successful, and
safer gambling entertainment industry for the benefit of all
stakeholders. A key pillar of Sustainable Success is our commitment
to invest GBP5 million from 2020 to 2025 to promote healthy online
lives, digital resilience and to reduce digital gambling-related
harm by engaging with a wide range of organisations to explore
opportunities for collaboration, research, and interventions.
During the year, in addition to strengthening our approach to
sustainability, we continued to focus on our stakeholders, making
them an integral part of what we do - from working ever closer with
our licensees, to engaging with our people to help them support our
communities. To continue to strengthen our stakeholder engagement
into 2021, Playtech launched its first Stakeholder Advisory Panel.
Throughout 2021, the Playtech Chairman and CEO will host a series
of panels with thought leaders, policy and sustainability experts
from inside and outside the sector to inform and challenge how we
approach sustainability and safer gambling.
During 2020, Playtech shareholders approved the amendment of the
Company's articles to facilitate the migration of the Company's tax
residency to the United Kingdom from the Isle of Man. This allows
Playtech to hold Board and General meetings in the UK and helps to
facilitate greater shareholder and broader stakeholder engagement
with the Company and the Board.
Shareholder Returns
As part of the Management team's actions to preserve cash across
the business, the Board suspended shareholder distributions in
March 2020 due to the uncertainty relating to COVID-19. The share
repurchase programme announced at the FY 2019 results was postponed
with immediate effect with approximately EUR10 million of the EUR40
million buyback having been completed. Also, the 2019 final
dividend was not proposed at the AGM. Together these measures
allowed the Company to preserve over EUR65 million of cash outflows
during the year and has helped to ensure that Playtech ended 2020
in a strong financial position.
Playtech remains committed to returning capital to shareholders
whilst balancing the needs of the business and taking a prudent
approach to its capital structure and leverage.
Chief Executive Officer's Review
Overview
Against a challenging backdrop, Playtech delivered a resilient
financial performance in 2020 with swift management actions
limiting the impact of COVID-19 restrictions on overall Adjusted
EBITDA. More importantly, Playtech continued to make significant
strategic progress, which positions the Group strongly to benefit
from the recovery and to capture the exciting market
opportunity.
Playtech made excellent progress in the highly strategic US
market, launching with bet365 and Entain in 2020. The scope for
further progress is significant, and the Group recently announced
agreements with the Greenwood companies to license our products in
four states.
Alongside this, Playtech has continued to build on its position
in Latin America. Caliente continues to go from strength to
strength, and the Group added new structured agreements in
Guatemala, Costa Rica and Panama. Playtech also added more than 100
new brands to its SaaS offering in 2020.
Snaitech has continued to outperform in Italy despite the retail
closures in 2020 as a result of the pandemic. Snai achieved the
number one market share position in Italy across online and retail
sports betting (measured by GGR) and grew its overall online
revenue by 58% in 2020.
As the leading technology company in the gambling industry,
Playtech recognises that licensees look to the Group to deliver
innovation that changes the way players experience gambling
entertainment. Key to this approach is Sustainable Success,
Playtech's new ESG strategy launched in 2020, which aims to
consolidate its position as a global leader in safer products, data
analytics and player engagement solutions and build a safe and
sustainable gambling industry.
The simplification of Playtech is also progressing. Casual
Gaming has been disposed and the Finalto sale process is advanced.
Once this process is completed, Playtech will be a simpler
business, focused on the attractive markets of core B2B Gambling
and B2C Gambling.
Response to COVID-19
As COVID-19 impacted the global economy throughout 2020,
Playtech made considerable efforts to mitigate the effects of the
outbreak on its staff, its partners and its business. Management
took decisive action to ensure the health and wellbeing of its
employees and to preserve cash flow, while continuing to provide
customers with Playtech's leading technology.
Playtech enacted its business continuity plan in the early
stages of the pandemic with all of its offices moving to remote
working during March to protect employees' health and safety.
Playtech managed this transition while largely maintaining
productivity levels and delivery deadlines. Other actions taken
included the deferral or cancellation of capital expenditure,
strict working capital management, suspension of shareholder
distributions, reduced working hours in certain locations, reduced
office and maintenance costs, and the renegotiation of timing of
cash outflows including contingent consideration payments due in
2020.
Certain parts of Playtech's business, particularly those with a
retail focus, were severely affected by the pandemic in 2020, and
some continue to be impacted into 2021. As a result of the actions
taken and the outstanding response from its people, Playtech
demonstrated strong operational resilience during the period. In
addition to delivering a robust performance, the Company made
significant strategic and operational progress by adding new
brands, expanding existing relationships and entering new
markets.
At the end of the year the Board took the decision to commission
a GBP3 million Resilience & Recovery Fund to help address and
alleviate some of the long term impacts of the COVID-19 pandemic on
its communities and the industry as a whole. The Fund has been
established to assist and support organisations delivering mental
health and wellbeing services around the world, so that people can
benefit from accessible and affordable support from these vital
programmes.
Core B2B Gambling
The strategic focus of Playtech's Core B2B Gambling business
continues to be on higher margin regulated opportunities with
Casino, Live Casino and Sports being of greatest focus. Playtech
continues to support existing licensees with new technologies and
tools and provide them with greater flexibility in their
operations. Playtech intends to continue accessing opportunities
including attracting new customers in both existing regulated
markets and newly regulated markets, as well as through new
structured agreements and joint ventures depending on commercial
suitability and market dynamics.
Overall, Core B2B Gambling revenues declined 6% in the period
compared to 2019, as the impact of retail closures and the
cancellation or postponement of sporting events had a significant
negative impact on revenue in the retail parts of this business,
outweighing the significant growth seen in the online business.
Excluding Sports, the online portion of Core B2B Gambling grew 30%
at constant currency compared to 2019 driven by strong results from
the Casino (including Live), Bingo and Poker online businesses.
Despite the pandemic, operational momentum continued across B2B
Gambling in 2020 with new customer wins, new launches with existing
customers and further product enhancements.
US
The US is a highly strategic market for Playtech and creates a
significant long-term opportunity across its full product suite. In
2020, Playtech made significant progress in the US as it was
granted licences to operate in New Jersey and Michigan and launched
in New Jersey with bet365 and Entain. Playtech will continue to
increase its strategic investment in the US market. Playtech has
also started the licensing process in additional US states and has
a strong pipeline of opportunities with both potential new
customers as well as existing ones in other markets.
In early 2021 Playtech signed strategic agreements with various
subsidiaries of Greenwood Racing Inc. which own and operate the
Parx Casino in Pennsylvania. The agreements include licensing of
Playtech products to the Greenwood companies in the states of
Michigan, Indiana, New Jersey and Pennsylvania, commencing with the
launch of online casino in Michigan on Playtech's IMS Platform and
Player Account Management (PAM).
Casino
Playtech's online Casino business had a very strong 2020.
Activity increased due to the growth in recent customer additions,
including Swiss Casino, the expansion with existing customers,
including Caliente, bet365 and Fortuna, as well as overall
increased activity levels in light of government lockdown
restrictions in various countries. The lack of sporting events also
led customers to look for alternative forms of leisure.
Playtech signed over 100 new brands in 2020 (compared with over
50 in 2019), including Betsson, Stoiximan and Kindred. Playtech
continued to roll out its products to further Entain brands and
geographies. Playtech also launched with bet365 in Greece, Spain
and Bulgaria, as well as with Fortuna in Slovakia, and went live
with Svenska Spel in Sweden.
Among various new product developments, Playtech developed the
Player Engagement Hub, an in-game widget that updates players on
features, such as leaderboards, and will also contain in-built
safer gambling functionality to inform players, in real-time, about
the potential dangers at various stages of gameplay. Leaderboards
is the first feature to be delivered within the Player Engagement
Hub. As with future features, this development is an out-of-the-box
tool that will reduce the technical burden for licensees, and in
turn, accelerate customer's go-to-market timeframes.
Further product developments included the roll-out of Age of The
Gods: Norse, an extension of the previously successful suite of
games which now includes advanced jackpot functionality.
Live Casino
The Live Casino business continued its strong momentum in 2020.
The business continued to add new customers, expand partnerships
with existing customers, and deliver innovation while dealing with
the challenges posed by the COVID-19 pandemic.
During 2020, Playtech's Live Casino business added a number of
new customers, including Totalizator Sportowy, BetConstruct and
Svenska Spel. Its progress with existing customers included
PokerStars expanding into new territories, such as Denmark and
Sweden, and significantly increasing its number of tables with
Playtech. Playtech completed key strategic partnership product
launches with a series of games, such as Majority Rules Speed
Blackjack with Entain, Spin & Win Roulette with Flutter
Entertainment, and Cash Back Blackjack with Stoiximan. The business
also delivered a variety of new dedicated tables, including Quantum
Roulette in Italian for Snaitech, and a series of promotional-led
tables and dedicated tables in Spain with Codere, Sportium, Betfred
and Entain.
Playtech's key focus in regulated markets saw the launch of
Quantum Roulette in Spain, providing the first multiplier-based
Roulette game in that market, whilst launching the first live
variant of Sette e Mezzo in Italy, which specifically supports
partners with a traditional Italian-based Blackjack game.
Playtech took extensive measures to ensure minimal disruption to
its Live Casino facilities during the pandemic, whilst also
prioritising the safety of employees. As a result, Playtech's
largest Live Casino facility in Riga has remained open throughout
the pandemic. The Manila facility has been closed at various times
due to the Philippines government's strict lockdown measures,
however, Playtech has been able to shift all traffic to its other
facilities. Playtech has additional contingency plans should
further disruptions arise in the future.
Playtech's ability to offer seamless integration to its
facilities within days led to a new agreement with one of the most
significant providers of Live Casino in Asia. As a result, not only
did Playtech's Live Casino business experience exceptional organic
growth during the period, it was also able to take on significant
additional traffic from this Asian provider's extensive
distribution channel.
In addition to its existing product pipeline, Playtech delivered
Auto Table and Live Streamer, two products which allowed customers
to continue delivering games and services, and enabled dealers to
continue hosting games from remote locations during the pandemic.
Further innovation included the development of fixed odds games,
known as 'Live Betslip Games', to add value to sportsbook users
during a period with limited sporting events. Playtech also
developed its first ever Live Bingo game.
Sports
Playtech's Sports business started 2020 strongly in January and
February while also benefiting from favourable sporting results.
However, it was significantly impacted by various government
restrictions put in place in March as a result of the COVID-19
pandemic that led to retail closures and the cancellation or
postponement of the majority of major sporting events. The B2B
Sports business began to recover towards the end of H1 and in early
H2 as sporting events resumed and retail locations reopened. The
business was again impacted by government enforced retail closures
towards the end of 2020 and into 2021.
Bingo & Poker
The Bingo and Poker businesses enjoyed a strong 2020 with strong
growth compared to 2019. The pandemic created a significant
increase in activity driven by an increase in players' leisure time
due to the government lockdown measures in many jurisdictions at
various times during 2020.
Playtech's Poker network added 19 new brands in 2020, including
several following the closure of the Microgaming Poker Network,
most of which are new to Playtech.
Core B2C Gambling
Snaitech
Snaitech revenue was down 37% in 2020 compared to 2019 while
Adjusted EBITDA was down only 19%, highlighting the resilience of
its business model. Snaitech had a very strong start to 2020
through January and February, also benefitting from favourable
sporting results. However, following the decree from the Italian
Government issued on 8 March 2020, all betting shops, arcades and
bingo halls across Italy were forced to close as a result of the
COVID-19 pandemic. Snaitech was further impacted by the
postponement of most sporting events and competitions globally.
During, this period Snaitech continued to generate revenues from
its online gaming business, with online betting severely impacted
by the lack of sporting events. While Snaitech lost significant
revenue from retail closures and the lack of sport, it managed to
remain broadly breakeven on an EBITDA level even during the peak of
the pandemic. This was largely due to the strong performance of
online gaming and Snaitech's low fixed cost base franchise
operating model as well as action taken by the business to reduce
costs.
Retail shops began to reopen in June with the introduction of
appropriate safety measures such as plexiglass screens and social
distancing rules. The return of football and other sporting events
acted as a significant boost as activity levels started to
normalise towards the end of H1 and into H2. Snaitech had a very
strong period from July through October when the business was once
again impacted by government enforced retail closures from late
October through the end of 2020 and into 2021. However, sporting
events largely continued throughout H2 and Snaitech remained
positive on an EBITDA basis in this period despite the impact of
retail closures from late October through the end of the year.
Snaitech achieved the number one market share position in the
Italian sports betting market (retail and online combined measured
by GGR) in 2020, showing its operational and brand strength.
B2C (ex-Snaitech)
Playtech's White label business (predominantly Sun Bingo) saw a
strong performance in 2020 with heightened volumes of activity
versus 2019 leading to revenue growth of 10% at constant currency
in the year.
HPYBET was impacted by government lockdown restrictions during
parts of 2020 and by the cancellation and postponement of sporting
events during H1. Its retail locations in Germany and Austria were
closed at various points during 2020 and into 2021 and the business
incurred fixed costs owing to it being a mix between an owned and
franchise model. The closures have led to a EUR41.2 million
impairment of the business.
Asia
Playtech's revenue in Asia declined 28% as the business was
negatively impacted in 2020 by government restrictions imposed in
the region in response to the COVID-19 pandemic. The business has
also been impacted by restrictions on payment processing which,
while not targeted towards the gambling industry, have nonetheless
negatively impacted the business.
During 2020, Playtech added a new distributor alongside its
existing distributor to add more flexibility in the region going
forward and also benefitted in the period from a contract with a
leading provider of Live Casino in the region.
Finalto (previously TradeTech Group)
In early 2021, Playtech rebranded its Financials Division,
previously TradeTech Group, to Finalto. Playtech remains in
discussion regarding the intended sale of this business and it has
now been classified as a discontinued operation with an impairment
recognised as discussed below.
Finalto had a very strong performance in 2020 as it benefited
from increases in market volatility and trading volumes,
particularly in H1. This resulted in Finalto's revenues growing 80%
versus 2019. Market activity began to normalise towards the end of
the first half and this trend largely continued throughout the
remainder of 2020. This led to a modest performance from Finalto in
H2 compared to H1.
Group simplification
Playtech is in the process of simplifying the group to focus on
its core gambling businesses. This process led to the Casual and
Social Gaming business being classified as a discontinued operation
in 2019. The sale of certain loss-making assets of this business
was completed in 2020 for USD 1 million and the remainder of the
business was disposed of in early 2021 for approximately USD 10
million.
Playtech remains in discussions regarding the intended sale of
Finalto and the business is now considered a discontinued
operation. The Group remains committed to executing its
simplification strategy in order to focus on its core businesses
and in doing so, has recognised an impairment charge of EUR221.3
million in relation to Finalto.
Regulation
Playtech is committed to raising industry standards and
facilitating a fairer, safer and more sustainable sector. The
Company continues to actively promote regulation in all markets.
Effective regulation should ultimately lead to a safer gambling
experience. Starting from increasing the potential longevity of
each market by driving responsible decision making and investment
in safer gambling by operators, regulatory legislation should
improve consumer protection in our business of entertainment.
Playtech's commitment to safer gambling and its use of technology
and data to support its licensees in this area position the Group
well to remain the leading platform in regulated markets.
Regulated markets in Europe, Latin America and the US remain key
to Playtech's continued growth. Playtech's increase in regulated
revenue in recent years is a result of its sustained progress
against its strategic goals as well as the continuing success of
Snaitech in Italy. Playtech continues to expand into new regulated
markets, including the US. The Company intends to increase its
scale and distribution in these markets by leveraging its range of
products and services across the gambling value chain and its
global expertise to sign new licensees as well as expand its
relationship with existing licensees into further regulated and
newly regulating markets.
US
Since the repeal of PASPA in 2018, numerous states including New
Jersey, Pennsylvania, Nevada, Indiana, Colorado, Iowa, Mississippi,
Washington D.C., Illinois and most recently Virginia have approved
legislation to legalise sports betting. Many of these markets have
already launched in both online and retail channels, with others
expected to launch soon. In total, 22 states now offer or have
introduced legislation to allow sports betting with further states
expected to pass legislation in the coming years.
Online casino, which was not subject to PASPA, is allowed at the
discretion of individual states. West Virginia began allowing
online casino in 2020, while Michigan launched in early 2021,
joining New Jersey, Pennsylvania, and Delaware while Nevada allows
online poker only.
Europe
Regulated markets in Europe represent significant growth
opportunities. The Ukrainian regulations launched on 14 July 2020
and looking forward, others will follow. Netherlands and Germany,
both top 10 markets in Europe, are likely to reach regulatory
resolutions in 2021 with the Netherlands expected to issue licenses
and Germany set to update its expiring inter-state gaming treaty.
Playtech is well positioned to enter each of these markets and was
awarded a sports betting license in Germany through its B2C
division HPYBET in October 2020.
After many years of uncertainty for online casino in Germany,
the market provided some regulatory clarity in late 2020 as the 16
Länder (German federal states) confirmed that they have agreed to a
transitional Tolerance Policy for the period ahead of the
implementation of the Interstate Treaty 2021. The Tolerance Policy
effectively brought forward several parts of the Interstate Treaty,
namely switching off casino table games (Blackjack and Roulette)
until the individual Lander chooses to issue licenses under the
Treaty, as well as deposit limits on slots and poker of EUR1,000
per month, EUR1 maximum stakes per spin on slots, 5-second minimum
duration of slot spins and certain advertising restrictions.
In Italy, one of the Group's largest markets due to the presence
of Snaitech, the Government introduced significant restrictions
effective since July 2019 on the online advertising of gambling
products. Although smaller operators, particularly those who solely
operate online, will likely find it more difficult to compete in
the market, Snaitech's retail presence and the strength of its
brand saw it benefit from the advertising ban in relative terms
while it continued to increase its market share online. Further, in
light of the COVID-19 pandemic, the Government introduced an
additional emergency tax on retail and online sports betting until
the end of 2021.
Latin America
Latin America remains a key growth territory for online gaming.
Playtech continues to explore deals across Latin America and will
look to leverage the success of its relationship with Caliente in
Mexico. In H2 2019 Playtech signed a major new agreement with
Wplay, one of the leading operators in Colombia, which went live
with Playtech technology in 2020. Playtech also signed agreements
in Guatemala, Costa Rica and Panama in 2020 as it continued to
extend its presence in the region. Playtech recently received a
licence in the province of Buenos Aires in Argentina.
Sports betting legislation has been passed in Brazil, which is
expected to be implemented in the next few years. Given the
population and its access to the mobile channel, this could be an
interesting opportunity in the future. Further jurisdictions such
as Peru and individual provinces of Argentina should also provide
opportunities for Playtech in the coming years.
UK
The UK remains a key regulated market for Playtech with its
ongoing relationships with major operators. Playtech has been
actively involved in discussions around safer game design and
online advertising and, through the industry trade body the Betting
and Gaming Council (BGC), is co-leading a working group on the
subject. Playtech expects that its commitment to safer gambling and
its use of technology and data to support its licensees in this
area will see it remain the go-to platform for regulated markets
including the UK.
In December 2020 the UK Government announced a call for evidence
in order to review the current gambling laws in the UK. After an
initial 16-week call for evidence, the Government will assess the
evidence presented, alongside other data, with the aim of setting
out conclusions and any proposals for reform in a white paper next
year. Playtech is curating data and evidence relating to the call
and will be submitting in line with the Government's request.
During 2020 Playtech pledged to make a GBP3.5 million payment to
charities in lieu of a regulatory settlement following an
investigation into one of its former B2C operations. The Gambling
Commission investigation focused on regulatory failings which
occurred between May 2015 and September 2017 in a subsidiary that
operated two B2C brands in the UK, namely Titan.co.uk and
Winner.co.uk. Titan.co.uk closed in August 2018 and Winner.co.uk
closed in June 2019. This was part of a strategic decision to focus
on the Group's B2B activities in the UK and was taken in advance of
the UKGC's investigation. Following a fresh review of the UKGC
investigation led by interim Chairman Claire Milne, the Board took
the decision to voluntarily make charitable donations of GBP3.5
million and send the message to all Playtech's stakeholders that
this event in a former operation was not representative of
Playtech's high standards or where the Company sits today.
Game Design
Given Playtech's status as a strategic technology partner to
major operators worldwide, it is uniquely positioned to champion
innovation in product safety and game design. This is an area of
growing interest amongst regulators, politicians and society at
large.
Playtech was invited to co-lead the UK Gambling Commission
(UKGC) and Betting and Gaming Council's industry efforts to develop
the industry's first code of conduct on safer game design. The
code, published in September 2020, addresses player safety by
ensuring that safer gambling principles are fully incorporated into
the design of online games before they enter the market.
The resulting Game Design Code of Conduct includes principles as
well as commitments to act on specific features such as limits on
slot spin speeds and bans on certain features to discourage
intensive play. Following extensive consultation, the measures
outlined in the Code were agreed by all members of the Betting
& Gaming Council, with some requirements being implemented
immediately and others in 2021. The Code is intended to be a living
document, evolving as the research base and understanding around
game design continues to develop - Playtech is committed to playing
a major role in pioneering this important research agenda by
providing sound empirical data and insights. In the years ahead,
the Group hopes to spur greater levels of industry collaboration.
In the UK, the regulator is currently consulting on whether to
include the Code measures in its own License Conditions and Codes
of Practice (LCCP), which would make compliance mandatory for all
UK-licensed operators.
Safer Gambling and Sustainability
In 2020 Playtech launched Sustainable Success, its commitment to
grow its business in a way that benefits its people, its
communities, the environment, and the industry. Sustainable Success
aims to deliver change to help build a safer, more sustainable
entertainment industry for the benefit of all stakeholders and
Playtech has commitment to invest GBP5 million into initiatives
that boost digital resilience and safer gambling behaviours . A key
pillar of Playtech's corporate strategy is to cement its position
as the industry leader in safer products, data analytics and player
engagement solutions. To support this, a key commitment of
Sustainable Success is to increase the uptake of safer gambling
tools and solutions. During 2020, Playtech launched Playtech
Protect, a unified brand for all its safer gambling products,
research, innovation and thought leadership. As well as offering
Playtech's leading safer gambling tools and services, such as IMS,
BetBuddy and Player Journey, Playtech Protect also utilises the
scale of Playtech's technology by bringing compliance solutions
from outside the industry to Playtech's licensees - Playtech
Protect simplifies the integration meaning licensees only have to
integrate with Playtech to access these additional services.
Through Playtech Protect the Company is continuing to share its
research, data analytics expertise and insights with a wide range
of stakeholders including trade bodies, research organisations and
academics.
As part of its commitment to power and promote safer gambling
tools, Playtech offered all its Playtech Protect services,
including BetBuddy, for free to its licensees during the COVID-19
pandemic. Throughout the pandemic, Playtech continued supporting
its licensees and partners to ensure that pre-COVID Safer Gambling
commitments and industry codes of conduct were met and operating
effectively, to further safeguard consumers during the crisis.
Sustainable Success is also designed to support and further
Playtech's core values and unique family culture. How the Company
has responded and continues to respond to the human challenges of
COVID-19 is a clear testament to that strong culture. As a global
business, Playtech has offices in many locations significantly
impacted by the crisis. Playtech is offering its skills, charitable
budgets, assets, and technology to support its local communities,
charity and not-for-profit organisations as well as licensees to
help minimise the impact of COVID-19.
Alongside powering Safer Gambling tools, a key commitment of
Sustainable Success is for Playtech to partner with global leaders
on the shared societal challenges presented by digital and online
life. In September 2020 Playtech announced a new collaboration with
the Responsible Gambling Council (RGC), the international leader in
problem gambling prevention, awareness, and research. Playtech will
use its expertise and experience to help the RGC examine the links
between mental health, digital wellbeing and problem gambling using
a combination of thought leadership, research, and evaluation.
Chief Financial Officer's Review(1)
Overview
Response to COVID-19
Despite Playtech being severely impacted by COVID-19 through the
cancellation of sporting events worldwide and the closure of retail
shops, the Group continues to navigate the pandemic exceptionally
well and had a resilient 2020. Playtech took early and decisive
action to ensure the health and wellbeing of its employees and to
preserve cash flow, while also benefitting from heightened activity
in its online businesses.
Actions taken to preserve cash included the deferral or
cancellation of planned capital expenditure, strict working capital
management, reduced office and maintenance costs, the renegotiation
of the timing of major earnout payments in 2020 and the suspension
of shareholder distributions until further notice given the
uncertain economic backdrop.
As a precautionary measure, in the early stages of the pandemic
Playtech accessed approximately EUR6 million in government support
schemes in the UK and other markets. This was to ensure the Group
could protect jobs given the prevailing uncertainty over the
severity of the impact on the business from the pandemic. Despite
the impact of the restrictions on parts of our business and given
the overall resilient performance over the course of 2020, this
support is currently in the process of being repaid, has been fully
provided for at year end and therefore excluded from our results
for 2020.
Group performance
The Group saw an excellent start to 2020 in January and February
driven by strong performances from Snaitech, Live Casino and
Finalto (formerly TradeTech), combined with favourable sporting
results. However, the adverse impact of COVID-19 and the first
lockdowns from mid-March to June, and again from late October
onwards, led to the Group's total revenues including Finalto
decreasing by 20% year on year and on a constant currency basis,
albeit boosted by an exceptional Finalto performance during March
and April. Following the lifting of various global lockdowns and
the reopening of retail in June, the results showed a strong
recovery in H2 with July particularly strong driven by pent up
demand, a high concentration of football matches and another very
strong month from Finalto. The Group continued to recover well in
H2 driven by Snaitech and Core B2B, however, this recovery was
hindered from late October when further lockdowns were again
imposed by governments in several of its key markets, resulting in
further retail closures.
Despite the pandemic and the headwinds described above, the
Group achieved Adjusted EBITDA including Finalto of EUR310.0
million (2019: EUR383.1 million), an actual and constant currency
basis year-on-year decline of only 19%. This was driven by Finalto
in H1 and the strength of Playtech's online businesses outside of
Asia, namely Casino (including Live), Bingo, Poker and Snaitech in
H2.
During the year the Board of Directors solidified its decision
and made significant progress towards the sale of Finalto in line
with the Group's simplification strategy, in order to focus on its
core B2B and B2C gambling businesses. Therefore, the results of
this division in the current and prior years have been classified
as discontinued operations. Total reported revenue from continuing
operations ended at EUR1,078.5 million (2019: EUR1,440.5 million),
representing a 25% year on year decline, and 24% on a constant
currency basis. The Group achieved Adjusted EBITDA from continuing
operations of EUR253.6 million (2019: EUR375.3 million), a decrease
of 32% from last year and on a constant currency basis. The Group's
reported EBITDA from continuing operations decreased by 33% to
EUR222.9 million (2019: EUR333.7 million).
The Group implemented an internal restructuring in January 2021,
which resulted in Playtech plc migrating its tax residency to the
UK and the Group's key operating entity transferring its business
to a UK company.
Divisional Performance
Core B2B Gambling revenues (2) declined by 6% year on year and
4% at constant currency. This was driven by a 26% decrease in UK
revenues as a result of a 47% decline in UK retail activity because
of COVID-19 lockdowns. However, the UK performance was offset by a
5% increase in revenues from regulated markets outside of the UK,
namely Mexico with contributions from Poland, Colombia, Italy and
several other geographies, as well as a 26% increase in revenues
from unregulated markets excluding Asia, namely Canada, Germany and
South Africa. Revenues from Asia declined by 28% due to the severe
impacts of the pandemic in the region as well as non-sector
specific restrictions introduced on payment processing.
When excluding the impacts of retail closures and sporting
cancellations in 2020, Core B2B Gambling (online excluding sports)
revenues increased by 26% and 30% on a constant currency, driven by
revenues from regulated markets outside of the UK, which increased
by 59% and 68% on a constant currency basis. Revenues from
unregulated markets excluding Asia increased by 28%, while the UK
remained largely flat.
Within B2C, Snaitech revenues declined 37% due to the absence of
sporting events and the closure of retail shops during the COVID-19
lockdowns. However, Snaitech revenues were boosted by a 58%
increase in online revenue and furthermore, it achieved the number
one position across sports (online and retail measured by GGR) in
Italy in 2020. Snaitech's Adjusted EBITDA declined by 19%, a
smaller decrease than its revenues, due to its low fixed cost base,
effective cost reduction and the strong performance of its
higher-margin online business, which saw exceptional growth in
online EBITDA of 92%. Playtech's white label revenues,
predominantly Sun Bingo, increased 8% while the Retail Sport B2C
business suffered only a 3% decline in revenues, despite the retail
closures in Germany and Austria.
Regulated revenues from continuing operations accounted for 84%
of Group revenues in 2020 (86% including Finalto) versus 87% in
2019 (88% when including Finalto), with the fall driven by lower
revenues from Snaitech in Italy as described above.
Reported and Adjusted Profit
Adjusted profit before tax from continuing operations decreased
by 75 % to EUR45.1 million (2019: EUR177.8 million), driven by the
fall in Adjusted EBITDA and an increase in finance costs in 2020
owing to the full period impact of the EUR350 million bond raised
in March 2019, as well as the draw-down from the Company's
revolving credit facility during 2020.
Reported profit before tax from continuing operations declined
by 160% to a loss of EUR52.7 million (2019 reported profit: EUR88.2
million). Reported tax expense decreased by EUR11.4 million due
to:
-- Reduction in the current tax because of lower taxable
profits, following the decline in the overall Group performance;
and
-- Decrease in deferred tax as a result of lower utilisation of
brought forward losses in Snaitech, due to its lower taxable
profits resulting from the closure of retail locations throughout
much of the period.
This led to a total post-tax reported loss from continuing
operations of EUR73.0 million (2019 reported profit: EUR56.5
million).
Balance sheet and liquidity(3)
2020 2019
EUR'm EUR'm
---------------------------------------------- -------- --------
Cash and cash equivalents 683.7 671.5
Cash and cash equivalents included in assets
held for sale 376.9 2.6
---------------------------------------------- -------- --------
Total cash and cash equivalents 1,060.6 674.1
----------------------------------------------
Cash held on behalf of clients, progressive
jackpots and security deposits (129.1) (338.3)
Cash held on behalf of clients, progressive
jackpots and security deposits and included
in assets held for sale (280.4) -
---------------------------------------------- -------- --------
Adjusted gross cash and cash equivalents 651.1 335.8
---------------------------------------------- -------- --------
The Group continues to maintain a strong balance sheet with
total cash and cash equivalents of EUR1,060.6 million at 31
December 2020 (2019: EUR674.1 million). Adjusted gross cash, which
excludes the cash held on behalf of clients, progressive jackpots
and security deposits, increased to EUR651.1 million as at 31
December 2020 (31 December 2019: EUR335.8 million), owing in large
part to the Group drawing down its revolving credit facility as a
precautionary measure.
Excluding cash from the revolving credit facility, the Group
steered through the effects of the pandemic with its adjusted gross
cash increasing to EUR342.2 million at 31 December 2020 (2019:
EUR271.5 million) owing to the considerable cash preservation
actions described below.
The Group's total gross debt increased to EUR1,182.0 million at
31 December 2020 (31 December 2019: EUR935.8 million) with Net
debt, after deducting adjusted gross cash, decreasing to EUR530.9
million (31 December 2019: EUR600.0 million). The Net debt /
Adjusted EBITDA ratio increased only slightly to 1.7x at 31
December 2020 from 1.6x at 31 December 2019(6) , due to the overall
reduction in Adjusted EBITDA.
Playtech takes a prudent and disciplined approach to its banking
relationships. Despite being comfortably within its covenants,
Playtech proactively approached its lenders and agreed to amend the
covenants in its revolving credit facility for the 31 December 2020
and 30 June 2021 tests.
The leverage covenant was amended to 5x Net debt / Adjusted
EBITDA for the 31 December 2020 test and 4.5x for the 30 June 2021
test. The interest cover covenant was amended to 3x for the 31
December 2020 test and 3.5x for the 30 June 2021 test. The
covenants will return to the previous levels of 3x Net debt /
Adjusted EBITDA and 4x Adjusted EBITDA / interest cover from the 31
December 2021 test onwards, or sooner should the Company decide to
make shareholder distributions within those periods.
Given the ongoing uncertainty related to COVID-19 the Board
suspended shareholder distributions in February 2020 until further
notice. The share repurchase programme announced at the FY 2019
results was postponed with immediate effect and the 2019 final
dividend was not proposed at the 2020 AGM. Together these measures
allowed the Company to preserve over EUR65 million of cash outflows
during the year. In addition, Playtech received a total of EUR49.5
million in cash from the sale of Snaitech land in Italy during the
year.
Playtech's swift actions and assured navigation of the pandemic
has left the Group in strong financial health to benefit from the
reopening of retail shops in its main markets, the full return of
sporting events across the world and further growth opportunities
as it looks ahead into 2021 and beyond.
Group Summary (continuing operations) (4)
2020 2019 5
EUR'm EUR'm
B2B Gambling 494.8 553.9
B2C Gambling 596.3 900.5
Intercompany (12.6) (13.9)
------------------------------------------------- -------- ----------
Total Group Revenue from continuing operations 1,078.5 1,440.5
Adjusted costs (824.9) (1,065.2)
------------------------------------------------- -------- ----------
Adjusted EBITDA from continuing operations 253.6 375.3
------------------------------------------------- -------- ----------
Reconciliation from EBITDA to Adjusted EBITDA:
EBITDA 222.9 333.7
Employee stock option expenses 16.5 13.3
Professional fees on acquisitions 1.7 0.5
Additional consideration payable put/call
option 5.3 10.2
Movement in contingent consideration and
redemption liability 1.2 6.3
Effect from the amendment on terms of Sun
Bingo contract back dated - 6.4
Provision for other receivables 2.8 4.5
Impairment of associate - 0.4
Charitable donation 3.2 -
Adjusted EBITDA 253.6 375.3
------------------------------------------------- -------- ----------
Adjusted EBITDA margin 24% 26%
------------------------------------------------- -------- ----------
Adjusted EBITDA on a constant currency basis 256.4 375.3
------------------------------------------------- -------- ----------
Adjusted EBITDA margin on a constant currency
basis 24% 26%
------------------------------------------------- -------- ----------
EBITDA related to acquisitions at constant (0.3) -
currency
------------------------------------------------- -------- ----------
Underlying Adjusted EBITDA on a constant
currency basis 256.7 375.3
------------------------------------------------- -------- ----------
Underlying Adjusted EBITDA margin on a constant
currency basis 24% 26%
------------------------------------------------- -------- ----------
Despite the pandemic and the interruption of retail activity for
significant parts of the year, the Group's total reported revenues
(from continuing operations) decreased by only 25% to EUR1,078.5
million (2019: EUR1,440.5 million) and down 24% on a constant
currency basis. This was driven by the strength of the online
business, even when including online sports, which increased by 16%
year on year and 27% if we exclude Asia, offset by a decrease of
49% in retail revenue as a result of the various lockdowns during
the year.
The Group's Adjusted EBITDA from continuing operations reached
EUR253.6 million (2019: EUR375.3 million), a year-on-year and
constant currency basis decline of 32%. The decrease in Adjusted
EBITDA was higher than the decrease in revenue because of the
higher cost base in the B2B Gambling division, only partly offset
by the reduced cost base in the B2C Gambling division. This caused
the 2% year on year decline in the Adjusted EBITDA margin, from 26%
to 24% and is further analysed in the following sections. The
Group's total reported EBITDA decreased by 33% to EUR222.9 million
(2019: EUR333.7 million).
B2B Gambling
2020 2019 Change
EUR'm EUR'm
------------------------------ ------- ------- -------
B2B Gambling Revenue * 494.8 553.9 -11%
Research and development 76.1 80.9 -6%
Operations 214.5 181.2 18%
Administrative 63.2 57.4 10%
Sales and marketing 15.2 19.6 -22%
B2B Gambling Costs 369.0 339.1 9%
------------------------------ ------- ------- -------
B2B Gambling Adjusted EBITDA 125.8 214.8 -41%
------------------------------ ------- ------- -------
*To reflect the underlying activity of the B2B Gambling
division, B2B revenues include the software and services charges
generated from the relevant B2C activity with fellow Group
companies, which is then eliminated to show the consolidated
gambling division revenues.
B2B Gambling Revenue
Core B2B Gambling revenues declined by 6% driven by a 26%
decrease in UK revenues, offset by a 5% increase in revenues from
regulated markets outside of the UK and a 26% increase in revenues
from unregulated markets excluding Asia. Of the regulated markets
outside of the UK, the biggest contributor was Mexico, driven by
revenue growth at Caliente, with Poland, Colombia, Italy and
several other geographies also contributing to revenue growth. The
growth in revenues from unregulated markets excluding Asia came
from Canada, Germany and South Africa. Asian revenues declined 28%
due to the severe impact of the pandemic in the region as well as
non-sector specific restrictions introduced on payment
processing.
When excluding the impacts of retail closures and sporting
cancellations in 2020, Core B2B Gambling (online excluding sports)
revenues increased by 26% and 30% at constant currency, driven by
revenues from regulated markets outside of the UK, which increased
by 59% and by 68% on a constant currency basis. When including
Sports, total online revenues within Core B2B increased by 19% and
23% on a constant currency basis, driven by strong performances
within Casino, Live, Bingo and Poker, as a result of the increase
in demand for online entertainment due to the COVID-19 lockdown
periods during the year.
Overall, B2B Gambling revenues decreased by 11 % largely due to
the impact of retail closures in the period which led to a 51%
decline in retail revenues, alongside the 28% decline of revenues
from Asia.
When excluding Asia, B2B online gambling revenues were resilient
through the pandemic. With the exception of online Sport, which
declined significantly because of the suspension of sporting events
worldwide due to COVID-19, every other online business within the
B2B Gambling division achieved strong revenue growth against the
prior year.
B2B Gambling Costs
B2B Gambling costs increased in 2020. At the start of the year,
we had aggressive investment plans to support the expected strong
revenue growth in the year and to capture the opportunity in
markets such as the US and LatAm. When the pandemic hit, our
revenues and growth plans were impacted with either investment
already having been made or with Playtech taking the decision to
carry on with the investment plans in order to further strengthen
our market positions.
Research and development ("R&D") costs include, among
others, employee-related costs, direct expenses related to
dedicated teams and proportional office expenses. Expensed R&D
costs decreased by 6% to EUR76.1 million (2019: EUR80.9 million),
driven by a decline in outsourcing costs and a reduction in office
expenses and travel costs relating to R&D teams. Capitalised
development costs were 38% of total B2B Gambling R&D costs in
the period, compared to 37% in 2019.
The operations cost line includes employee-related costs and
their direct expenses, operational marketing, hosting, license fees
paid to third parties, branded content, hardware terminals
purchased for resale, feeds, chat moderators and proportional
office expenses. Operations costs increased by 18% to EUR214.5
million in 2020 (2019: EUR181.2 million). This increase was driven
by recruitment in Live Casino, an increase in targeted marketing
campaigns relating to turnkey customers and structured agreements,
an increase in game patent fees and an increase in doubtful debts
directly linked to COVID-19. These were offset by a decrease in
costs relating to hardware sales compared to 2019 as well as a
reduction in land-based terminals maintenance and service fees.
Administrative expenses increased by 10% to EUR63.2 million
(2019: EUR57.4 million) driven by an increase in employee-related
costs, legal and consulting fees including those relating to
Playtech's expansion into new geographies such as the US and Latin
America, tax advice fees relating to matters such as the Group's
change of tax residence, compliance expenses and charitable
donations. These increases were partially offset by a significant
reduction in general travel expenses.
Sales and marketing expenses decreased by 22% to EUR15.2 million
(2019: EUR19.6 million), driven by a reduction in exhibition costs
and travel costs directly related to exhibitions.
B2B Gambling Adjusted EBITDA
B2B Gambling Adjusted EBITDA decreased by 41% to EUR125.8
million (2019: EUR214.8 million). The decrease was driven by the
closure of retail activity for significant parts of 2020 due to the
pandemic and the decline in high-margin Asian revenues which flow
through in large part to EBITDA.
Furthermore, and as discussed above, included in our B2B costs
are significant investments made in order to enter new strategic
agreements and geographies (marketing, legal and consulting fees),
without an equivalent increase in revenue recognised in 2020, which
predominantly explains why the decrease in Adjusted EBITDA was
higher than the decrease in revenue.
B2C Gambling
2020 2019 Change
EUR'm EUR'm
------------------------------- ------- ------- -------
Snaitech 522.2 829.7 -37%
White label (incl. Sun Bingo) 55.0 51.1 8%
Sport B2C 19.1 19.7 -3%
B2C Gambling Revenue 596.3 900.5 -34%
Snaitech 390.2 667.2 -42%
White label (incl. Sun Bingo) 47.9 41.2 16%
Sport B2C 30.4 31.6 -4%
B2C Gambling Costs 468.5 740.0 -37%
------------------------------- ------- ------- -------
B2C Gambling Adjusted EBITDA 127.8 160.5 -20%
------------------------------- ------- ------- -------
Snaitech
Snaitech revenues decreased by 37% to EUR522.2 million (2019:
EUR829.7 million), owing to the effects of the COVID-19 pandemic
which resulted in the closure of retail betting shops in Italy and
the reduction in sporting events during the year. However,
Snaitech's revenue was supported by a 58% increase in online
revenues, which was driven by a 52% year on year increase in online
wagers.
Snaitech operating costs decreased by 42% to EUR390.2 million
(2019: EUR667.2 million). Given the high variable costs in the
business, the fall in operating costs was driven by the decrease in
revenues and mainly consisted of a decrease in franchise
commission, gaming concession fees, platform charges, maintenance
of the retail network and costs relating to data feeds.
Snaitech's Adjusted EBITDA declined by 19%, a smaller decrease
than its revenues, due to its low fixed cost base, effective cost
reduction and the strong performance of its higher-margin online
business, which saw exceptional growth in online EBITDA of 92%. As
a result, Snaitech's EBITDA margin improved to 25% (2019: 20%) and
its underlying margin, which excludes the distribution costs paid
to franchisees, improved to 48% (2019: 46%).
White label (including Sun Bingo )
Revenue from the white label business increased by 8% in total,
driven by an outstanding performance by Sun Bingo which grew 32% to
EUR53.8 million (2019: EUR40.7 million). Operating costs within Sun
Bingo increased by 49% to EUR45.6 million (2019: EUR30.7 million),
driven by an increase in marketing costs. Adjusted EBITDA from the
Sun Bingo business decreased by 19% to EUR8.1 million (2019:
EUR10.0 million). Adjusted EBITDA includes the release of the
minimum guarantee prepayment over the new period of the contract
which was renegotiated in 2019.
Other White label revenue decreased by 88% to EUR1.2 million
(2019: EUR10.4 million), as part of an ongoing effort to
consolidate or cease the operations of certain brands. Other White
label costs decreased by 78% in line with the decrease in revenue,
resulting in an Adjusted EBITDA loss of EUR1.0 million (2019: loss
of EUR0.1 million). During the year Playtech made a EUR3.2 million
payment to charities as part of its pledge following regulatory
review.
Sport B2C
The Sport B2C business is currently at the investment phase, so,
despite the retail closures in Germany and Austria resulting from
COVID-19, revenues decreased by only 3% to EUR19.1 million (2019:
EUR19.7 million), with a 4% decrease in costs. The business remains
loss making, with the Adjusted EBITDA loss decreasing by 5% to
EUR11.3 million (2019: EUR11.9 million). An impairment loss of
EUR41.2 million has been recognised in the Sports B2C cash
generating unit ("CGU") primarily as a result of COVID-19 and the
impact it's had on retail performance. This impairment, which was
accounted for below EBITDA, is further discussed below.
Below EBITDA items
Depreciation and amortisation
Depreciation decreased by 6 % to EUR47.5 million (2019: EUR50.4
million). Adjusted amortisation, after deducting amortisation of
acquired intangibles of EUR39.0 million (2019: EUR41.6 million)
increased by 6% to EUR83.1 million (2019: EUR78.1 million). The
remainder of the balance under depreciation and amortisation of
EUR18.5 million (2019: EUR17.8 million) relates to IFRS 16 Leases,
being the right-of-use asset amortisation.
Impairment of tangible and intangible assets, including assets
held for sale
Included in the total reported impairment of tangible and
intangible assets is a EUR41.2 million impairment for the B2C
Sports CGU, which comprises of the B2C sports operations in Germany
and Austria. The impairment, which fully wrote off the value of
this CGU, was primarily a result of the impact of COVID-19 on the
estimated recovery period and the uncertainty of future
cashflows.
Within discontinued operations, the Group has recognised an
impairment for the Finalto segment of EUR221.3 million (2019:
EURNil), which is classified as held for sale at 31 December 2020.
This is further discussed below.
Profit on disposal of asset classified as held for sale
On 21 April 2020, the sale and purchase agreement of part of the
surplus Snai land in Italy, known as 'Area Sud', was completed for
total consideration of EUR18.8 million, of which EUR5.0 million had
already been received on sign off of the preliminary agreement in
2019.
On 21 July 2020, the sale and purchase agreement of part of the
surplus Snai land in Italy, known as 'Area Nord', was completed for
total consideration of EUR35.7 million.
As a result of these transactions a total of EUR49.5 million was
received in cash during the year (2019: EUR5 million) and the Group
realised a profit on disposal of EUR22.1 million (2019: EURNil) as
reflected in the consolidated statement of comprehensive
income.
Finance costs and income
Reported finance costs decreased by 3% to EUR64.6 million (2019:
EUR66.7 million), while adjusted finance costs increased by 11% to
EUR61.5 million (2019: EUR55.3 million). The latter was driven by
both the increase in interest expense on bond loans in 2020 owing
to the 2019 bond being issued part-way through H1 2019, as well as
the additional withdrawal from the revolving credit facility during
2020. The difference between adjusted and reported finance costs in
2020 is the movement of the contingent consideration and redemption
liability. In 2019 the difference is mainly the decrease in the
effective interest on the previously held convertible bond due to
its repayment in November 2019.
Adjusted finance income decreased by 58% to EUR1.1 million
(2019: EUR2.6 million) driven by a decrease in interest income.
Reported finance income decreased by 89% to EUR1.1 million (2019:
EUR9.7 million) due to the movement in contingent consideration and
redemption liability, which was an income in the prior year of
EUR7.1 million against an expense of EUR3.0 million in the current
year and therefore included in reported finance cost.
Taxation
In 2020, the Group's underlying adjusted effective tax rate from
continuing operations increased to 22% (2019: 13%). Whilst income
tax expense and cash tax actually decreased, there was an increase
in the percentage tax rates due to the greater fall in profit
before tax.
The total adjusted tax charge in 2020 was EUR17.9 million (2019:
EUR39.8 million), whereas the reported tax charge was EUR20.4m
(2019: EUR31.8 million). The adjusted tax expense excludes the
impact of tax in relation to the Snai land disposed during the year
and the movement in deferred tax in relation to acquisitions.
The group implemented an internal restructuring in January 2021,
which resulted in Playtech plc migrating its tax residency to the
UK and the Group's key operating entity transferring its business
to a UK company. This restructuring is not expected to have a
significant impact on the Group's underlying effective tax
rate.
Discontinued operations
Casual and Social Gaming segment
Following the reclassification of the Casual and Social Gaming
business in 2019 as a discontinued operation, the Group entered
into an agreement for the partial disposal of the business, namely
"FTX", for a total consideration of EUR 0.9 million on 29 June
2020. As a result of this transaction, the Group realised profit of
EUR0.6 million in the consolidated statement of comprehensive
income.
On 11 January 2021, the Group entered into an agreement for the
disposal of the remainder of the business, namely "YoYo", for a
total consideration of $ 9.5 million resulting in an estimated
profit of EUR7.6 million to be recognised in FY 2021. This business
has now been fully disposed of.
The Adjusted EBITDA related to the Casual and Social Gaming
business improved to EUR0.4 million (2019: loss of EUR4.6 million)
due to the winding down of operations and reduction in
employee-related costs. Adjusted profit after tax improved to
EUR0.1 million (2019: adjusted loss of EUR8.5 million).
Finalto (formerly TradeTech Group)
In August 2020 the Group, which previously announced it is
continuing to evaluate all options for Finalto, confirmed that it
was in early discussion stages with a number of parties regarding a
potential sale of the division. A formal decision to dispose of
this segment was made by the Board of Directors. Post year end, the
Group further announced that it was in exclusive discussions with a
management consortium with a cash offer of up to US$200 million.
The Board is confident that the sale will complete by the end of
2021. The assets and liabilities of the division were therefore
classified as held for sale at 31 December 2020 and the financial
results of this division in both years being presented were
included in discontinued operations. Despite the strong performance
in 2020 as discussed below, the Group continues to execute its
simplification strategy in order to focus on its core businesses.
As a result an impairment charge of EUR221.3 million was recognised
against this CGU when comparing its carrying value to expected
proceeds from the disposal, less expected costs.
In terms of performance, revenues increased by 80% to EUR121.9
million (2019: EUR67.9 million). Adjusted and reported EBITDA both
increased to EUR56.4 million (2019: EUR7.8 million) and EUR45.3
million (2019: EUR1.6 million) respectively. Finalto, which earned
72% of its 2020 revenue and 94% of its 2020 Adjusted EBITDA in H1,
had an outstanding first half where the business benefitted
significantly from increased market volatility and trading volumes,
particularly in March and April as the effect of the pandemic
created large price movements in major instruments. Market
conditions normalised during the second half.
Adjusted profit and Adjusted EPS
2020 2019
EUR'm EUR'm
--------------------------------------------------------- ------- -------
(Loss)/Profit from continuing operations attributable
to the owners of the Company* (73.0) 55.9
Employee stock option expenses 16.5 13.3
Professional fees on acquisitions 1.7 0.5
Additional consideration payable for put/call option 5.3 3.0
Movement in contingent consideration and redemption
liability 4.2 6.3
Effect from the amendment on terms of Sun Bingo
contract back dated - 6.4
Provision for other receivables 2.8 4.4
Impairment of investment in associate - 0.4
Charitable donation 3.2 -
Fair value change of equity investments (0.6) 0.3
Tax relating to prior years 4.9 4.1
Deferred tax on acquisitions (11.7) (12.1)
Amortisation of intangibles on acquisitions 39.0 41.6
Finance costs on acquisitions - 1.5
Notional interest on convertible bonds - 9.9
Impairment of tangible and intangible assets and
right of use assets 45.4 1.9
Fair value change on acquisition of associate (6.5) -
Loss on disposal of associate 8.9 -
Profit on disposal of asset classified as held for (22.1) -
sale
Tax on disposal of asset classified as held for 9.3 -
sale
--------------------------------------------------------- ------- -------
Adjusted Profit from continuing operations attributable
to the owners of the Company 27.3 137.4
--------------------------------------------------------- ------- -------
Adjusted basic EPS (in Euro cents) 9.2 45.5
--------------------------------------------------------- ------- -------
Adjusted diluted EPS (in Euro cents) 8.8 44.6
--------------------------------------------------------- ------- -------
Constant currency impact 4.8 4.3
--------------------------------------------------------- ------- -------
Adjusted profit for the year attributable to owners
of the Company on constant currency 32.1 141.7
Adjusted net profit / (loss) on constant currency (0.3) -
related to acquisitions
Underlying adjusted profit for the year attributable
to owners of the Company 32.4 141.7
Basic and diluted EPS from loss attributable to
owners of the Company (in Euro Cents) (99.6) (6.5)
--------------------------------------------------------- ------- -------
Basic EPS from profit/(loss) attributable to the
owners of the Company from continuing operations
(in Euro Cents) (24.5) 18.5
--------------------------------------------------------- ------- -------
Diluted EPS from profit/(loss) attributable to the
owners of the Company from continuing operations
(in Euro Cents) (24.5) 18.1
--------------------------------------------------------- ------- -------
* The reconciling items in the table above are further explained
in Note 10 of the financial statements.
The above reconciling items are further explained in Note 10 of
the financial statements. Reported loss per share from continuing
operations decreased by 232%, in line with the decrease in profit.
Adjusted diluted EPS decreased by 80% compared to 2019 . Basic EPS
is calculated using the weighted average number of equity shares in
issue during 2020 of 298.4 million (2019: 301.8 million). Diluted
EPS also includes the dilutive impact of share options and is
calculated using the weighted average number of shares in issue
during 2020 of 310.8 million (2019: 308.0 million).
Cashflow
Playtech continues to be cash generative and delivered operating
cash flows of EUR 366.9 million (2019: EUR320.9 million), with
adjusted cash conversion of 89% (2019: 79%).
Cash conversion (including Finalto)
2020 2019
EUR'm EUR'm
--------------------------------------------- ------- -------
Adjusted EBITDA 310.0 383.1
Net cash provided by operating activities 366.9* 320.9
--------------------------------------------- ------- -------
Cash conversion 118% 84%
---------------------------------------------
Change in jackpot balances (2.0) (9.5)
Change in client deposits and client equity (76.6) (22.0)
One-off tax payment - 28.0
Dividends payable (0.2) (0.3)
Professional expenses on acquisitions 5.0 1.9
Finance costs on acquisitions - 1.5
ADM security deposit (17.1) (17.2)
---------------------------------------------
Adjusted net cash provided by operating
activities 276.0 303.3
--------------------------------------------- ------- -------
Adjusted cash conversion 89% 79%
--------------------------------------------- ------- -------
* Net cash provided by operating activities is benefitting from
a deferred payment of gaming tax duties of EUR89.6 million in
Italy, which was due in Q4 2020. As a result of COVID-19 the
Italian tax authorities allowed the deferral of these gaming tax
duties to be made in the first half of 2021.
Adjusted cash conversion is shown after adjusting for jackpots,
security deposits and client equity, dividend s payable and
professional and finance costs on acquisitions. Adjusting the above
cash fluctuations is essential in order to truly reflect the
quality of revenue and cash collection. This is because the timing
of cash inflows and outflows for jackpots, security deposits,
client equity and payable dividend s only impacts the reported
operating cashflow and not EBITDA, while professional expenses and
costs relating to acquisitions are excluded from A djusted EBITDA
but impact operating cashflow.
The adjusted net cash provided by operating activities excluded,
among other items, the security deposit repayment from Italy's
online betting and gaming regulator (ADM) for 2020 and 2019,
changes in client deposits and client equity and the EUR28.0
million one-off cash payment made to the Israeli government in 2019
for the settlement of additional tax relating to the Group's
activities in Israel for the years 2008 to 2017 inclusive.
The increase in net cash provided by operating activities is
largely due to the significant increase in contribution from
Finalto. Adjusted cash conversion, which the Group believes is a
better representation of cash collection in the period, was 89%
(2019: 79%).
Net cash outflows used in investing activities totaled EUR 89.3
million (2019: EUR 152.8 million) of which:
-- EUR19.8 million (2019: EUR1.4 million) relates to
consideration paid in relation to acquisitions of subsidiaries in
the period;
-- EUR41.7 million (2019: EUR61.4 million) was used in the
acquisition of property, plant and equipment;
-- EUR22.0 million (2019: EUR24.3 million) was used on the acquisition of intangible assets;
-- EUR55.8 million (2019: EUR65.5 million) was spent on capitalised development costs; and
-- EUR49.8 million (2019: EUR5 million) is cash received on the
disposal of assets held for sale of which EUR49.5 million (2019:
EUR5.0 million) relates to real estate located in Milan.
Net cash inflows from financing activities totaled EUR104.6
million (2019: EUR117.3 million outflow) of which EUR245.8 million
(2019: EUR63.9 million) was cash inflow from the drawing down of
the Group's revolving credit facility, offset by:
-- EUR10.1 million (2019: EUR65.1 million) on the repurchasing of Playtech shares in the year;
-- EUR27.4 million (2019: EUR27.2 million) of principal and interest lease liability payments;
-- EUR63.7 million (2019: EUR48.1 million) payment of contingent
consideration and redemption liability and;
-- higher total interest payments on bond loans and bank
borrowings totaling EUR39.7 million (2019: EUR29.5 million) due to
the issuance of both the 2019 bond part-way through H1 2019 and the
Group's revolving credit facility.
Balance sheet, liquidity and financing
Cash
Including cash classified within assets held for sale, the Group
continues to maintain a strong balance sheet with cash and cash
equivalents of EUR1,060.6 million as at 31 December 2020 (2019:
EUR674.1 million). Adjusted gross cash, which excludes the cash
held on behalf of clients, progressive jackpots and security
deposits, increased to EUR651.1 million as at 31 December 2020
(2019: EUR335.8 million), owing in large part to the Group drawing
down EUR245.8 million from its revolving credit facility as a
precautionary measure as well as the considerable cash preservation
actions described below. The Board keeps Playtech's capital
structure under continuous review and is cognisant of the level of
cash on its balance sheet. Once there is greater certainty on the
outcome of the pandemic, the revolving credit facility will be
repaid.
Financing
The Group holds 5-year senior secured notes to the value of
EUR530 million (3.75% coupon, maturity 2023), which were raised in
October 2018 to support the acquisition of Snaitech.
The Group also holds 7-year senior secured notes to the value of
EUR350 million (4.25% coupon, maturity 2026), which were raised in
March 2019. The net proceeds of this bond were used to fully repay
the EUR297 million convertible bond which matured in H2 2019, and
for general corporate purposes, including payment of contingent
consideration.
In November 2019 the Group signed an amendment to its previous
revolving credit facility, increasing it to EUR317.0 million and
extending its term by an additional four years, ending in November
2023, with a further one-year extension option. Interest payable on
the loan is based on Euro Libor rates. Playtech acted promptly
following the announcement of the first lockdown in Q1 2020 and the
uncertainty surrounding this, to secure its liquidity position by
drawing down EUR245.8 million against the revolving credit facility
as a precautionary measure during the period (2019: EUR63.9
million). However, it is important to note that the Group steered
through the pandemic with an improved cash position at 31 December
2020 against 31 December 2019, even after excluding the cash
contribution from the revolving credit facility.
The Group's total gross debt amounted to EUR1,182.0 million at
31 December 2020 (31 December 2019: EUR935.8 million) and Net debt,
after deducting adjusted gross cash, amounted to EUR530.9 million
(31 December 2019: EUR600.0 million). The Net debt / Adjusted
EBITDA ratio increased slightly to 1.7x at 31 December 2020 from
1.6x at 31 December 2019(6) , due to the overall reduction in
Adjusted EBITDA.
Playtech takes a prudent and disciplined approach to its banking
relationships. Despite being comfortably within its covenants,
Playtech proactively approached its lenders and agreed to amend the
covenants in its revolving credit facility for the 31 December 2020
and 30 June 2021 tests. The leverage covenant was amended to 5x Net
debt / Adjusted EBITDA for the 31 December 2020 test and 4.5x for
the 30 June 2021 test. The interest cover covenant was amended to
3x for the 31 December 2020 test and 3.5x for the 30 June 2021
test. The covenants will return to previous levels of 3x Net debt /
Adjusted EBITDA and 4x Adjusted EBITDA / interest cover from the 31
December 2021 test onwards, or sooner should the Company decide to
make shareholder distributions within those periods.
Contingent consideration
Contingent consideration and redemption liability decreased by
EUR51.4 million to EUR9.7 million (31 December 2019: EUR61.1
million) due to the completed payments relating to Playtech BGT
Sports Ltd, Rarestone Gaming PTY Ltd and GenerationWeb, offset by
the redemption liability arising from the acquisition of Statscore.
The existing liability as at 31 December 2020 comprised the
following:
Acquisition Maximum payable Contingent consideration Payment date
earnout (per terms and redemption (based on maximum
of acquisition) liability as payable earnout)
at 31.12.2020
HPYBET Austria EUR15.0 million Nil Q2 2021
GmbH
------------------- ------------------------ ------------------
Eyecon Limited EUR25.0 million Nil Q2 2021
------------------- ------------------------ ------------------
EUR4.0 million
Q4 2022
EUR0.9 million
Wplay EUR4.9 million EUR3.9 million Q4 2024
------------------- ------------------------ ------------------
EUR5.0 million
Q1 2023
EUR10.0 million
Statscore EUR15.0 million EUR4.6 million in Q1 2026
------------------- ------------------------ ------------------
EUR7.3 million
Other EUR7.3 million EUR1.2 million in Q3 2021
------------------- ------------------------ ------------------
Total EUR67.2 million EUR9.7 million
------------------- ------------------------ ------------------
Shareholder returns
The Board suspended shareholder distributions in March 2020
until further notice due to the uncertainty relating to COVID-19.
The share repurchase programme announced at the FY 2019 results was
postponed with immediate effect with approximately EUR10 million of
the EUR40 million buyback having been completed. Also, the 2019
final dividend was not proposed at the AGM. Together these measures
allowed the Company to preserve over EUR65 million of cash outflows
during the year.
Playtech remains committed to returning capital to shareholders
whilst balancing the needs of the business and taking a prudent
approach to its capital structure and leverage.
Going concern
In adopting the going concern basis of preparation for the
financial statements, the directors have considered the Group's
current trading performance, financial position and liquidity
alongside robust scenario assessments and reverse stress-test
assessments for the forecast period. The outbreak of the pandemic,
the measures adopted by governments in countries worldwide to
mitigate the pandemic's spread, including the ongoing second wave
of lockdowns and the vaccine announcement and current rollout
plans, were also taken into account in these assessments. COVID-19
continues to present challenges across many areas of Playtech's
business, however, management believe the business has demonstrated
resilience against the pandemic and these challenges.
At 31 December 2020, the Group held total cash of EUR1,060.6
million (2019: EUR674.1 million) and adjusted gross cash, which
excludes the cash held on behalf of clients, progressive jackpots
and security deposits, of EUR651.1 million (2019: EUR335.8
million). Further, the Group has long-term debt facilities totaling
EUR1,182.0 million (2019: EUR935.8 million). Management has secured
a covenant relaxation at 31 December 2020 and 30 June 2021 relating
to the revolving credit facility, as discussed in Note 26 of the
financial statements, and further, has considered future projected
cash flows under a number of scenarios to stress-test any risk of
covenant breaches.
Management concluded that the risk of a covenant breach over the
next twelve-month period from the date of releasing this report is
low and as such, has a reasonable expectation that the Group will
have adequate financial resources to continue in operational
existence. It has, therefore, considered it appropriate to adopt
the going concern basis of preparation in the full year 2020
financial statements.
(1) Adjusted numbers relate to certain non-cash and one-off
items. The Board of Directors believes that the adjusted results
represent more closely the consistent trading performance of the
business. A full reconciliation between the actual and adjusted
results is provided in Note 10 of the financial statements.
(2) Core B2B Gambling refers to the Company's B2B Gambling
business excluding unregulated Asia.
(3) The balance sheet and liquidity analysis includes assets and
liabilities that are part of both continuing operations and assets
held for sale because this better represents the Group's position
at 31 December 2020 and 31 December 2019 as it still has full
control of its cash and liabilities affecting its cash
position.
4 Totals in tables throughout this statement may not exactly
equal the components of the total due to rounding.
5 Due to the classification of a discontinued operation and a
correction of prior year error, the comparative information for
2019 has been restated. Please refer to Note 8 of the financial
statements for further details.
6 Net debt/Adjusted EBITDA is calculated as Gross Debt less
Adjusted Gross Cash including cash held for sale and excluding cash
held on behalf of clients, progressive jackpots and security
deposits divided by Adjusted EBITDA from continuing operations and
Finalto (included in discontinued operations) of the last 12 months
totaling EUR310.0 million (2019: EUR383.1 million).
Emerging risks, principal risks and uncertainties
-- Regulation - Licensing requirements (both Gambling and Financials divisions)
Playtech holds several licences for its activities from
regulators. The review and/or loss of all or any of these licences
may adversely impact on the operations, revenues and/or reputation
of the Group.
-- Regulation - Local Technical Regulatory Requirements (both
Gambling and Financials divisions)
Local regulators have their own specific requirements, which
often vary on a country-to-country basis. In addition, new
requirements may be imposed. For example, a requirement to locate
significant technical infrastructure within the relevant territory
or to establish and maintain real-time data interfaces with the
regulator. Such conditions present operational challenges and may
prohibit the ability of licensees to offer the full range of the
Group's products.
-- Regulation - Local Technical Regulatory Requirements (both
Gambling and Financials divisions)
Given the dynamic nature of tax rules, guidance and tax
authority practice, the business is exposed to continuously
evolving rules and practices governing the taxation of e-commerce
and betting and gaming activities in countries in which the Group
has presence. Such taxes may include corporate income tax,
withholding taxes and indirect taxes.
-- Regulation - Data Protection (both Gambling and Financials divisions)
The requirements of the new EU General Data Protection
Regulations (GDPR) came into force in May 2018. The regulation is
mandatory and all organisations that hold or process personal data
must comply with these regulations.
-- Regulatory - Preventing Financial Crime (both Gambling and Financials divisions)
Policymakers in the EU and at national levels have taken steps
to strengthen financial crime legislation covering Anti-Money
Laundering (AML), prevention of facilitation of tax evasion and
Anti-Bribery and Corruption (ABC). Non-compliance could result in
investigations, prosecutions, loss of licences and/or an adverse
reputational impact.
-- Regulation - Safer Gambling (Gambling division)
Regulators, industry, charities and the public at large continue
to challenge the gaming and betting sector to make gambling and
gaming products safer, fairer and crime free. In addition,
licensing requirements are regularly updated to ensure that
companies in the sector provide a safe environment for
consumers.
-- Mergers and Acquisitions (both Gambling and Financials divisions)
Playtech has made a number of acquisitions in the past. Such
acquisitions may not deliver the expected synergies and/or benefits
and may diminish shareholder value if not integrated effectively or
the opportunity executed successfully.
-- Key Employees (both Gambling and Financials divisions)
The Group's future success depends in large part on the
continued service of a broad leadership team including Executive
Directors, senior managers and key personnel. The development and
retention of these employees, along with the attraction and
integration of new talent, cannot be guaranteed.
-- Cyber Crime and IT Security (both Gambling and Financials divisions)
System downtime or a data breach, whether through cyber-attacks
and distributed denial-of-service attacks or technology failure,
could significantly affect the services offered to licensees.
-- Global Diversification (both Gambling and Financials divisions)
As Playtech plc continues to operate across multiple locations,
servicing our clients in many markets across the globe, these
operations bring with them significant opportunities for growth;
however, as is well understood, globally diverse operations carry
risk particularly as markets change.
-- Failure or disruption of supply chain (both Gambling and Financials divisions)
Inability to supply services due to failure or disruption in
global supply chains following large scale global events such as
pandemics, political unrest, climate control etc. The current
coronavirus (COVID-19) may present potential risks to our supply
chains should the situation worsen.
-- Disruption affecting business (both Gambling and Financials divisions)
Large scale global events such as pandemics, political unrest,
climate control etc, have the potential to affect Playtech's key
business markets particularly at live sporting events. The current
coronavirus (COVID-19) may present further potential risks to our
key business generating markets such as Asia and Italy.
-- Business continuity planning (both Gambling and Financials divisions)
Loss of revenue, reputational damage or breach of regulatory
requirements may occur as a result of a business or location
disruptive event.
-- General Health and Wellbeing concerns from ALL Sites during
Covid-19 (both Gambling and Financials divisions)
As new strands of COVID-19 spread worldwide, all employees
continue to work remotely, which brings challenges such as
exertion, stress, anxiety and the added pressure of childcare and
home schooling.
-- Live Studio Closures (Gambling division)
COVID-19 could result in our live studios being forced to close
which will affect our portfolio.
Additional Risks for the Financials Division only
-- Market exposure
The fair value of financial assets and financial liabilities
could adversely fluctuate due to movements in market prices of
foreign exchange rates, commodity prices, equity and index
prices.
-- Regulatory - Capital Adequacy
The requirement to maintain adequate regulatory capital may
affect the Group's ability to conduct its business and may reduce
profitability.
-- Counterparty risk
Extreme market movements in financial instruments over a very
short period of time could result in the Group's financial
counterparties incurring losses in excess of the funds in their
account, and they may be unable to fund those losses.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2020
2020 2019
Note Actual Adjusted Actual Adjusted
EUR'000 *EUR'000 EUR'000 *EUR'000
**Restated **Restated
Continuing operations
Revenue 9 1,078,460 1,078,460 1,440,533 1,440,533
Distribution costs before depreciation and amortisation (726,728) (719,073) (976,276) (969,795)
Administrative expenses before depreciation and amortisation (112,476) (92,221) (119,691) (89,254)
Impairment of financial assets (16,401) (13,611) (10,863) (6,227)
EBITDA 10 222,855 253,555 333,703 375,257
Depreciation and amortisation (188,106) (149,130) (187,949) (146,345)
Impairment of tangible and intangible assets 10 (45,352) - (1,887) -
Finance income 12A 1,131 1,131 9,699 2,577
Finance costs 12B (64,554) (61,540) (66,692) (55,309)
Share of profit from joint ventures 121 121 621 621
Share of profit from associates 19B 955 955 1,020 1,020
Fair value change on acquisition of associate 34A 6,520 - - -
Loss on disposal of associate 19B (8,907) - - -
Unrealised fair value changes on equity investments 598 - (270) -
Profit on disposal of asset classified as held for sale 24 22,082 - - -
Profit/(loss) before taxation (52,657) 45,092 88,245 177,821
Tax expenses 13 (20,382) (17,874) (31,768) (39,791)
Profit/(loss) from continuing operations (73,039) 27,218 56,477 138,030
Discontinued operation
Profit/(loss) from discontinued operation, net of tax 8 (224,327) 20,076 (75,445) (12,900)
Profit/(loss) for the year - total 10 (297,366) 47,294 (18,968) 125,130
Other comprehensive income/(loss):
Items that are or may be classified subsequently to profit
or loss:
Exchange (loss)/gain arising on translation of foreign
operations (19,875) (19,875) 6,733 6,733
Items that will not be classified to profit or loss:
Loss on re-measurement of employee termination indemnities (96) (96) (334) (334)
Total comprehensive (loss)/income for the year (317,337) 27,323 (12,569) 131,529
Profit/(loss) for the year attributable to:
Owners of the Company (297,279) 47,381 (19,571) 124,527
Non-controlling interests (87) (87) 603 603
(297,366) 47,294 (18,968) 125,130
Total comprehensive (loss)/income attributable to:
Owners of the Company (317,250) 27,410 (13,172) 130,926
Non-controlling interests (87) (87) 603 603
(317,337) 27,323 (12,569) 131,529
Earnings per share attributable to the ordinary equity holders of the Company
Profit or loss - total
Basic (cents) 14 (99.6) 15.9 (6.5) 41.3
Diluted (cents) 14 (99.6) 15.2 (6.5) 40.4
Profit or loss from continuing operations
Basic (cents) 14 (24.5) 9.2 18.5 45.5
Diluted (cents) 14 (24.5) 8.8 18.1 44.6
Adjusted numbers relate to certain non-cash and one-off items.
The Board of Directors believes that the adjusted results
represents more closely the consistent trading performance of the
business. A full reconciliation between the actual and adjusted
results is provided in Note 10.
** Comparative information has been re--presented due to a
discontinued operation, see Note 8.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2020
Total
attributable
Additional Employee Employee Put/Call Foreign to equity
paid in termination Retained benefit options exchange holders of Non-controlling Total
capital indemnities earnings trust reserve reserve Company interests equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------------- ----------- ------------ ---------- --------- --------- --------- ------------- ---------------- ----------
Balance at 1
January 2020 600,954 (278) 659,802 (16,175) (16,376) (1,420) 1,226,507 (4,301) 1,222,206
Total
comprehensive
loss for the
period
Loss for the
year - - (297,279) - - - (297,279) (87) (297,366)
Other
comprehensive
loss for the
year - (96) - - - (19,875) (19,971) - (19,971)
----------- ------------ ---------- --------- --------- --------- ------------- ---------------- ----------
Total
comprehensive
loss for the
year - (96) (297,279) - - (19,875) (317,250) (87) (317,337)
----------- ------------ ---------- --------- --------- --------- ------------- ---------------- ----------
Transactions
with the owners
of the Company
Contributions
and
distributions
Exercise of
options - - (1,733) 1,718 - - (15) - (15)
Employee stock
option scheme - - 8,487 - - - 8,487 - 8,487
Share buyback (8,829) - (1,320) - - - (10,149) - (10,149)
----------- ------------ ---------- --------- --------- --------- ------------- ---------------- ----------
Total
contributions
and
distributions (8,829) - 5,434 1,718 - - (1,677) - (1,677)
----------- ------------ ---------- --------- --------- --------- ------------- ---------------- ----------
Change in
ownership
interests
Acquisition of
non-controlling
interests
without change
in control - - (20,711) - 16,376 - (4,335) 4,369 34
Acquisition of
subsidiary with
non controlling
interests - - - - (3,654) - (3,654) 365 (3,289)
----------- ------------ ---------- --------- --------- --------- ------------- ---------------- ----------
Total changes in
ownership
interests - - (20,711) - 12,722 - (7,989) 4,734 (3,255)
----------- ------------ ---------- --------- --------- --------- ------------- ---------------- ----------
Total
transactions
with owners of
the Company (8,829) - (15,277) 1,718 12,722 - (9,666) 4,734 (4,932)
----------- ------------ ---------- --------- --------- --------- ------------- ---------------- ----------
Balance at 31
December 2020 592,125 (374) 347,246 (14,457) (3,654) (21,295) 899,591 346 899,937
----------- ------------ ---------- --------- --------- --------- ------------- ---------------- ----------
Employee Total
termination attributable
Additional indemnities Employee Convertible Put/Call Foreign to equity
paid in Retained benefit bond option options exchange holders of Non-controlling Total
capital earnings trust reserve reserve reserve Company interests equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------------- ----------- ------------- --------- --------- ------------ --------- --------- ------------- ---------------- ----------
Balance at 1
January 2019 627,764 56 718,907 (17,863) 45,392 (30,820) (8,153) 1,335,283 7,797 1,343,080
----------- ------------- --------- --------- ------------ --------- --------- ------------- ---------------- ----------
Total
comprehensive
income for the
period
(Loss)/profit
for the year - - (19,571) - - - - (19,571) 603 (18,968)
Other
comprehensive
income/(loss)
for the year - (334) - - - - 6,733 6,399 - 6,399
----------- ------------- --------- --------- ------------ --------- --------- ------------- ---------------- ----------
Total
comprehensive
income / (loss)
for the year - (334) (19,571) - - - 6,733 (13,172) 603 (12,569)
----------- ------------- --------- --------- ------------ --------- --------- ------------- ---------------- ----------
Transactions
with the owners
of the Company
Contributions
and
distributions
Dividend paid - - (55,545) - - - - (55,545) (4,412) (59,957)
Exercise of
options - - (1,803) 1,688 - - - (115) 43 (72)
Employee stock
option scheme - - 18,102 - - - - 18,102 - 18,102
Redemption of
convertible
bond - - 45,392 - (45,392) - - - - -
Share buyback (26,810) - (38,322) - - - - (65,132) - (65,132)
----------- ------------- --------- --------- ------------ --------- --------- ------------- ---------------- ----------
Total
contributions
and
distributions (26,810) - (32,176) 1,688 (45,392) - - (102,690) (4,369) (107,059)
----------- ------------- --------- --------- ------------ --------- --------- ------------- ---------------- ----------
Change in
ownership
interests
Acquisition of
non-controlling
interests
without change
in control - - (7,358) - - 14,444 - 7,086 (8,332) (1,246)
----------- ------------- --------- --------- ------------ --------- --------- ------------- ---------------- ----------
Total changes in
ownership
interests - - (7,358) - - 14,444 - 7,086 (8,332) (1,246)
----------- ------------- --------- --------- ------------ --------- --------- ------------- ---------------- ----------
Total
transactions
with owners of
the Company (26,810) (39,534) 1,688 (45,392) 14,444 - (95,604) (12,701) (108,305)
----------- ------------- --------- --------- ------------ --------- --------- ------------- ---------------- ----------
Balance at 31
December 2019 600,954 (278) 659,802 (16,175) - (16,376) (1,420) 1,226,507 (4,301) 1,222,206
----------- ------------- --------- --------- ------------ --------- --------- ------------- ---------------- ----------
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2020
2020 2019
Note EUR'000 EUR'000
----------------------------------------- ----- ------------------ ----------
NON-CURRENT ASSETS
Property, plant and equipment 16 357,115 376,378
Right of use assets 17 66,702 74,659
Intangible assets 18 1,097,205 1,499,396
Investments 19 50,442 52,265
Trade receivables 21 18,405 13,600
Other non current assets 20 70,449 37,950
1,660,318 2,055,378
----------------------------------------- ----- ------------------ ----------
CURRENT ASSETS
Trade receivables 21 153,220 192,844
Other receivables 22 98,344 141,154
Cash and cash equivalents 23 683,681 671,540
----------------------------------------- ----- ------------------ ----------
935,245 1,005,538
----------------------------------------- ----- ------------------ ----------
Assets classified as held for sale 24 468,891 36,798
----------------------------------------- ----- ------------------ ----------
TOTAL ASSETS 3,064,454 3,097,714
EQUITY
Additional paid in capital 25 592,125 600,954
Employee termination indemnities (374) (278)
Employee benefit trust 25 (14,457) (16,175)
Put/Call options reserve (3,654) (16,376)
Foreign exchange reserve (21,295) (1,420)
Retained earnings 347,246 659,802
Equity attributable to equity holders
of the Company 899,591 1,226,507
----------------------------------------- ----- ------------------ ----------
Non controlling interests 346 (4,301)
TOTAL EQUITY 899,937 1,222,206
----------------------------------------- ----- ------------------ ----------
NON CURRENT LIABILITIES
Loans and borrowings 26 308,875 64,396
Bonds 27 873,129 871,190
Lease liability 17 61,547 65,274
Deferred revenues 2,128 2,332
Deferred tax liability 31 75,163 78,338
Contingent consideration and redemption
liability 29 8,508 2,520
Other non current liabilities 32 12,433 14,244
1,341,783 1,098,294
Liabilities directly associated
with assets classified as held for
sale 24 309,169 3,595
----------------------------------------- ----- ------------------ ----------
CURRENT LIABILITIES
Loans and borrowings - 206
Trade payables 30 47,694 62,420
Lease liability 17 21,019 25,515
Progressive operators' jackpots
and security deposits 100,211 98,152
Client deposits - 113,879
Client funds 28,924 126,309
Income tax payable 12,017 22,019
Gaming and other taxes payable 33 126,949 98,288
Deferred revenues 9,735 6,857
Contingent consideration and redemption
liability 29 1,162 58,605
Provisions for risks and charges 28 18,077 19,508
Other payables 32 147,777 141,861
----------------------------------------- ----- ------------------ ----------
513,565 773,619
TOTAL LIABILITIES 2,164,517 1,875,508
TOTAL EQUITY AND LIABILITIES 3,064,454 3,097,714
The financial information was approved by the Board and
authorised for issue on 10 March 2021.
Mor Weizer Andrew Smith
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2020
2020 2019
Note EUR'000 EUR'000
Restated
-------------------------------------------- --------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the year (297,366) (18,968)
Adjustment to reconcile net income
to net cash provided by operating
activities (see below) 692,147 389,699
Net taxes paid (27,857) (49,793)
Net cash from operating activities 366,924 320,938
-------------------------------------------- --------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans granted (2,542) (1,424)
Acquisition of property, plant and
equipment (41,694) (61,384)
Dividends received 19A, 19B 121 699
Acquisition of intangible assets (21,999) (24,320)
Acquisition of subsidiaries (see
below) 34A,34B (19,829) (1,402)
Cash of subsidiaries on acquisition
(see below) 34A,34B 8,509 1,039
Capitalised development costs (55,762) (65,529)
Acquisition of associates and joint
ventures 19B - (6,453)
Investment in other investments 19D (6,535) -
Proceeds from sale of property, plant
and equipment 541 973
Proceeds from the sale of discontinued
operations, net of cash, and surplus
land held for sale 24 49,843 5,000
Net cash used in investing activities (89,347) (152,801)
-------------------------------------------- --------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to the owners of the
Company 25 - (55,545)
Dividends paid to non controlling
interests - (4,412)
Interest payable on bonds, bank borrowings
and other borrowings (39,748) (29,509)
Issue of bonds, net of issue costs 27 - 345,672
Share buyback 25 (10,149) (65,132)
Repayment of bonds 27 - (297,000)
Repayment of loans and borrowings (206) -
Proceeds from loans and borrowings 26 245,828 63,906
Payment of deferred and contingent
consideration and redemption liability
(see below) (63,720) (48,071)
Principal paid on lease liability (21,491) (20,950)
Interest paid on lease liability (5,895) (6,280)
Net cash from/(used in) financing
activities 104,619 (117,321)
-------------------------------------------- --------- ---------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS 382,196 50,816
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 674,186 622,197
Exchange gain on cash and cash equivalents 4,797 1,173
CASH AND CASH EQUIVALENTS AT
OF YEAR 1,061,179 674,186
-------------------------------------------- --------- ---------- ----------
Cash and cash equivalent consists
of:
Cash and cash equivalent - continuing
operations 23 684,308 671,540
Cash and cash equivalent treated
as held for sale 23 376,871 2,646
---------- --------
1,061,179 674,186
Less: expected credit loss on cash
and cash equivalent 23 (627) -
1,060,522 674,186
--------------------------------------- --- ---------- --------
2020 2019
EUR'000 EUR'000
------------------------------------------------- ---- --------- ---------
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH PROVIDED
FROM OPERATING ACTIVITIES
Income and expenses not affecting
operating cash flows:
Depreciation on property, plant
and equipment 48,802 51,585
Amortisation of intangible assets 149,076 148,506
Amortisation of right of use assets 21,990 22,096
Gain on early termination of lease (1,110) -
contracts
Share of profit from joint ventures 19a (121) (621)
Share of profit from associates 19b (955) (1,020)
Fair value change on step-acquisition
of associate 34a (6,520) -
Impairment of other non-current
assets 1,264 4,432
Impairment of investment in associates 19b - 443
Impairment of right of use assets 17 2,755 827
Impairment of property, plant and
equipment 16 8,716 895
Impairment of intangible assets 18 33,880 113,863
Impairment of asset held for sale 221,255 -
Profit on disposal of discontinued
operations 24 (586) -
Profit on disposal of asset classified
as held for sale 24 (22,082) -
Loss on disposal of associate 19b 8,907 -
Changes in fair value of equity
investments (598) 270
Interest on bonds, bank borrowings
and other borrowings 41,878 35,863
Interest on convertible bonds - 9,851
Interest on lease liability 5,895 6,280
Income tax expense 23,198 35,339
Employee stock option plan expenses 21,079 18,102
Movement in deferred and contingent
consideration and redemption liability 8,310 (69,940)
Expected credit loss on cash and 627 -
cash equivalents
Exchange gain on cash and cash equivalents (4,797) (1,173)
Unrealised exchange gain (5,511) -
Other 494 90
Changes in operating assets and
liabilities:
Change in trade receivables 34,558 2,442
Change in other receivables 360 (5,901)
Change in trade payables (13,342) (10,912)
Change in progressive, operators
jackpot, security deposits 1,974 9,551
Change in client funds and deposits 76,579 22,046
Change in other payables 34,929 (12,200)
Change in provisions for risks and
charges (1,431) 7,413
Change in deferred revenues 2,674 1,572
692,147 389,699
------------------------------------------------- ---- --------- ---------
Acquisition of subsidiaries
2020 2019
Note EUR'000 EUR'000
--------------------------------------- ----- -------- --------
Acquisitions in the year
A. Acquisition of Statscore SP Z.O.O. 34A 6,500 -
B. Acquisition of Best In Game SRL 34B 13,329 -
Acquisitions in previous year
A. Acquisition of Areascom SpA - -
B. Other acquisitions 35A - 1,402
19,829 1,402
--------------------------------------- ----- -------- --------
Cash of subsidiaries on acquisition
2020 2019
Note EUR'000 EUR'000
-------------------------------------------- ----- -------- --------
Acquisitions in the year
A. Acquisition of Statscore SP Z.O.O. 34a 60 -
B. Acquisition of Best In Game SRL 34b 8,449 -
Acquisitions in previous year
A. Acquisition of Areascom SpA - 324
B. Other acquisitions - 715
8,509 1,039
-------------------------------------------- ----- -------- --------
Payment of contingent consideration and redemption liabilities on previous acquisitions
2020 2019
EUR'000 EUR'000
----------------------------------------------------------------------------------------- -------- --------
Acquisitions in previous years
A. Acquisition of Rarestone Gaming PTY Ltd 4,140 4,469
B. Acquisition of ACM Group - 3,420
C. Acquisition of Consolidated Financial Holdings - 21,979
D. Acquisition of Quickspin AB - 14,345
E. Acquisition of Playtech BGT Sports Limited 41,558 -
F. Other acquisitions 2,789 3,858
-------- --------
48,487 48,071
G. Interest in Aquila Global Group SAS ("Wplay") 15,233 -
63,720 48,071
----------------------------------------------------------------------------------------- -------- --------
The cash outflows, as stated in the financial statements for the
year ended 31 December 2019, relating to payments of long term
deferred and contingent consideration on the acquisition of
subsidiaries and the payments of redemption liabilities to acquire
non controlling interests in previous periods has been restated
during the period. As a result, they have been reclassified from
investing to financing cash flows. This presentational change in
the cash flow statement has no impact on actual cash flows nor on
any of the other primary statements.
NOTE 1 - GENERAL
Playtech plc (the "Company") is a company domiciled in the Isle
of Man. The Company was incorporated in British Virgin Islands as
an offshore company with limited liability. The registered office
is located at St George's Court, Upper Church Street, Douglas, Isle
of Man, IM1 1EE.
These consolidated financial statements comprise the Company and
its subsidiaries (together referred to as the "Group").
Playtech is the gambling industry's leading technology company
delivering business intelligence driven gambling software,
services, content and platform technology across the industry's
most popular product verticals, including, casino, live casino,
sports betting, virtual sports, bingo and poker. It is the pioneer
of omni-channel gambling technology through its integrated platform
technology, Playtech ONE. Playtech ONE delivers data driven
marketing expertise, single wallet functionality, CRM and
responsible gambling solutions across one single platform across
product verticals and across retail and online.
Playtech partners with and invests in the leading brands in
regulated and newly regulated markets to deliver its data driven
gambling technology across the retail and online value chain.
Playtech provides its technology on a B2B basis to the industry's
leading retail and online operators, land-based casino groups and
government sponsored entities such as lotteries. Playtech directly
owns and operates Snaitech, the leading sports betting and gaming
company in online and retail in Italy.
The Group's financial trading division, which is treated as a
discontinued operation in these financial statements (Notes 8 and
24), has four primary business models, being:
-- B2C retail Contracts for difference ("CFD"), through
www.markets.com where the Group acts as the execution venue and the
market-maker on a variety of instruments which fall under the
general categories of Foreign exchanges, Commodities, Equities and
indices;
-- B2B clearing and execution services for other retail brokers
and professional clients, through CFH, where the Group acts as a
matched-principal liquidity provider and straight through processes
("STPs") the trades to prime brokers and clearing houses such as
BNP, Jeffries, UBS, Citi etc;
-- B2B clearing and execution for other retail brokers, where
the Group acts as the execution venue and market-maker; and
-- B2B technology and risk management services, where the Group
provides platform, CRM, reporting and risk-management technology to
the retail broker market.
Where the Group acts as the execution venue, or provides
execution services, these activities are undertaken in entities
regulated by the UK's Financial Conduct Authority ("FCA"), the
Australian Securities & Investments Commission ("ASIC"), the
Cyprus Securities and Exchange Commission ("CySEC"), the British
Virgin Islands' Financial Services Commission ("FSC"), and the
South African Financial Sector Conduct Authority ("FSCA").
NOTE 2 - BASIS OF PREPARATION
This financial information does not constitute the company's
statutory accounts for the years ended 31 December 2020 or 2019 but
is derived from those accounts. The auditor has reported on those
accounts; their reports were (i) unqualified and (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report.
This financial information has been prepared in accordance with
the International Financial Reporting Standards (IFRS) adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union (EU). The audited accounts were authorised for issue
by the Company's board of directors on 10 March 2021.
Details of the Group's accounting policies are included in Note
5.
Coronavirus (COVID-19) impact
Background
COVID-19, which is a respiratory illness caused by a new virus,
was declared a world-wide pandemic by the World Health Organisation
in March 2020 and since then has had a significant impact on global
economies and equity, debt and commodity markets. The Group has
considered the impact of COVID-19 and other market volatility in
preparing its financial statements.
Considering recent developments, which include the second wave
that forced governments back into ongoing lockdowns, as well as the
debate over the outcome (and timing of this outcome) the vaccines
will have, management considered the possible impact to the
estimates and outcomes in the measurement of the Group's assets and
liabilities. In making these considerations, management have also
taken into account the different financial and economic impact the
pandemic has had to the Group's online and retail gambling results
since March 2020. This is further discussed in Note 6.
Process applied
The Group is closely monitoring developments in, and the effects
of COVID-19 on the global economy. On the basis of currently
available information, and the latest updates on the ongoing
lockdowns and vaccine announcements, the Group is not in a position
to accurately assess the magnitude of the impact of COVID-19 on the
Group's operations and future financial results, as this will
principally depend on the effectiveness of vaccine, the overall
contribution in stopping the pandemic, as well as the regulatory
and fiscal measures taken to support the economy and mitigate the
impact of the virus.
As a consequence of COVID-19 and in preparing these financial
statements, management:
-- re-evaluated whether there were any additional areas of
judgement or estimation uncertainty;
-- reviewed external market communications to identify other COVID-19 related impacts;
-- reviewed public forecasts and experience from previous downturns;
-- conducted several internal processes to ensure consistency in
the application of the expected impact of COVID-19 across all asset
classes; and
-- assessed the carrying values of its assets and liabilities
and determined the impact thereon as a result of market inputs and
variables impacted by COVID-19.
Going concern basis
In adopting the going concern basis in the preparation of the
consolidated financial statements, the Directors have considered
the current trading performance, financial position and liquidity
of the Group, the principal risks and uncertainties together with
scenario planning and reverse stress tests completed for a period
of no less than 12 months from the approval of these financial
statements. The outbreak of the COVID-19 pandemic, the measures
adopted by governments in countries worldwide to mitigate the
pandemic's spread, including the ongoing lockdowns and COVID-19
vaccine announcements, were also taken into consideration in our
assessment.
Despite the impact on cash flows of COVID-19, the Group
continues to hold a strong liquidity position with adjusted gross
cash of EUR651.1 million (31 December 2019 EUR335.8 million). As a
precautionary measure, in the early stages of the pandemic Playtech
accessed approximately EUR6 million in government support schemes
in the UK and other markets. This was to ensure the Group could
protect jobs given the prevailing uncertainty over the severity of
the impact on the business from the pandemic. Despite the impact of
the restrictions on parts of our business and given the overall
resilient performance over the course of 2020, this support is
currently in the process of being repaid and therefore excluded
from our results for 2020. Whilst there are a number of risks to
the Group's trading performance from COVID-19 and its impact on the
global economy, the Directors are confident of its ability to
continue as a going concern.
The Directors have reviewed liquidity and covenant forecasts for
the Group, which have been updated for the expected impact of
COVID-19 on trading as well as the relaxed covenants agreed with
the Group's facility providers until 30 June 2021. The Directors
have also considered sensitivities in respect of potential downside
scenarios, reverse stress tests and the mitigating actions
available to management.
The modelling of downside scenarios assessed if there was a
significant risk to the Group's liquidity and covenant compliance
position. This includes the risk of future lockdowns, and
consideration of the recovery period in the Groups' key markets and
licensees' operations.
The Group's principal financing arrangements are a revolving
credit facility ("RCF") up to EUR317.0 million which expires in
November 2023 with an option of extension for one year, the 2018
Bond amounting to EUR530.0 million and the 2019 Bond amounting to
EUR350.0 million which are repayable in October 2023 and March 2026
respectively. These financing arrangements are subject to certain
financial covenants which are tested every six months on a rolling
12-month basis, as set out in Notes 26 and 27. The RCF covenants
have been relaxed as follows:
-- Leverage: Net Debt/Adjusted EBITDA revised to 5:1 for the
year ended 31 December 2020 and 4.5:1 for the last twelve months to
30 June 2021 (31 December 2019: 3:1)
-- Interest cover: Adjusted EBITDA/Interest revised to 3:1 for
the year ended 31 December 2020 and 3.5:1 for the last twelve
months to 30 June 2021 (31 December 2019: 4:1)
If the Group's results are in line with its base case
projections it would not be in breach of the financial covenants
for a period of no less than 12 months from approval of these
financial statements ("the relevant going concern period"). There
can be no assurance that a downside scenario will be avoided if the
COVID-19 vaccine is not effective in decreasing the severity of the
virus and further impacts the performance of the Group.
However, the Directors have concluded that the Group is well
placed to manage foreseeable downside and severe downside scenarios
after also considering mitigating actions that would be available
to the Directors and are within their control. In making this
conclusion, the Directors have considered a stress test and a
reverse test as explained below.
Stress test
The stress test assumes a worst-case scenario with further
impacts caused by the pandemic, together with additional
sensitivities around the UK, Italy and Asia, but with mitigations
similar to the ones taken in 2020 (including salary and capital
expenditure reductions and continued suspension of distributions).
Under this scenario EBITDA would fall on average by 23% per month
compared to the base case and the company would have breached one
of its covenants (Net Debt/Adjusted EBITDA) but at the same time
would have sufficient liquidity to repay the RCF, should payment be
demanded by its facility providers. This would however not result
in a breach of the bond covenants and the Group would have adequate
cash reserves to be able to continue as a going concern over the
relevant going concern period.
Reverse stress test
The reverse test was used to find what would be the level of
EBITDA and consequently the cash burn that would lead to a breach
in the bonds' financial covenants before the end of the relevant
going concern period. Under this test, management assumed the
following:
-- A further deterioration of revenue and EBITDA as a result of
the assumed ongoing second lockdown;
-- Downturn in cash generation; and
-- No further mitigating actions taken.
As a result of completing this assessment management considered
the likelihood of the reverse stress test scenario arising to be
remote. In reaching this conclusion management considered the
following:
-- Current trading is performing above the base case;
-- EBITDA would fall on average by 86% per month compared to the
base case until the end of 2021;
-- In the event that revenues decline, additional mitigating
actions are available to management which have not been factored
into the reverse stress test scenario.
As such, the Directors have a reasonable expectation that the
Group will have adequate financial resources to continue in
operational existence over the relevant going concern period and
have therefore considered it appropriate to adopt the going concern
basis of preparation in the consolidated financial statements.
NOTE 3 - FUNCTIONAL AND PRESENTATION CURRENCY
These consolidated financial statements are presented in Euro,
which is the Company's functional currency. The functional currency
for subsidiaries includes Euro, United States Dollar and British
Pounds. All amounts have been rounded to the nearest thousand,
unless otherwise indicated.
NOTE 4 - NEW STANDARDS, INTERPRETATIONS AND AMMENTS ADOPTED BY
THE GROUP
New standards, interpretations and amendments adopted from 1
January 2020
The Group applied for the first-time certain standards and
amendments, which are effective for annual periods beginning on or
after 1 January 2020, but do not have a material impact on the
consolidated financial statements of the Group.
New standards, interpretations and amendments not yet
effective
There a number of standards, amendments to standards, and
interpretation which have issued by the IASB that are effective in
future accounting periods that the Group has decided not to adopt
early.
-- Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current and
Classification of Liabilities as Current or Non-current.
In January 2020, the IASB issued amendments to IAS 1, which
clarify the criteria used to determine whether liabilities are
classified as current or non-current. These amendments clarify that
current or non-current classification is based on whether an entity
has a right at the end of the reporting period to defer settlement
of the liability for at least twelve months after the reporting
period. The amendments also clarify that 'settlement' includes the
transfer of cash, goods, services, or equity instruments unless the
obligation to transfer equity instruments arises from a conversion
feature classified as an equity instrument separately from the
liability component of a compound financial instrument. The
amendments were originally effective for annual reporting periods
beginning on or after 1 January 2022. However, in May 2020, the
effective date was deferred to annual reporting periods beginning
on or after 1 January 2023.
The Group is currently assessing the impact of these new
accounting standards and amendments. The Group does not believe
that the amendments to IAS 1 will have a significant impact on the
classification of its liabilities.
The Group does not expect any other standards issued by the
IASB, but not yet effective, to have a material impact on the
Group.
NOTE 5 - SIGNIFICANT ACCOUNTING POLICIES
The Group has consistently applied the following accounting
policies to all periods presented in the consolidated financial
statements, except if mentioned otherwise.
A. Basis of consolidation
i. Business combinations
The Group accounts for business combinations using the
acquisition method when the acquired set of activities and assets
meets the definition of a business and control is transferred to
the Group. In determining whether a particular set of activities
and assets is a business, the Group assesses whether the set of
assets and activities acquired includes, at a minimum, an input and
substantive process and whether the acquired set has the ability to
produce outputs. The Group has an option to apply a 'concentration
test' that permits a simplified assessment of whether an acquired
set of activities and assets is not a business. The optional
concentration test is met if substantially all of the fair value of
the gross assets acquired is concentrated in a single identifiable
asset or group of similar identifiable assets.
The consideration transferred in the acquisition is generally
measured at fair value, as are the indefinable net assets acquired.
Any goodwill arises is tested annually for impairment. Any gain on
a bargain purchase is recognised in the statement of comprehensive
income immediately. Transaction costs are expensed as incurred,
except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related
to the settlement of pre-existing relationships. Such amounts are
recognised in statement of comprehensive income.
Any contingent consideration is measured at fair value at the
date of acquisition. If an obligation to pay contingent
consideration that meets the definition of a financial instrument
is classified as equity, then it is not remeasured, and settlement
is accounted for within equity. Otherwise, other contingent
consideration is remeasured at fair value at each reporting date
and subsequent changes in the fair value of the contingent
consideration are recognised in the statement of comprehensive
income.
When a business combination is achieved in stages, the Group's
previously held interests in the acquired entity are remeasured to
its acquisition-date fair value and the resulting gain or loss, if
any, is recognised in the statement of comprehensive income.
Amounts arising from interests in the acquiree prior to the
acquisition date that have previously been recognised in other
comprehensive income are reclassified to the statement of
comprehensive income, where such treatment would be appropriate if
that interest were disposed of.
ii. Subsidiaries
Subsidiaries are entities controlled by the Group. 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.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date on which control
commences until the date on which control ceases.
iii. Non-controlling interests (NCI)
NCI are measured initially at their proportionate share of the
acquiree's identifiable net assets at the date of acquisition.
Changes in the Group's interest in a subsidiary that do not result
in a change of control are accounted for as equity transactions.
The difference between the consideration and the carrying value of
the NCI is recognised as profit/loss in the retained earnings.
iv. Interest in equity accounted investees
Where the Group has the power to participate in (but not
control) the financial and operating policy decisions of another
entity, it is classified as an associate, joint venture or
structured entity, as appropriate.
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but not
control or joint control over these policies.
A joint venture is a type of joint arrangement whereby the
parties that have joint control of the entity or arrangement and
have rights to the net assets of the joint venture. Joint
arrangement include the contractually agreed sharing of control of
an arrangement, which exists only when decisions about the relevant
activities require the unanimous consent of the parties sharing
control.
A structured entity is an entity that has been designed so that
voting or similar rights are not the dominant factor in deciding
who controls the entity, such as when any voting rights relate to
administrative tasks only and the relevant activities are directed
by means of contractual arrangements.
A structured entity often has some or all of the following
features or attributes;
-- restricted activities,
-- a narrow and well-defined objective, such as to provide
investment opportunities for investors by passing on risks and
rewards associated with the assets of the structured entity to
investors,
-- insufficient equity to permit the structured entity to
finance its activities without subordinated financial support
and
-- financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches).
Structured entities are entities in which shareholding
percentage may exists or may not, and therefore voting or similar
rights are not the dominant factor in deciding who controls the
entity. The control is defined through the existence of contractual
agreements.
Where the group holds an option to acquire equity in an entity,
this is included in the assessment of control unless the option is
not exercisable or, in limited circumstances, even if it is not
currently exercisable and their impact on the assessment of
significant influence when the option is currently exercisable.
Equity accounted associates
Under the equity method, the investment in an associate is
initially recognised at cost. The carrying amount of the investment
is adjusted to recognise changes in the Group's share of net assets
of the associate since the acquisition date.
After application of the equity method, the Group determines
whether it is necessary to recognise an impairment loss on its
investment in its associate. At each reporting date, the Group
determines whether there is objective evidence that the investment
in the associate is impaired. If there is such evidence, the Group
calculates the amount of impairment as the difference between the
recoverable amount of the associate and its carrying value, and
then recognises in the statement of comprehensive income.
On disposal of the associate, or loss of significant influence
over the associate, the Group measures and recognises any retained
investment at its fair value. Any difference between the carrying
amount of the associate upon loss of significant influence and the
fair value of the retained investment and proceeds from disposal is
recognised in the statement of comprehensive income.
Joint venture
The Group accounts for its interests in joint ventures in the
same manner as investment in associates (refer above).
Structured entities
An entity that has been designed so that voting or similar
rights are not the dominant factor in deciding who controls the
entity, such as when any voting rights relate to administrative
tasks only and the relevant activities are directed by means of
contractual arrangements. Structured agreements are initially
recognised at cost and are subsequently considered for impairment.
Where there is objective evidence that the investment in a
structured agreement has been impaired the carrying amount of the
investment is tested for impairment in the same way as other
non-financial assets.
Where there is a loss of joint control due to a change in the
contractual arrangements and a joint venture becomes either an
associate or structured arrangement, the investment continues to be
measured using the equity method. Given that there is no change in
the measurement requirements, the loss of joint control is not an
event that warrants remeasurement of the retained interest at fair
value.
Where the Group is remunerated for services and software
provided to the arrangement through a revenue share or share of
profit, the Group recognises this income as revenue in accordance
with IFRS 15.
v. Equity investments held at fair value
All equity investments in scope of IFRS 9 are measured at fair
value in the statement of financial position. Value changes are
recognized in the income statement. Fair value is based on quoted
market prices (Level 1). Where this is not possible, fair value is
assessed based on alternative methods (Level 3).
vi. Transactions eliminated on consolidation
Intra-group balances and transactions arising from intra-group
transactions are eliminated on consolidation. Unrealised gains
arising from transactions with equity-accounted investees are
eliminated against the investment to the extent of the Group's
interest in the investee. Unrealised losses are eliminated in the
same way as unrealised gains, but only to the extent that there is
no evidence of impairment.
B. Foreign currency
i. Foreign currency transactions
Transactions in foreign currencies are translated into the
respective functional currencies of Group companies at the exchange
rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the
exchange rate at the reporting date. Non-monetary assets and
liabilities that are measured at fair value in a foreign currency
are translated into the functional currency at the exchange rate
when the fair value was determined. Non-monetary items that are
measured based on historical cost in a foreign currency are
translated at the exchange rate at the date of the transaction.
Foreign currency differences are generally recognised in statement
of comprehensive income and presented within finance costs.
ii. Foreign operations
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on acquisition, are
translated into euro at the exchange rates at the reporting date.
Revenue and expenses of foreign operations are translated into euro
at the end of each month at the average exchange rate for the month
which approximates the exchange rates at the date of the
transactions.
Foreign currency differences are recognised in other
comprehensive income (OCI) and accumulated in the foreign exchange
reserve, except to the extent that the translation difference is
allocated to NCI.
When a foreign operation is disposed of its entirety or
partially such that control significant influence or joint control
is lost, the cumulative amount in the foreign exchange reserve
relates to the foreign operation is reclassified to the statement
of comprehensive income as part of the gain or loss on
disposal.
C. Discontinued operation
A discontinued operation is a component of the Group's business,
the operations and cash flows of which can be clearly distinguished
from the rest of the Group and which:
-- Represents a separate major line of business or geographical area of operations
-- Is part of a single co-ordinated plan to dispose of a
separate major line of business or geographical area of
operations;or
-- Is a subsidiary acquired exclusively with a view to resale
Classification as a discontinued operation occurs at the earlier
of disposal or when the operation
meets the criteria to be classified as held-for-sale.
When an operation is classified as a discontinued operation, the
comparative statement of comprehensive income is re-presented as if
the operation had been discontinued from the start of the
comparative year.
D. Revenue recognition
The majority of the Group's revenue is derived from selling
services with revenue recognised at a point in time when services
have been delivered to the customer. Revenue comprises the fair
value of the consideration received or receivable for the supply of
services in the ordinary course of the Group's activities. Revenue
is recognised when economic benefits are expected to flow to the
Group, where economic benefits are not expected to flow, revenue is
not recognised. Specific criteria and performance obligations are
described below for each of the Group's material revenue
streams.
Type of Service Nature, timing of satisfaction
of performance obligations and
significant payment terms
B2B royalty income Royalty income relates to licensed
technology and the provision
of certain services provided
via various distribution channels
(online, mobile or land-based
interfaces).
Royalty income is based on the
underlying gaming revenue earned
by our licensees based on the
contractual terms in place.
Revenue is recognised when performance
obligation is met which is when
the gaming transaction occurs.
------------------------------------------------------------------
B2B fixed-fee income Fixed-fee income includes revenue
derived from the provision of
certain services and licensed
technology for which charges
are based on a fixed-fee and
stepped according to the monthly
usage of the service/technology.
The usage measurement is reset
on a monthly basis.
The performance obligation is
met and revenue is recognised
once the obligations under the
contracts have been met. Where
amounts are billed and obligations
are not met, revenue is deferred.
Amounts are billed on a monthly
basis. Additional fees charged
according to the usage of the
service/technology are billed
and recognised on the month
that the services are provided.
------------------------------------------------------------------
B2B cost based revenue Cost based revenue is the total
revenue charged to the licensee
based on the actual costs incurred
from production and an additional
percentage charged on top as
a margin.
Cost based revenues are recognised
on delivery of the service.
------------------------------------------------------------------
B2B revenue received from the Revenue received from the sale
sale of hardware of hardware is the total revenue
charged to customers upon the
sale of each hardware product.
The performance obligation is
met and revenue is recognised
on delivery of the hardware
and acceptance by the customer.
------------------------------------------------------------------
B2B profit share income Profit share income relates
to certain services provided
to customers defined as structured
agreements. Profit share is
based on a pre-defined profit
of the customers.
Profit share is recognised when
the performance obligation is
met which is when the defined
period for measuring the profit
is over.
------------------------------------------------------------------
B2C revenue In respect of B2C and white
label revenues, the Group acts
as principal with the end customer,
with specific revenue policies
as follows:
* The revenues from land based gaming machines are
recognised net of the winnings, jackpots and certain
flat-rate gaming tax.
* The revenue from Online gaming (games of
skill/casino/bingo) are recognised net of the
winnings, jackpots, bonuses and certain flat-rate
gaming tax. In respect of the casino and bingo,
revenue is recognised at the conclusion. Revenue from
games of skill are recognised at the time of the bet.
* The revenues related to the acceptance of fixed odds
bets are considered financial instruments under IFRS
9 and are recognised net of certain flat-rate gaming
tax , winnings, bonuses and the fair value of open
bets.
* Revenues related to fixed odds bets are recognised at
the conclusion of the event.
* Poker revenues in the form of commission (i.e. rake)
is recognised at the conclusion of each poker hand.
The performance obligation is the provision of the
poker games to the players.
* All the revenues from gaming machines are recorded
net of players winnings and certain gaming taxes but
inclusive of compensation payable to managers,
operators and platforms, as well as the concession
fees payable to the ADM. Revenue is recognised at the
time of the bet.
Where the gaming tax incurred
is directly measured by reference
to the individual customer transaction
and related to the stake (described
as "Flat-rate tax" above), this
is deducted from revenue.
Where the tax incurred is measured
by reference to the Groups'
net result from betting and
gaming activity this is not
deducted from revenue and is
recognised as an expense.
------------------------------------------------------------------
Financial trading income Financial trading income represents
gains (including commission)
and losses arising on client
trading activity, primarily
in contracts for difference
on shares, indexes, commodities
and foreign exchange.
Open client positions are carried
at fair market value and gains
and losses arising on this valuation
are recognised in revenue as
well as gains and losses realised
on positions that have closed.
The performance obligation is
met in the accounting periods
in which the trading transaction
occurs and is concluded.
------------------------------------------------------------------
Based on the services provided by the Group, excluding certain
rebates provided to customers in the financial division, no return,
refund and other similar obligations exist. Moreover, no warranties
and related obligations exist.
E. Share-based payments
Certain employees participate in the Group's share option plans.
The fair value of the equity settled options granted is charged to
the statement of comprehensive income on a straight-line basis over
the vesting period and the credit is taken to equity, based on the
Group's estimate of shares that will eventually vest. Fair value is
determined by the Black-Scholes and Binomial valuation model. Where
equity settled share options are settled in cash at the group's
discretion the debit is taken to equity.
The Group has also granted awards to be distributed from the
Group's Employee Benefit Trust. The fair value of these awards is
based on the market price at the date of the grant, some of the
grants have performance conditions. The performance conditions are
for the executive management and include targets based on growth in
earnings per share and total shareholder return over a specific
period compared to other competitors. The fair value of the awards
with performance condition was determined by the Monte Carlo
Method.
Where, at the outset, the Group decided that there was no
obligation to settle in cash but it subsequently did so at its own
discretion and has no past practice or stated policy of settling in
cash, the expense recognised is based on the fair value at grant
date. Where the entity has a present obligation to settle in cash
the liability is measured at the end of each reporting period at
the fair value of the liability.
F. Income tax
Income tax expense comprises current and deferred tax.
i. Current tax
Current tax comprises the expected tax payable or receivable on
the taxable income or loss for the year and any adjustment to the
tax payable or receivable in respect of previous years. The amount
of current tax payable or receivable is the best estimate of the
tax amount expected to be paid or received that reflects
uncertainty related to income taxes, if any. It is measured using
tax rates enacted or substantively enacted at the reporting date.
Current tax also includes any tax arising from dividends. Current
tax assets and liabilities are offset only if certain criteria are
met.
ii. Deferred tax
Deferred tax is provided using the liability method on temporary
differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at the
reporting date.
Deferred tax liabilities are recognised for all taxable
temporary differences, except:
-- When the deferred tax liability arises from the initial
recognition of goodwill or an asset or liability in a transaction
that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable
profit or loss
-- In respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint
ventures, when the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary
differences, the carry forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised to the extent that
it is probable that taxable profit will be available against which
the deductible temporary differences, and the carry forward of
unused tax credits and unused tax losses can be utilised,
except:
-- When the deferred tax asset relating to the deductible
temporary difference arises from the initial recognition of an
asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss.
-- In respect of deductible temporary differences associated
with investments in subsidiaries, associates and interests in joint
ventures, deferred tax assets are recognised only to the extent
that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against
which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are re-assessed at each reporting date and are
recognised to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
reporting date.
Deferred tax relating to items recognised outside the statement
of comprehensive income is recognised outside the statement of
comprehensive income. Deferred tax items are recognised in
correlation to the underlying transaction either in OCI or directly
in equity.
Tax benefits acquired as part of a business combination, but not
satisfying the criteria for separate recognition at that date, are
recognised subsequently if new information about facts and
circumstances change. The adjustment is either treated as a
reduction in goodwill (as long as it does not exceed goodwill) if
it was incurred during the measurement period or recognised in
profit or loss.
The Group offsets deferred tax assets and deferred tax
liabilities if and only if it has a legally enforceable right to
set off current tax assets and current tax liabilities and the
deferred tax assets and deferred tax liabilities relate to income
taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities which intend either to
settle current tax liabilities and assets on a net basis, or to
realise the assets and settle the liabilities simultaneously, in
each future period in which significant amounts of deferred tax
liabilities or assets are expected to be settled or recovered.
G. Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less
accumulated depreciation.
If significant parts of an item of property, plant and equipment
have different useful lives, then they are accounted for as
separate items (major components) of property, plant and
equipment.
Any gain or loss on disposal of an item of property, plant and
equipment is recognised in the statement of comprehensive
income.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable
that the future economic benefits associated with the expenditure
will flow to the Group.
(iii) Depreciation
Depreciation is calculated to write off the cost of items of
property, plant and equipment less their estimated residual values
using the straight-line method over their estimated useful lives,
and is generally recognised in statement of comprehensive
income.
The estimated useful lives of property, plant and equipment for
current and comparative periods are as follows:
%
---------------------------------- ----------------------------
Computers and gaming machines 20-33
Office furniture and equipment 7-33
Freehold and leasehold buildings 3-20, or over the length of
and improvements the lease
Motor vehicles 15
Land is not depreciated.
Depreciation methods, useful lives and residual values are
reviewed at each reporting date and
adjusted if appropriate.
Carrying amounts are reviewed on each reporting date for
impairment. Where the carrying amount of an asset is greater than
its estimated recoverable amount, it is written down immediately to
its recoverable amount.
H. Intangible assets and goodwill
(i) Recognition and measurement
Goodwill
Goodwill represents the excess of the cost of a business
combination over the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired. Cost comprises the fair value of assets given,
liabilities assumed and equity instruments issued, plus the amount
of any non-controlling interests in the acquiree plus, if the
business combination is achieved in stages, the fair value of the
existing equity interest in the acquiree. Contingent consideration
is included in cost at its acquisition date fair value and, in the
case of contingent consideration classified as a financial
liability, remeasured subsequently through profit or loss. Direct
costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment
in carrying value being charged to the statement of comprehensive
income. Where the fair value of identifiable assets, liabilities
and contingent liabilities exceed the fair value of consideration
paid, the excess is credited in full to the statement of
comprehensive income on the acquisition date.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised
at cost and subsequently amortised on a straight-line basis over
their useful economic lives.
Business combinations
Intangible assets are recognised on business combinations if
they are separable from the acquired entity or give rise to other
contractual/legal rights. The amounts ascribed to such intangibles
are arrived at by using appropriate valuation techniques (see
section related to critical estimates and judgements below).
Internally generated intangible assets (development costs)
Development costs that are directly attributable to the design
and testing of identifiable and unique software products controlled
by the Group are recognised as intangible assets where the
following criteria are met:
-- it is technically feasible to complete the software so that it will be available for use
-- management intends to complete the software and use or sell it
-- there is an ability to use or sell the software
-- it can be demonstrated how the software will generate probable future economic benefits
-- adequate technical, financial and other resources to complete
the development and to use or sell the software are available,
and
-- the expenditure attributable to the software during its
development can be reliably measured.
Directly attributable costs that are capitalised as part of the
software include employee costs and an appropriate portion of
relevant overheads.
Capitalised development costs are recorded as intangible assets
and amortised from the point at which the asset is ready for
use.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the
future economic benefits embodied in the specific asset to which it
relates. All other expenditure, including expenditure on internally
generated goodwill and brands, is recognised in the statement of
comprehensive income as incurred.
(iii) Amortisation
Amortisation is calculated to write off the cost of intangible
assets less their estimated residual values using the straight-line
method over their estimated useful lives, and is generally
recognised in statement of comprehensive income. Goodwill is not
amortised.
The estimated useful lives for current and comparative periods
are as follows:
%
---------------------------------- -----------------------------
Domain names Nil
Internally generated capitalised
development costs 20-33
Technology IP 13-33
Customer lists In line with projected cash
flows or 7-20
Affiliate contracts 5-12.5
Patents and licenses 10-33 or over the period of
the license
Amortisation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
(iv) Assets held for sale
Non-current assets, or disposal groups comprising assets and
liabilities, are classified as held-for sale if it is highly
probable that they will be recovered primarily through sale rather
than through continuing use.
Such assets, or disposal groups, are tested for impairment
immediately prior to transfer to held for sale, then subsequently
measured at the lower of their carrying amount and fair value less
costs to sell. Any impairment loss on a disposal group is allocated
first to goodwill, and then to the remaining assets on a pro rata
basis, except that no loss is allocated to inventories, financial
assets, deferred tax assets, which continue to be measured in
accordance with the Group's other accounting policies. Impairment
losses on initial classification as held-for-sale or held-for
distribution and subsequent gains and losses on remeasurement are
recognised in statement of comprehensive income.
Once classified as held-for-sale, intangible assets and
property, plant and equipment are no longer amortised or
depreciated.
I. Financial Instruments
Initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
(i) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost, fair value through other
comprehensive income and fair value through profit or loss.
The classification of financial assets at initial recognition
depends on the financial asset's contractual cash flow
characteristics and the Group's business model for managing them.
With the exception of trade receivables that do not contain a
significant financing component or for which the Group has applied
the practical expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs. Trade
receivables that do not contain a significant financing component
or for which the Group has applied the practical expedient are
measured at the transaction price. In order for a financial asset
to be classified and measured at amortised cost or fair value
through OCI, it needs to give rise to cash flows that are 'solely
payments of principal and interest (SPPI)' on the principal amount
outstanding. This assessment is referred to as the SPPI test and is
performed at an instrument level. Financial assets with cash flows
that are not SPPI are classified and measured at fair value through
profit or loss, irrespective of the business model.
Subsequent measurement
For purposes of subsequent measurement, financial assets are
classified in four categories:
-- Financial assets at amortised cost (debt instruments)
-- Financial assets at fair value through OCI with recycling of
cumulative gains and losses (debt instruments)
-- Financial assets designated at fair value through OCI with no
recycling of cumulative gains and losses
upon derecognition (equity instruments)
-- Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in the statement of
comprehensive income when the asset is derecognised, modified or
impaired. The Group's financial assets at amortised cost includes
trade receivables and loans receivable.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are
carried in the statement of financial position at fair value with
net changes in fair value recognised in the statement of
comprehensive income. This category includes listed equity
investments which the Group had not irrevocably elected to classify
at fair value through OCI.
Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial
assets) is primarily derecognised (i.e. removed from the Group's
consolidated statement of financial
position) when:
-- The rights to receive cash flows from the asset have expired,
or
-- The Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
'pass-through' arrangement; and either (a) the Group has
transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control
of the asset.
When the Group has transferred its rights to receive cash flows
from an asset or has entered into a passthrough arrangement, it
evaluates if, and to what extent, it has retained the risks and
rewards of ownership. When it has neither transferred nor retained
substantially all of the risks and rewards of the asset, nor
transferred control of the asset, the Group continues to recognise
the transferred asset to the extent of its continuing involvement.
In that case, the Group also recognises an associated liability.
The transferred asset and the associated liability are measured on
a basis that reflects the rights and obligations that the Group has
retained.
Continuing involvement that takes the form of a guarantee over
the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of
consideration that the Group could be required to repay.
Impairment
The Group recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at an
approximation of the original effective interest rate. The expected
cash flows will include cash flows from the sale of collateral held
or other credit enhancements that are integral to the contractual
terms.
ECLs are recognised in two stages. For credit exposures for
which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses that
result from default events that are possible within the next
12-months (a 12-month ECL). For those credit exposures for which
there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses
expected over the remaining life of the exposure, irrespective of
the timing of the default (a lifetime ECL).
For trade receivables, the Group applies a simplified approach
in calculating ECLs. Therefore, the Group does not track changes in
credit risk, but instead recognises a loss allowance based on
lifetime ECLs at each reporting date. The Group has established a
provision matrix that is based on its historical credit loss
experience, adjusted for forward-looking factors specific to the
debtors and the economic environment.
(ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. All financial
liabilities are recognised initially at fair value and, in the case
of loans and borrowings and payables, net of directly attributable
transaction costs. The Group's financial liabilities include trade
and other payables, loans and borrowings including bank overdrafts,
and derivative financial instruments.
Subsequent measurement
For purposes of subsequent measurement, financial liabilities
are classified in two categories:
-- Financial liabilities at fair value through profit or
loss
-- Financial liabilities at amortised cost (loans and borrowings
and bonds)
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value
through profit or loss.
Financial liabilities at amortised cost
This is the category most relevant to the Group. After initial
recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the Effective Interest Method
("EIR") method. Gains and losses are recognised in the statement of
comprehensive income when the liabilities are derecognised as well
as through the EIR amortisation process. Amortised cost is
calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR.
The EIR amortisation is included as finance costs in the statement
of comprehensive income.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the statement of
comprehensive income.
(iii) Offsetting
Financial assets and financial liabilities are offset and the
net amount is reported in the consolidated statement of financial
position if there is a currently enforceable legal right to offset
the recognised amounts and there is an intention to settle on a net
basis, to realise the assets and settle the liabilities
simultaneously.
J. Share capital
Ordinary shares are classified as equity and are stated at the
proceeds received net of direct issue costs.
K. Share buyback
The Group cannot hold treasury shares under the Company's
memorandum and article of association and therefore the shares are
cancelled after the buyback. Consideration paid for the share
buyback is recognised against the additional paid in capital. Any
excess of the consideration paid over the weighted average price of
shares in issue is debited to the retained earnings.
L. Employee Benefit Trust
Consideration paid/received for the purchase/sale of shares
subsequently put in the Employee Benefit Trust is recognised
directly in equity. The cost of shares held is presented as a
separate reserve (the "Employee Benefit Trust reserve"). Any excess
of the consideration received on the sale of treasury shares over
the weighted average cost of the shares sold is credited to
retained earnings.
M. Compound financial instruments
Compound financial instruments issued by the Group comprise
convertible notes denominated in euro that can be converted to
ordinary shares at the option of the holder, when the number of
shares to be issued is fixed and does not vary with changes in fair
value.
The liability component of compound financial instruments is
initially recognised at the fair value of a similar liability that
does not have an equity conversion option. The equity component is
initially recognised at the difference between the fair value of
the compound financial instrument as a whole and the fair value of
the liability component. Any directly attributable transaction
costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a
compound financial instrument is measured at amortised cost using
the effective interest method. The equity component of a compound
financial instrument is not remeasured.
Interest related to the financial liability is recognised in
statement of comprehensive income.
N. Dividends
Dividends are recognised when they become legally payable. In
case of interim dividends to equity shareholders, this is when
declared by the Directors. In case of final dividends, this is when
approved by the shareholders at the AGM.
O. Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts
of its non-financial assets to determine whether there is any
indication of impairment. If any such indication exists, then the
asset's recoverable amount is estimated. Goodwill is tested
annually for impairment.
For impairment testing, assets are grouped together into the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or CGUs. Goodwill arising from a business combination
is allocated to CGUs that are expected to benefit from the
synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its
value in use and its fair value less costs to sell. Value in use is
based on the estimated future cash flows, discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an
asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in the statement of
comprehensive income. They are allocated first to reduce the
carrying amount of any goodwill allocated to the CGU, and then to
reduce the carrying amounts of the other assets in the CGU on a pro
rata basis.
An impairment loss in respect of goodwill is not reversed. For
other assets, an impairment loss is reversed only to the extent
that the asset's carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
P. Provisions
Provisions for legal claims, service warranties and make good
obligations are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the
obligation, and the amount can be reliably estimated. Provisions
are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any
one item included in the same class of obligations may be
small.
Provisions are measured at the present value of management's
best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. The discount rate
used to determine the present value is a pre-tax rate that reflects
current market assessments of the time value of money and the risks
specific to the liability.
Q. Leases
The Group assesses at contract inception whether a contract is,
or contains, a lease. That is, if the contract conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach
for all leases, except for short-term
leases and leases of low-value assets. The Group recognises
lease liabilities to make lease payments and right of use assets
representing the right to use the underlying assets.
(i) Right of use assets
The Group recognises right of use assets at the commencement
date of the lease (i.e. the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated
amortisation and impairment losses and adjusted for any
remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right of use
assets are amortised on a straight line basis over the shorter of
the lease term and the estimated useful lives of the assets.
(ii) Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments
(including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by
the Group and payments of penalties for terminating the lease, if
the lease term reflects the Group exercising the option to
terminate. Variable lease payments that do not depend on an index
or a rate are recognised as expenses (unless they are incurred to
produce inventories) in the period in which the event or condition
that triggers the payment occurs.In calculating the present value
of lease payments, the Group uses its incremental borrowing rate at
the lease commencement date because the interest rate implicit in
the lease is not readily determinable. After the commencement date,
the amount of lease liabilities is increased to reflect the
accretion of interest and reduced for the lease payments made.
In addition, the carrying amount of lease liabilities is
remeasured if there is a modification, a change in the lease term,
a change in the lease payments (e.g. changes to future payments
resulting from a change in an index or rate used to determine such
lease payments) or a change in the assessment of an option to
purchase the underlying asset. When the lease liability is
remeasured in this way, a corresponding adjustment is made to the
carrying amount of the right-of-use asset, or is recorded in the
statement of comprehensive income if the carrying amount of the
right-of-use asset has been reduced to zero.
(iii) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
its short-term leases of machinery and
equipment (i.e. those leases that have a lease term of 12 months
or less from the commencement date and do not contain a purchase
option). It also applies the lease of low-value assets recognition
exemption to leases of office equipment that are considered to be
low value. Lease payments on short-term leases and leases of
low-value assets are recognised as expense on a straight-line basis
over the lease term.
R. Fair value measurement
'Fair value' is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the
principal or, in its absence, the most advantageous market to which
the Group has access at that date. The fair value of a liability
reflects its non-performance risk.
When one is available, the Group measures the fair value of an
instrument using the quoted price in an active market for that
instrument. A market is regarded as 'active' if transactions for
the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis.
If there is no quoted price in an active market, then the Group
uses valuation techniques that maximise the use of relevant
observable inputs and minimise the use of unobservable inputs. The
chosen valuation technique incorporates all of the factors that
market participants would take into account in pricing a
transaction.
If an asset or a liability measured at fair value has a bid
price and an ask price, then the Group measures assets and long
positions at a bid price and liabilities and short positions at an
ask price.
The best evidence of the fair value of a financial instrument on
initial recognition is normally the transaction price - i.e. the
fair value of the consideration given or received. If the Group
determines that the fair value on initial recognition differs from
the transaction price and the fair value is evidenced neither by a
quoted price in an active market for an identical asset or
liability nor based on a valuation technique for which any
unobservable inputs are judged to be insignificant in relation to
the measurement, then the financial instrument is initially
measured at fair value, adjusted to defer the difference between
the fair value on initial recognition and the transaction price.
Subsequently, that difference is recognised in the statement of
comprehensive income on an appropriate basis over the life of the
instrument but no later than when the valuation is wholly supported
by observable market data or the transaction is closed out.
S. Adjusted results
The Group disclosed EBITDA being the retained earnings before
interest, taxes and depreciation, and amortisation. EBITDA is a
measure of the Group's overall financial performance and
profitability which the Directors consider useful to reflect the
underlying performance of the business.
The Board of Directors believes that in order to best represent
the trading performance and results of the Group, the reported
numbers should exclude certain non-cash and one-off items including
the below. Adjusted EBITDA and Adjusted Profit/Loss after making
these exclusions are therefore presented alongside the reported
EBITDA and reported Profit/Loss in the consolidated statement of
comprehensive income.
Management regularly uses the adjusted financial measures
internally to understand, manage and evaluate the business and make
operating decisions. These adjusted measures are among the primary
factors management uses in planning for and forecasting future
periods. Furthermore, compensation of the executives is based in
part on the performance of the business based on these adjusted
measures.
Accordingly, these are the key performance metrics used by the
Board of Directors when assessing the Group's financial
performance. Such exclusions include:
-- Material non-cash items: these items are excluded to better
analyse the underlying cash transactions of the business as the
management regularly monitors the operating cash conversion to
Adjusted EBITDA.
-- Material one-off items: there items are excluded to get
normalized results that is distorted by unusual or infrequent
items. Unusual items include highly abnormal and only incidentally
related to the ordinary activities of the Group and infrequent
occurring not reasonably expected to recur in the foreseeable
future given the environment in which the Group operates.
In the last few years the Group has acquired new businesses on a
regular basis, however, the costs incurred due to these
acquisitions are not considered to be an ongoing trading cost and
usually cannot be changed or influenced by management.
Underlying adjusted results exclude the following items in order
to present a more accurate 'like for like' comparison over the
comparable period:
-- The impact of acquisitions made in the period or in the
comparable period and the directly related finance and professional
costs relating to the acquisitions; and
-- Currency fluctuations affecting the results in the period and
the comparable period. In view of the fact that the Group has
transaction in foreign currencies and may affected from the
fluctuations of the currencies all transactions in foreign currency
transactions are converted to Euro using the exchange rate of the
comparable period.
As these are non-GAAP measures, they should not be considered as
replacements for IFRS measures. The Group's definition of these
non-GAAP measures may not be comparable to other similarly titled
measures reported by other companies. A full reconciliation of
adjustments is included in Note 10.
NOTE 6 - SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
In preparing these consolidated financial statements, management
has made judgements and estimates that effect the application of
the Group's accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual events may differ for
these estimates.
As a result of the uncertainty associated with the unpredictable
nature of the COVID-19 pandemic management faces challenges
relating to selecting appropriate assumptions and developing
reliable estimates. The use of forecast information is pervasive in
the Group's assessment for impairment of goodwill and other
intangible assets, the recoverability of deferred taxes,
determination of the fair value of contingent consideration and
redemption liability and the entity's ability to continue as a
going concern. The complexities associated with preparing forecasts
as a result of the pandemic and the economic downturn include the
following:
-- There are wide ranges of possible outcomes, resulting in a
high degree of uncertainty about the ultimate trajectory of the
pandemic and the path and time needed for a return to a "steady
state".
-- The associated economic impact of the pandemic is highly
dependent on variables that are difficult to predict.
-- The effect of these macro-economic conditions on the
estimated future cash flows of the Group.
Judgments
In the process of applying the Group's accounting policies
management has made the following judgments, which have the most
significant effect on the amounts recognised in the consolidated
financial statements.
-- Structured agreements
IFRS 12 defines a 'Structured entity' as an entity designed so
that voting rights are not the dominant factor in assessing control
and the relevant activities are directed by means of a contractual
arrangement. The application of the definition involves judgment as
well as the identification of the investor-investee relationship.
The following are considered in assessing which party controls the
entity:
-- The purpose and design of such entities
-- The rights which investee holds
-- The rights held by other parties in the investee
-- Exposure to the majority of the risks and rewards from the entity
-- The decision making rights and the power over those
activities that significantly affect the structured entity's
return
The Group currently holds a number of call options to acquire
equity interests in third parties connected with the structured
agreements (see note 19C). In the case of the structured
agreements, the Group is the local partner's strategic technology
partner delivering its products together with operational and
marketing services across the local partner's online operations. In
addition to a framework agreement which governs the relationship of
the structured agreement relationship, the Group provides software
and services under a separate agreement for which it is remunerated
for the provision of software based on a revenue share and
separately for the provision of services which are remunerated
based on the reimbursement of certain costs and a contractual share
of the operating profit of the local partner's business (a "Profit
Share"). Management is required to consider the accounting for the
options and their impact on the assessment of control when the
option is currently exercisable or, in limited circumstances, even
if it is not currently exercisable and their impact on the
assessment of significant influence when the option is currently
exercisable.
Judgement is therefore required to assess the impact of any
potential voting rights held under the options and also the extent
of any influence held over the entity's activities afforded by
contractual arrangements. Where options are held primarily as a
protective right they do not give power over the structure,
existing operating agreements or financing structures. In such
circumstances, management would currently assess the likelihood of
exercise as remote.
The definition of 'control' in the absence of shareholding
rights is judgmental and therefore difficult to determine. Exposure
to the risk and rewards, as well as decision making rights can be
identified by the agreement between the two parties, however, what
is considered exposure to the 'majority' of the risks and rewards
and 'power' over the investees activities are also judgmental
areas. The Group has made judgements in respect of classifying
arrangements as structured agreements (see Note 19).
Prior to exercise, if the options (which may allow the Group to
acquire the equity interests for no further payments above the
investments already made) were assessed as part of the control and
significant influence assessment rather than as protective rights,
this would not materially change the investments recognised in the
balance sheet or amounts recognised in the income statement under
the equity method of accounting. However, exercising the option
would give rise to the recognition of an equity interest which
would result in certain agreements no longer meeting the definition
of a structured agreement as voting rights would become more
dominant and the investments would most likely be accounted for as
an associate.
-- Revenue from contracts with customers
The Group applies judgement in determining whether it is acting
as a principal or an agent specifically on the revenue earned under
the B2B royalty income stream. This income falls within the scope
of IFRS15 Revenue from contracts with customers. In making these
judgements, the Group considers, by examining each contract with
its business partners, which party has the primary responsibility
for providing the services and is exposed to the majority of the
risks and rewards associated with providing the services, as well
as if it has latitude in establishing prices, either directly or
indirectly. The business model of this division is predominately a
revenue share model which is based on royalties earned from B2C
business partners' revenue. Based on this activity, we consider the
Group to be an agent and revenue is therefore recognised as the net
amount of royalties received. The majority of this B2B revenue is
recognised at a point in time that is determined when the gaming or
betting activity used as the basis for the revenue share
calculation takes place, and furthermore is only recognised when
collection is virtually certain with a legally enforceable right to
collect.
-- Internally generated intangible assets
The Group capitalises costs for product development projects.
Expenditure on internally developed products is capitalised when it
meets the following criteria:
-- adequate resources are available to complete and sell the product
-- the Group is able to sell the product
-- sale of the product will generate future economic benefits,
-- expenditure on the project can be measured reliably
Initial capitalisation of cost is based on the management's
judgement that the technological and economic feasibility is
confirmed, usually when product development has reached a defined
milestone and future economic benefits expect to be realised
according to an established project management model. Following
capitalisation, an assessment is performed in regards to project
recoverability which is based on the actual return of the project.
During the year, the Group capitalised EUR55.8 million (2019:
EUR65.5 million) and the carrying amount capitalised development
costs as at 31 December 2020 was EUR118.4 million (2019: EUR126.1
million).
Classification as held for sale
The definition of asset held for sale involves a significant
degree of judgement given that in order for an asset to be
classified as held for sale, it must be available for immediate
sale in its present condition and its sale must be highly probable.
The meaning of 'highly probable' is judgmental and therefore IFRS5
sets out criteria for the sale to be considered as a highly
probable as follows:
-- Management must be committed to a plan to sell the asset;
-- An active program to find a buyer must be initiated;
-- The asset must be actively marketed for sale at a price that
is reasonable to its current fair value;
-- The sale must be completed within one year from the date of
classification;
-- Significant changes to be made to the plan must be
unlikely.
The Board of Directors made a decision to dispose of the Casual
and Social Gaming Business during 2019. As disclosed in Note 24,
part of the Casual and Social Gaming Business disposed in 2020 and
the remaining part disposed in January 2021.
In addition to the above, management have included the Financial
segment in held for sale assets and therefore IFRS5 requirements
have been applied. The segment is available for immediate sale and
can be sold in its current condition subject to the approval by the
shareholders and the regulator. Management announced a plan to sell
the Financial segment during 2020, launched an active program to
locate a buyer and the sale is expected to be completed within one
year from the date of the initial classification. Judgment is
applied on the above classification, on the grounds that disposal
will take place during 2021, and both shareholders and regulators
will provide their approval.
-- Impairment of investments
The Group assesses on a yearly basis whether there is any
indication of impairment which may affect the carrying value of the
investments. The carrying values of associates, joint ventures,
structured agreements and other investments might be affected by
the economic environment in which the companies are operating in.
The Group mainly consider the financial results of the investments,
as well as Return on Investment Ratio ("ROI") which are strong
indications of the investment's recoverability. There are no
significant uncertainties over assumptions made due to the actual
data used to perform assessment over profitability and ROI ratio.
No impairment indications exist this year, given the profitable
position of investments and the significant return on our
investment.
-- Adjusted performance measures
As noted in Note 5 paragraph S, management uses the adjusted
financial measures by excluding certain non-cash and one-off items
from the actual results. The determination of whether non-cash
items or one-off items should form part of the adjusted results, is
a matter of judgment and it's based on whether the
inclusion/exclusion from the results represent more closely the
consistent trading performance of the business.
-- Provision for risks and charges and potential liabilities
The Group operates in a number of regulated markets and is
subject to lawsuits and potential lawsuits regarding complex legal
problems, which are subject to a different degree of uncertainty in
different jurisdictions and under different laws. For all material
ongoing and potential legal and regulatory claims against the
group, an assessment is performed to consider whether an obligation
or possible obligation exists and to determine the probability of
any potential outflow to determine whether a claim results in the
recognition of a provision or disclosure of a contingent liability.
See Note 40 for further details.
Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are described below. The Group based its assumptions and estimates
on parameters available when the consolidated financial statements
were prepared. Existing circumstances and assumptions about future
developments, may change due to market changes or circumstances
arising that are beyond the control of the Group. Such changes are
reflected in the assumptions when they occur.
-- Impairment of non financial assets
Impairment exists when the carrying value of an asset or cash
generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs of
disposal and its value in use. The fair value less costs of
disposal calculation is based on available data from binding sales
transactions, conducted at arm's length, for similar assets or
observable market prices less incremental costs of disposing of the
asset. The value in use calculation is based on a discounted cash
flow model ("DCF"). The cash flows are derived from the budget for
the next five years and do not include restructuring activities
that the Group is not yet committed to or significant future
investments that will enhance the performance of the assets of the
CGU being tested. The recoverable amount is sensitive to the
discount rate used for the DCF model as well as the expected future
cash-inflows and the growth rate used for extrapolation purposes.
These estimates are most relevant to goodwill and other intangibles
with indefinite useful lives recognised by the Group. The key
assumptions used to determine the recoverable amount for the
different CGUs, including a sensitivity analysis, are disclosed and
further explained in Note 18.
-- Income taxes
The Group is subject to income tax in several jurisdictions and
significant judgement is required in determining the provision for
income taxes. During the ordinary course of business, there are
transactions and calculations for which the ultimate tax
determination is uncertain. As a result, the Group recognises tax
liabilities based on estimates of whether additional taxes and
interest will be due.
These tax liabilities are recognised when, despite the Group's
belief that its tax return positions are supportable, the Group
believes it is more likely than not that a taxation authority would
not accept its filing position. In these cases, the Group records
its tax balances based on either the most likely amount or the
expected value, which weights multiple potential scenarios. The
Group believes that its accruals for tax liabilities are adequate
for all open audit years based on its assessment of many factors
including past experience and interpretations of tax law.
This assessment relies on estimates and assumptions and may
involve a series of complex judgments about future events. To the
extent that the final tax outcome of these matters is different
than the amounts recorded, such differences will impact income tax
expense in the period in which such determination is made. Where
the management conclude that it is not probable that the taxation
authority will accept an uncertain tax treatment, they calculate
the effect of uncertainty in determining the related taxable profit
(tax loss), tax bases, unused tax losses, unused tax, credits or
tax rates. The effect of uncertainty for each uncertain tax
treatment is reflected by using the expected value - the sum of the
probability and the weighted amounts in a range of possible
outcomes. More details are included in Note 13.
-- Determination of fair value of intangible assets acquired on
business combinations
The fair value of the intangible assets acquired is based on the
discounted cash flows expected to be derived from the use of the
asset. This is defined through valuation reports obtained by
experts, who determined the value of identifiable assets acquired
through a business combination at the acquisition date by reference
to key assumptions. Further information in relation to the
determination of fair value of intangible assets acquired is given
in Notes 34 and 35.
-- Impairment of financial assets
In response to COVID-19 the Group undertook a review of trade
receivables and other financial assets exposures, as applicable,
and the Expected Credit Losses ("ECL") for each. The review
considered the macroeconomic outlook, customer credit quality,
exposure at default, and the effect of payment deferral options as
at the reporting date. The ECL methodology and definition of
default remained consistent with prior periods. The model inputs,
including forward-looking information, scenarios and associated
weightings, together with the determination of the staging of
exposures were however revised. The group's financial assets
consist of trade receivables and cash and cash equivalents. ECL on
cash balances was considered and calculated by reference to Moody's
credit rating for each financial institution, while ECL on trade
receivables was based on past default experience and an assessment
of the future economic environment. ECL, and specific provisions,
are considered and calculated with reference to the ageing and risk
profile of the balances. In addition, where customers within the
financial trading division have not passed the necessary ongoing
regulatory requirements, consideration is given as to whether
financial assets relating to that customer should be impaired. More
details are included in Note 38.
-- Determining the discount rate of a lease liability under IFRS
16
The Group cannot readily determine the interest rate implicit in
the lease, therefore, it uses its incremental borrowing rate (IBR)
to measure lease liabilities. The IBR is the rate of interest that
the Group would have to pay to borrow over a similar term, and with
a similar security, the funds necessary to obtain an asset of a
similar value to the right-of-use asset in a similar economic
environment. The IBR therefore reflects what the Group 'would have
to pay', which requires estimation when no observable rates are
available (such as for subsidiaries that do not enter into
financing transactions) or when they need to be adjusted to reflect
the terms and conditions of the lease (for example, when leases are
not in the subsidiary's functional currency). The Group estimates
the IBR using observable inputs (such as market interest rates)
when available and is required to make certain entity-specific
estimates (such as the subsidiary's stand-alone credit rating).
The possible effects of a change in the incremental borrowing
rate are an increase or decrease in the lease liability,
right-of-use asset, amortisation and finance costs recognised.
The possible effects of an increase of 1% in the interest rate
would a decrease in amortisation and an increase in interest
expense by EUR0.8 million and EUR1.0 million respectively. The
possible effects of a decrease of 1% in the interest rates would be
an increase in amortisation and a decrease in interest expense by
EUR1 million and EUR1.1 million respectively.
-- Sun Bingo agreement
Following the amendment of the News UK contract in February
2019, which included a 15 year contract extension, the minimum
guarantee ("MG") which is payable to 30 June 2021 is recognised as
an asset and released over the remaining term of the contract in
line with the level of profitability. Management is required to
make reliable estimates on the expected future profitability of the
contract and therefore the expected schedule of release of the
asset over the contract period. In making this assessment
management applies reasonable assumptions based on known factors,
but sometimes and outside of management's control, these factors
may vary. This is reviewed on a regular basis to ensure that the MG
asset is still recoverable over the remaining term of the contract
and if not an adjustment is made to the value of the MG in line
with the profile of the expected future profits.
-- Calculation of legal provisions
The Group ascertains a liability in the presence of legal
disputes or ongoing lawsuits when it believes it is probable that a
financial outlay will take place and when the amount of the losses
can be reasonably estimated. The Group is subject to lawsuits
regarding complex legal problems, which are subject to a differing
degree of uncertainty (also due to a complex legislative
framework), including the facts and the circumstances inherent to
each case, the jurisdiction and the different laws applicable.
Given the uncertainties inherent to these problems, it is difficult
to predict with certainty the outlay which will derive from these
disputes and it is therefore possible that the value of the
provisions for legal proceedings and disputes may vary depending on
future developments in the proceedings underway. The Group monitors
the status of the disputes underway and consults with its legal
advisors and experts on legal and tax-related matters. More details
are included in Note 28.
NOTE 7 - SEGMENT INFORMATION
The Group's reportable segments are strategic business units
that offer different products and services.
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the
management team including the Chief Executive Officer and the Chief
Financial Officer.
The operating segments identified are:
-- Gaming B2B: including Casino, Services, Sport, Bingo, Poker
and Other
-- Gaming B2C: Snaitech, Sun Bingo and Casual (discontinued
operations) and Other B2C
-- Financial: including B2C and B2B CFD (discontinued
operations)
The Group-wide profit measures are Adjusted EBITDA and Adjusted
Profit (see Note 10).
There is no allocation of operating expenses, profit measures,
assets and liabilities to individual products within the gaming
segments, as allocation would be arbitrary.
For the year ended 31 December 2020
Core Asia Total B2B B2C - Intercompany Total Financial - B2C - Total Total
B2B B2B continuing Gaming - discontinued discontinued discontinued
operations continuing operations operations operations
operations
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Revenue 412,974 81,860 494,834 596,339 (12,713) 1,078,460 121,883 8,072 129,955 1,208,415
Adjusted
EBITDA - - 125,897 127,658 - 253,555 56,462 431 56,893 310,448
Adjusted
Profit
attributable
to the
owners of
the Company - - 7,705 19,600 - 27,305 19,949 127 20,076 47,381
Total assets - - 1,304,108 1,293,622 - 2,597,730 465,880 844 466,724 3,064,454
Total
liabilities - - 959,531 895,817 - 1,855,348 308,612 557 309,169 2,164,517
For the year ended 31 December 2019
Core Asia Total B2B B2C - Intercompany Total Financial - B2C - Total Total
B2B B2B continuing Gaming - discontinued discontinued discontinued
operations continuing operations operations operations
operations
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Revenue 440,023 113,892 553,915 900,475 (13,857) 1,440,533 67,915 17,005 84,920 1,525,453
Adjusted
EBITDA 214,819 160,438 - 375,257 7,812 (4,573) 3,239 378,496
Adjusted
Profit
attributable
to the
owners of
the Company 89,609 47,818 - 137,427 (4,450) (8,450) (12,900) 124,527
Total assets 1,104,630 1,275,339 - 2,379,969 713,368 4,377 717,745 3,097,714
Total
liabilities 761,261 857,829 - 1,619,090 252,823 3,595 256,418 1,875,508
Geographical analysis of non-current assets
The Group's information about its non-current assets by location
are detailed below:
2020 2019
EUR'000 EUR'000
------------------------ ---------- ----------
Italy 826,739 855,436
Isle of Man 151,842 448,881
Austria 140,833 179,709
UK 100,878 111,240
Cyprus 63,079 75,050
Sweden 72,778 71,641
British Virgin Islands 59,534 62,410
Denmark - 42,137
Alderney 79,883 49,587
Gibraltar 38,109 39,248
Malta 21,958 25,969
Latvia 15,561 15,173
Ukraine 5,144 7,427
Estonia 9,533 8,657
Republic of Columbia 22,405 22,405
Australia 16,194 19,007
Rest of World 35,848 21,401
1,660,318 2,055,378
---------- ----------
NOTE 8 - DISCONTINUED OPERATION
As identified in Note 24, the Group has treated its Casual and
Social Gaming Business and Financial segment as discontinued in
these results.
The results of the Casual and Social Gaming Business for the
period are presented below:
2020 2019
Actual Adjusted Actual Adjusted
EUR'000 EUR'000 EUR'000 EUR'000
-------------------------------------------------------------- --------- --------- --------- ---------
Revenue 8,072 8,072 17,005 17,005
Distribution costs before depreciation and amortisation (7,545) (7,545) (21,290) (21,290)
Administrative expenses before depreciation and amortisation (392) (96) (290) (288)
--------- --------- --------- ---------
EBITDA 135 431 (4,575) (4,573)
Depreciation and amortisation (178) (178) (3,252) (2,567)
Impairment of intangible assets - - (23,686) -
Finance costs (42) (42) (266) (266)
Profit on disposal of discontinued operations (Note 24) 586 - - -
--------- --------- --------- ---------
Profit/(loss) before taxation 501 211 (31,779) (7,406)
Tax expenses (84) (84) (1,035) (1,044)
--------- --------- --------- ---------
Profit/(loss) from discontinued operations, net of tax 417 127 (32,814) (8,450)
--------- --------- --------- ---------
The results of the Financial segment for the period are
presented below:
2020 2019
Actual Adjusted Actual Adjusted
EUR'000 EUR'000 EUR'000 EUR'000
---------------------------------------------------------------- ---------- --------- --------- ---------
Revenue 121,883 121,883 67,915 67,915
Distribution costs before depreciation and amortisation (49,107) (50,028) (39,313) (38,892)
Administrative expenses before depreciation and amortisation (25,696) (15,270) (23,018) (17,185)
(1,780) (123) (4,026) (4,026)
---------- --------- --------- ---------
EBITDA 45,300 56,462 1,558 7,812
Depreciation and amortisation (27,960) (12,299) (27,791) (11,264)
Impairment of intangible assets - - (90,013) -
Impairment of asset held for sale (221,255) - - -
Finance income 380 380 76,915 3,917
Finance costs (18,478) (18,478) (764) (764)
Profit/(loss) before taxation (222,013) 26,065 (40,095) (299)
Tax expenses (2,731) (6,116) (2,536) (4,151)
---------- --------- --------- ---------
Profit/(loss) from discontinued operations, net of tax (224,744) 19,949 (42,631) (4,450)
---------- --------- --------- ---------
Profit/(loss) from discontinued operations, net of tax - Total (224,327) 20,076 (75,445) (12,900)
---------- --------- --------- ---------
Earnings per share from discontinued operations
Basic (cents) (75.1) 6.7 (25.0) (4.3)
Diluted (cents) (75.1) 6.4 (25.0) (4.3)
The net cash flows incurred by the Casual and Social Gaming
Business in the period, are as follows:
2020 2019
EUR'000 EUR'000
Operating (636) 3,809
Investing - (3,931)
Financing (163) (229)
--------- ---------
Net cash outflow (799) (351)
--------- ---------
The net cash flows incurred by the Financial segment in the
period, are as follows:
2020 2019
EUR'000 EUR'000
Operating 110,167 33,333
Investing (4,357) (14,668)
Financing (1,799) (27,437)
--------- ---------
Net cash inflow/(outflow) 104,011 (8,772)
--------- ---------
NOTE 9 - REVENUE FROM CONTRACTS WITH CUSTOMERS
The Group has disaggregated revenue into various categories in
the following table which is intended to:
-- Depict how the nature, amount, timing and uncertainty of
revenue and cash flows are affected by recognition date; and
-- Enable users to understand the relationship with revenue
segment information provided in the segmental information note.
Set out below is the disaggregation of the Group's revenue:
Revenue analysis by geographical location of licensee, product
type and timing of transfer of performance obligations
The revenues from B2B (consisting of royalty income, fixed- fee
income, revenue received from the sale of hardware and cost based
revenue), B2C and Financials are described in Note 5D.
For the year ended 31 December 2020
B2B B2C Intercompany Total Gaming Financial B2C - Total discontinued Total
- continuing - discontinued discontinued operations
operations operations operations
Primary
Geographic
Markets EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------- ------------------------------------ ------------------------------------ ------------------------------------- -------------------------- ------------------------------------ ------------- ------------------------------------------------- ---------------------------------
Italy 24,971 522,718 (6,247) 541,442 2,195 2,195 543,637
United 150,026 54,389 (3,557) 200,858 76,061 76,061 276,919
Kingdom
Philippines 70,150 - - 70,150 143 143 70,293
Malta 54,712 - - 54,712 965 965 55,677
Mexico 54,912 - - 54,912 420 420 55,332
Spain 22,802 27 (3) 22,826 827 827 23,653
Germany 2,097 16,121 (2,060) 16,158 1,715 1,715 17,873
Gibraltar 16,461 - - 16,461 37 37 16,498
Greece 13,853 - - 13,853 266 266 14,119
Curaccao 10,586 - - 10,586 69 69 10,655
United Arab 13 - - 13 9,158 9,158 9,171
Emirates
Cyprus 782 - - 782 7,438 7,438 8,220
Norway 6,051 - - 6,051 133 133 6,184
Finland 5,822 - - 5,822 85 85 5,907
Poland 5,310 - - 5,310 34 34 5,344
Rest of
World 56,286 3,084 (846) 58,524 22,337 8,072 30,409 88,933
494,834 596,339 (12,713) 1,078,460 121,883 8,072 129,955 1,208,415
------------------------------------ ------------------------------------ ------------------------------------- -------------------------- ------------------------------------ ------------- ------------------------------------------------- ---------------------------------
B2B B2C Intercompany Total Gaming Financial B2C - Total Total
- continuing - discontinued discontinued
operations discontinued operations operations
operations
Product
type EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------- -------- -------------------------------- ------------- -------------------------------- ------------- ------------- ------------- ----------
B2B 494,834 - (12,713) 482,121 - - - 482,121
-------- -------------------------------- ------------- -------------------------------- ------------- ------------- ------------- ----------
Snaitech - 522,172 - 522,172 - - - 522,172
Sun Bingo - 53,775 - 53,775 - - - 53,775
B2C Sport
and Other
B2C - 20,392 - 20,392 - 8,072 8,072 28,464
-------- -------------------------------- ------------- -------------------------------- ------------- ------------- ------------- ----------
Total B2C - 596,339 - 596,339 - 8,072 8,072 604,411
-------- -------------------------------- ------------- -------------------------------- ------------- ------------- ------------- ----------
Financial - - - - 121,883 - 121,883 121,883
-------- -------------------------------- ------------- -------------------------------- ------------- ------------- ------------- ----------
494,834 596,339 (12,713) 1,078,460 121,883 8,072 129,955 1,208,415
-------- -------------------------------- ------------- -------------------------------- ------------- ------------- ------------- ----------
B2B B2C Intercompany Total Financial B2C - Total Total
Gaming - discontinued discontinued
- discontinued operations operations
continuing operations
operations
Timing of
transfer
of
performance
obligations EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
--------------- ----------------------------------------------- ------------------------------------------------ ------------------------------------------------ ----------- ------------- ------------- ------------- ----------
Recognised at
point
in time (other
sales) 472,848 596,339 (12,713) 1,056,474 121,883 8,072 129,955 1,186,429
Recognised at
the
point in time
(hardware
sales) 20,479 - - 20,479 - - - 20,479
Recognised 1,507 - - 1,507 - - - 1,507
over
time
----------------------------------------------- ------------------------------------------------ ------------------------------------------------ ----------- ------------- ------------- ------------- ----------
494,834 596,339 (12,713) 1,078,460 121,883 8,072 129,955 1,208,415
----------------------------------------------- ------------------------------------------------ ------------------------------------------------ ----------- ------------- ------------- ------------- ----------
For the year ended 31 December 2019
B2B B2C Intercompany Total Gaming Financial B2C - discontinued Total discontinued Total
- continuing - discontinued operations operations
operations operations
Primary
Geographic
Markets EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------- ------------------------------------ ------------------------------------ ------------------------------------ -------------------------------- ------------------------------------ -------------------------------- ------------------------------------ ---------------------------------
Italy 22,031 834,867 (7,802) 849,096 1,745 - 1,745 850,841
United
Kingdom 204,252 45,678 (2,953) 246,977 33,229 - 33,229 280,206
Philippines 97,704 - - 97,704 40 - 40 97,744
Malta 40,229 - - 40,229 162 - 162 40,391
Mexico 29,748 - - 29,748 243 - 243 29,991
Spain 23,305 217 (23) 23,499 561 - 561 24,060
Greece 23,595 - - 23,595 (209) - (209) 23,386
Gibraltar 16,878 - - 16,878 22 - 22 16,900
Germany 2,120 14,572 (1,925) 14,767 1,371 - 1,371 16,138
Ireland 12,521 - - 12,521 203 - 203 12,724
Finland 9,265 - - 9,265 55 - 55 9,320
Austria 4,648 5,121 (1,149) 8,620 158 - 158 8,778
United Arab
Emirates - - - - 7,185 - 7,185 7,185
Cyprus 1,147 - - 1,147 5,894 - 5,894 7,041
Curacao 6,986 - - 6,986 13 - 13 6,999
Rest of
World 59,486 20 (5) 59,501 17,243 17,005 34,248 93,749
553,915 900,475 (13,857) 1,440,533 67,915 17,005 84,920 1,525,453
------------------------------------ ------------------------------------ ------------------------------------ -------------------------------- ------------------------------------ -------------------------------- ------------------------------------ ---------------------------------
B2B B2C Intercompany Total Gaming Financial B2C - discontinued Total discontinued Total
- continuing - discontinued operations operations
operations operations
Product
type EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------- ------------------------------------ -------------------------------- ------------------------------------ -------------------------------- ------------------------------------ -------------------------------- -------------------------------- --------------------------------
B2B 553,915 - (13,857) 540,058 - 540,058
------------------------------------ -------------------------------- ------------------------------------ -------------------------------- ------------------------------------ -------------------------------- -------------------------------- --------------------------------
Snaitech - 829,723 - 829,723 - - - 829,723
Sun Bingo - 40,633 - 40,633 - - - 40,633
B2C Sport
and Other
B2C - 30,119 - 30,119 - 17,005 17,005 47,124
------------------------------------ -------------------------------- ------------------------------------ -------------------------------- ------------------------------------ -------------------------------- -------------------------------- --------------------------------
Total B2C - 900,475 - 900,475 - 17,005 17,005 917,480
------------------------------------ -------------------------------- ------------------------------------ -------------------------------- ------------------------------------ -------------------------------- -------------------------------- --------------------------------
Financial - - - - 67,915 - 67,915 67,915
------------------------------------ -------------------------------- ------------------------------------ -------------------------------- ------------------------------------ -------------------------------- -------------------------------- --------------------------------
553,915 900,475 (13,857) 1,440,533 67,915 17,005 84,920 1,525,453
------------------------------------ -------------------------------- ------------------------------------ -------------------------------- ------------------------------------ -------------------------------- -------------------------------- --------------------------------
B2B B2C Intercompany Total Financial B2C - discontinued Total Total
Gaming - discontinued operations discontinued
- operations operations
continuing
operations
Timing of
transfer
of
performance
obligations EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
--------------- ------------------------------ ------------------------------- ------------------------------- ----------- ------------------------------- ------------------------------ ------------- -----------------------
Recognised at
point
in time
(other sales) 494,929 900,475 (13,857) 1,381,547 67,915 17,005 84,920 1,466,467
Recognised at
the
point in time
(hardware
sales) 56,153 - - 56,153 - - - 56,153
Recognised
over
time 2,833 - - 2,833 - - - 2,833
------------------------------ ------------------------------- ------------------------------- ----------- ------------------------------- ------------------------------ ------------- -----------------------
553,915 900,475 (13,857) 1,440,533 67,915 17,005 84,920 1,525,453
------------------------------ ------------------------------- ------------------------------- ----------- ------------------------------- ------------------------------ ------------- -----------------------
There were no changes in the Group's valuation processes and the
vast majority of the Group's B2B contracts are for the delivery of
services within the next 12 months. Furthermore, no individual
licensee in 2020 and 2019 individually accounted for more than 10%
of the total gaming revenue and the total revenue of the Group.
The Group's contract liabilities, in other words deferred
income, primarily include advance payment for hardware and
services, which are typically used in 12 months, and also include
the set-up fees paid by the licensee in the beginning of the
contract. The fees cover the whole period of the contract, with an
average period of 36 months. The revenue is recognised monthly
until the end of the contract. These are included in deferred
income and total EUR11.9 million (2019: EUR9.2 million).
The movement in contract liabilities during the year was the
following:
2020
EUR'000
--------------------------------------------------------- ---------
Balance 1 January 9,189
Recognised during the year 20,739
Realised in the consolidated statement of comprehensive
income (18,065)
11,863
---------
During 2019, the Group earned non-recurring market-making
revenue and EBITDA of $5.5 million through its trading contract
with AMC (Mauritius) plc which is ultimately own by the
shareholders of ACM Group Limited, from which the Group acquired
technology, intellectual property and certain customer assets on 10
October 2017. No similar income was earned in 2020.
NOTE 10 - ADJUSTED ITEMS
Management regularly uses adjusted financial measures internally
to understand, manage and evaluate the business and make operating
decisions. These adjusted measures are among the primary factors
management uses in planning for and forecasting future periods. The
primary adjusted financial measures are Adjusted EBITDA and
Adjusted Profit, which management considers are relevant in
understanding the Group's financial performance. The definitions of
adjusted items and underlying adjusted results are disclosed in
Note 5.
As these are not a defined performance measure under IFRS, the
Group's definition of adjusted items may not be comparable with
similarly titled performance measures or disclosures by other
entities.
The following tables provide a full reconciliation between
adjusted and actual results:
Administration Profit/(Loss)
and distribution from continuing Total
expenses operations Profit/(Loss)
For the year and impairment EBITDA attributable attributable
ended 31 December of financial from continuing to the owners to the owners
2020 Note Revenue assets operations of the Company of the Company
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------------ -------- ---------- ------------------ ----------------- ----------------- ------------------
Reported as
actual 1,078,460 855,605 222,855 (72,952) (297,279)
Employee stock
option
expenses(1) - (16,541) 16,541 16,541 21,079
Professional fees
on acquisitions - (1,755) 1,755 1,755 5,032
Additional
consideration
payable for
put/call
option(2) - (5,296) 5,296 5,296 5,296
Movement in
contingent
consideration
and redemption
liability
(finance costs
and
administrative
expenses row )(3) - (1,156) 1,156 4,170 4,170
Charitable
donation(4) - (3,162) 3,162 3,162 3,162
Provision for
other receivables
(5) - (2,790) 2,790 2,790 6,432
Fair value change
of equity
instruments(6) - - - (598) (598)
Deferred tax on
acquisitions (tax
expense
row) - - - (11,672) (13,253)
Tax relating to
prior years (tax
expense
row) 13 - - - 4,899 3,096
Amortisation of
intangibles on
acquisitions
(depreciation and
amortisation row) - - - 38,976 54,638
Impairment of
tangible,
intangible assets
and right of use
asset 16,17,18 - - - 45,352 45,352
Impairment of
discontinued
operations 24C - - - - 221,255
Fair value change
on acquisition of
associate 34A - - - (6,520) (6,520)
Profit on disposal
of asset
classified
as held for sale 24 - - - (22,082) (22,669)
Tax on disposal of
asset classified
as
held for sale
(tax expenses
row) 24 - - - 9,281 9,281
Loss on sale of
associate 19B - - - 8,907 8,907
Adjusted measure 1,078,460 824,905 253,555 27,305 47,381
Constant currency
impact 12,782 9,973 2,809 4,791 21,547
Adjusted result on
constant currency
basis 1,091,242 834,878 256,364 32,096 68,928
Adjusted result
related to
acquisitions
on constant
currency basis (1,932) (2,262) 330 (334) (334)
Underlying
adjusted result
on constant
currency basis 1,089,310 832,616 256,694 31,762 68,594
(1) Employee stock option expenses relate to non cash expenses
of the Group
(2) Fair value change in the put/call option for the acquisition
of Playtech BGT Sports and Statscore. Costs which directly relate
to acquisitions are not considered an ongoing cost of operations
and therefore have been added back to Adjusted EBITDA
(3) Finance costs on contingent consideration and redemption
liability and changes in the fair value of contingent consideration
payable related to prior year acquisitions. Costs which directly
relate to acquisitions are outside the normal course of business
and therefore have been added back to Adjusted EBITDA
(4) Following the conclusion of the UKGC investigation, the
Board of Directors agreed to make charitable contribution to the
value of GBP3.5 million, in lieu of regulatory settlement. Of this
pledge, EUR3.2 million was paid in the current financial year
(5) Provision against loans receivable that do not relate to the
ordinary operations of the Group
(6) Fair value change of equity instruments which are traded in
active markets. These are excluded from the results as they relate
to unrealised profit/loss
Administration Profit/(Loss)
and distribution from continuing
expenses and operations Total Profit/(Loss)
impairment attributable attributable
For the year ended 31 of financial EBITDA from continuing to the owners to the owners
December 2019 Revenue assets operations of the Company of the Company
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Reported as actual 1,440,533 1,106,830 333,703 55,874 (19,571)
Employee stock option
expenses - (13,252) 13,252 13,252 18,102
Professional fees on
acquisitions - (522) 522 522 1,926
Additional consideration
payable
for put/call option - (10,180) 10,180 10,180 10,180
Movement in contingent
consideration
and redemption liability - (6,285) 6,285 (837) (73,833)
Cost of fundamental
business reorganisation - (15) 15 15 15
Effect from the
amendments on the
terms of Sun contract
back dated - (6,425) 6,425 6,425 6,425
Impairment of investment
in associate - (443) 443 443 443
Provision for other
receivables - (4,432) 4,432 4,432 4,432
Fair value change of
equity instruments - - - 270 270
Notional interest on
convertible
bonds - - - 9,851 9,851
Finance costs on
acquisitions - - - 1,532 1,532
Deferred tax on
acquisitions - - - (12,100) (13,713)
Tax relating to prior
years - - - 4,077 4,067
Amortisation of
intangible assets
on acquisitions - - - 41,604 58,816
Impairment of intangible
assets
and right of use assets - - - 1,887 115,585
Adjusted measure 1,440,533 1,065,276 375,257 137,427 124,527
Constant currency impact - - - 4,304 1,173
Adjusted result on
constant currency
basis 1,440,533 1,065,275 375,257 141,731 125,700
Adjusted result related - -
to acquisitions
on constant currency
basis - - -
Underlying adjusted
result on constant
currency basis 1,440,533 1,065,275 375,257 141,731 125,700
NOTE 11 - AUDITORS' REMUNERATION
2020 2019
EUR'000 EUR'000
Group audit and parent company (BDO) 1,030 1,379
Audit of subsidiaries (BDO) 1,241 775
Audit of subsidiaries (non-BDO) 287 450
Total audit fees 2,558 2,604
Non-audit services provided by parent company
auditor and its international member firms
Other non-audit services 321 314
Tax advisory services 167 267
Total non-audit fees 488 581
NOTE 12 - FINANCE INCOME AND COSTS
2020 2019
EUR'000 EUR'000
A. Finance income
Interest income 1,131 2,577
Movement in deferred and contingent consideration and redemption liability - 7,122
1,131 9,699
B. Finance costs
Net foreign exchange loss (2,149) (4,303)
Notional interest on convertible bonds - (9,851)
Nominal interest on convertible bonds - (1,349)
Interest on bonds (36,743) (33,849)
Interest on lease liability (5,480) (5,767)
Interest on loans and borrowings and other (5,764) (639)
Bank facility fees (1,941) (3,306)
Bank charges (9,463) (7,628)
Movement in deferred and contingent consideration and redemption liability (3,014) -
(64,554) (66,692)
Net financing costs (63,423) (56,993)
NOTE 13 - TAX EXPENSES
2020 2019
EUR'000 EUR'000
Income tax expense for the current year 12,911 23,226
Income tax relating to prior years 3,876 4,183
Withholding tax 388 168
Deferred tax 3,207 4,191
Total tax charge 20,382 31,768
The tax charge for the year can be reconciled to accounting
profit from continuing operations as follows:
2020 2019
EUR'000 EUR'000
(Loss)/Profit before tax (52,657) 88,245
Tax at effective rate in Isle of Man - -
Income tax on profits of subsidiary operations 20,382 31,768
Total tax charge 20,382 31,768
The Group's policy is to manage, control and operate Group
companies only in the countries in which they are registered. The
international tax laws and practices in respect of the digital
economy continue to evolve in many jurisdictions where the Group
has significant assets or people presence. The Group's
international presence means that it is possible that the amount of
tax that will eventually become payable may differ from the amount
provided in the financial statements.
The Group's underlying adjusted current effective tax rate of
22% (2019:13%) is impacted by the geographic mix of profits and
reflects a combination of higher headline rates of tax in the
various jurisdictions in which the Group operates when compared
with the Isle of Man standard rate of corporation tax of 0%.
During the year, the Group recognised an overseas tax charge of
EUR4.9 million which relates to the settlement of open enquiries
with tax authorities.
The deferred tax is due to the reversal of temporary differences
arising on the identification of the intangible assets acquired in
the current and prior years. Refer to Note 31 for more detailed
information in respect of deferred taxes.
The Group implemented an internal restructuring in January 2021,
which resulted in Playtech plc migrating its tax residency to the
United Kingdom and the Group's key operating entity transferring
its business to a UK company. This restructuring is not expected to
have a significant impact on the Group's underlying effective tax
rate.
NOTE 14 - EARNINGS PER SHARE
The calculation of basic earnings per share ("EPS") has been
based on the following profit/(loss) attributable to ordinary
shareholders and weighted-average number of ordinary shares
outstanding.
2020 2019
Actual Adjusted Actual Adjusted
EUR'000 EUR'000 EUR'000 EUR'000
Profit/(loss) attributable
to owners of the Company (297,279) 47,381 (19,571) 124,527
Basic (cents) (99.6) 15.9 (6.5) 41.3
Diluted (cents) (99.6) 15.2 (6.5) 40.4
2020 2019
Actual Adjusted Actual Adjusted
EUR'000 EUR'000 EUR'000 EUR'000
Profit/(loss) attributable
to the owners of the Company
from continuing operations (72,952) 27,305 55,874 137,427
Basic (cents) (24.5) 9.2 18.5 45.5
Diluted (cents) (24.5) 8.8 18.1 44.6
2020 2019
Actual Adjusted Actual Adjusted
Number Number Number Number
Denominator - basic
Weighted average number of equity shares 298,357,055 298,357,055 301,790,246 301,790,246
Denominator - diluted
Weighted average number of equity shares 298,357,055 298,357,055 301,790,246 301,790,246
Weighted average number of option shares 12,455,965 12,455,965 6,258,364 6,258,364
Weighted average number of shares 310,813,020 310,813,020 308,048,610 308,048,610
The calculation of diluted EPS has been based on the above
profit attributable to ordinary shareholders and weighted-average
number of ordinary shares outstanding after adjustment for the
effects of all dilutive potential ordinary shares. The effects of
the anti-dilutive potential ordinary shares are ignored in
calculating diluted EPS.
EPS for discontinued operations is disclosed in Note 8.
NOTE 15 - EMPLOYEE BENEFITS
Total staff costs comprise the following:
2020 2019
EUR'000 EUR'000
Salaries and personnel-related costs 337,043 329,098
Employee stock option costs 21,079 18,102
358,122 347,200
Average number of personnel:
Distribution 5,776 5,382
General and administration 668 666
6,444 6,048
The Group has the following employee share option plans ("ESOP")
for the granting of non-transferable options to certain
employees:
-- Playtech 2005 Share Option Plan ("the Plan") and Israeli
plans. Options granted under these plans vest on the first day on
which they become exercisable which is typically between one to
four years after grant date.
-- GTS 2010 Company Share Option Plan ("CSOP"). Options granted
under these plan vest on the first day on which they become
exercisable which is three years after grant date.
-- Long Term Incentive Plan 2012 ("LTIP"). Awards (options,
conditional awards or a forfeitable share award) granted under this
plan vest on the first day on which they become exercisable which
is typically between eighteen to thirty six months after grant
date.
The overall term of the ESOP is ten years. These options are
settled in equity once exercised. Option prices are denominated in
GBP.
During 2012, the Group amended some of the rules of the
equity-based Plan. The amendments allow the Group, at the employees
consent, to settle fully vested and exercisable options for cash
instead of issuing shares.
During 2020 the Group granted:
-- 4,983,428 nil cost awards at fair value per share of GBP2.97 - GBP2.99
-- 2,483,140 nil cost awards subject to Diluted EPS, relative
total shareholder return ("TSR") against constituents of FTSE250
but excluding investment trusts index, and relative TSR against a
sector comparator group of 9-12 peer companies. The fair value per
share according to the Monte Carlo simulation model is between
GBP2.03 and GBP3.34. Inputs used were as follows:
Expected Share price Dividend Risk free Projection Volatility
life (years) at grant date yield rate period (years)
3 GBP3.488 1.49% 0.0% 3 45%
During 2019 the Group granted:
-- 620,429 nil cost awards subject to relative TSR against
constituents of the FTSE250 but excluding investment trusts index
and relative TSR against constituents of a sector comparator group
of 11 peer companies. The fair value per share according to the
Monte Carlo simulation model is between GBP1.93 and GBP2.13. Inputs
used were as follows:
Expected Share price Dividend Risk free Projection Volatility
life (years) at grant date yield rate period (years)
3 GBP4.224 4.96% 0.85% 2.84 34%
-- 3,998,179 nil cost awards out of which some are subject to
relative TSR against constituents of the FTSE250 but excluding
investment trusts index, relative TSR against constituents of a
sector comparator group of 11 peer companies and individual
conditions relating to business area and EBITDA performance. The
fair value per share according to the Monte Carlo simulation model
is between GBP2.22 and GBP3.91. Inputs used, where applicable, were
as follows:
Expected Share price Dividend Risk free Projection Volatility
life (years) at grant date yield rate period (years)
2.62 -
3 GBP4.491 4.66% 0.48% 2.46 36%
-- 1,900,000 nil cost awards subject to the volume weighted
average price of shares exceeding the share price target set out
over a period of 30 consecutive business days. The fair value per
share according to the Monte Carlo simulation model is between
GBP0.24 and GBP1.1. Inputs used were as follows:
--
Share price Dividend Risk free Projection Volatility
at grant date yield rate period (years)
GBP3.88 4.22% 0.54% 3 -5 30.9%
At 31 December 2020 and 2019 the following options were
outstanding:
2020 2019
Number Number
Shares vested between 18 April 2012
and 18 April 2013 at an exercise price
of GBP5.12 per share - 18,000
Shares vested between 26 August 2012
and 26 August 2013 at an exercise price
of GBP4.16 per share - 30,500
Shares vested on 10 March 2014 at an
exercise price of GBP3.5225 per share 25,700 25,700
Shares vested on 1 March 2018 at nil
cost 102,844 102,844
Shares vested between 1 September 2016
and 1 March 2018 at nil cost 83,929 100,596
Shares vested on 1 March 2019 at nil
cost 31,972 31,972
Shares vested between 1 September 2017
and 1 March 2019 at nil cost 163,308 202,161
Shares vested on 21 December 2019 at
nil cost 59,469 91,446
Shares vested between 1 September 2017
and 1 April 2019 at nil cost 27,520 33,372
Shares will vest on 1 March 2020 at
nil cost 384,406 522,992
Shares vested on 1 September 2019 at
nil cost - 16,703
Shares will vest on 1 March 2021 at
nil cost 2,606,507 2,729,622
Shares will vest between 1 March 2021
and 1 March 2022 4,374,371 4,565,881
Shares will vest by December 19 2024 1,900,000 1,900,000
Shares will vest between 1 March 2023
and 26 October 2023 7,126,752 -
16,886,778 10,371,789
Total number of shares exercisable as of 31 December 2020 is
879,148 (2019: 653,294).
The following table illustrates the number and weighted average
exercise prices of shares options for the ESOP.
2020 2019 2020 2019
Number of Number of Weighted Weighted
options options average exercise average
price exercise
price
Outstanding at the
beginning of the year 10,371,789 5,017,921 GBP0.03 GBP0.06
Granted 7,466,568 6,518,608 Nil Nil
Forfeited (733,791) (952,116) GBP0.3 GBP0.00
Exercised (217,788) (212,624) GBP0.00 GBP0.00
Outstanding at the
end of the year 16,886,778 10,371,789 GBP0.03 GBP0.03
Included in the number options exercised during the year are
16,961 options (2019: 12,410) where a cash alternative was
received.
The weighted average share price at the date of exercise of
options was GBP3.018 (2019: GBP4.166).
Share options outstanding at the end of the year have the
following exercise prices:
Expiry date Exercise price 2020 2019
Number Number
Between 18 April 2020 Between GBP4.16 and
and 26 August 2020 GBP5.12 - 48,500
10 March 2021 GBP3.5225 25,700 25 ,700
21 December 2025 Nil 186,773 203,440
Between 21 December
2026 and 31 December
2026 Nil 275,936 346,766
Between 1 March 2027
and 28 June 2027 Nil 372,047 516,485
23 July 2028 Nil 2,658,606 2,765,017
Between 27 February
2029 and 19 December
2029 Nil 6,240,964 6,465,881
Between 17 July 2030
and 26 October 2030 Nil 7,126,752 -
16,886,778 10,371,789
Tradetech ESOP
In addition, the Group has the following employee share option
plans ("ESOP") for the granting of non-transferable options to
certain employees:
-- TradeFX 2009 Global Share Option Plan ("the First Plan").
Options granted under the first plan vest on the first day on which
they become exercisable which is typically between one to four
years after grant date.
-- Tradetech Performance Share Plan 2017 ("the Second Plan").
Options granted under the second plan vest three years after grant
date, according to performance targets in the years 2017 and
2018.
The overall term of the ESOP is ten years. These options are
settled in equity once exercised. The second plan was exercised
fully in 2020 and was changed to be settled in cash. Option prices
are either denominated in USD, depending on the option grant
terms.
Total number of share options exercisable as of 31 December 2020
is 8,000 (2019: 6,000).
2020 2019
Number Number
Shares vested between 1 December 2015 and 31 December 2018 at an exercise price of $70 per
share 4,000 4,000
Shares vested between 1 January 2019 and 31 December 2019 at an exercise price of $70 per
share 2,000 2,000
6,000 6,000
Shares vested between 1 January 2019 and 1 September 2020 at an exercise price of $70 per
share 2,000 2,000
Shares vested between June 2020 November 2020 at nil cost - 7,898
2,000 9,898
8,000 15,898
The following table illustrates the number and weighted average
exercise prices of shares options for the ESOP:
2020 2019 2020 2019
Number Number Weighted Weighted average exercise price
of options of options average exercise
price
Outstanding at the
beginning of the year 15,898 20,898 $ 35.23 $ 43.54
Granted through the - - - -
year
Forfeited (327) (5,000) - $70.00
Exercised (7,571) - - -
Outstanding at the
end of the year 8,000 15,898 $70.00 $35.23
Included in the number of options exercised during the year is
7,571 (2019: Nil) where a cash alternative was received. The
weighted average share price at the date of exercise of options in
2020 was $9.67.
Share options outstanding at the end of the year have the
following exercise prices:
2020 2019
Number Number
Share options to be expired between 1 December 2024 and 10 March 2025 at an exercise price
of $70 per share 8,000 8,000
Share options to be expired between June 2027 and November 2027 at nil cost - 7,898
8,000 15,898
NOTE 16 - PROPERTY, PLANT AND EQUIPMENT
Computer Gaming Office furniture Buildings, Total
software machines and equipment leasehold
and hardware buildings
and improvements
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Cost
At 1 January 2020 108,314 67,869 32,373 303,687 512,243
Additions 14,272 19,600 5,464 2,340 41,676
Acquisitions through
business
Combinations (Note
34A) - - 9 - 9
Disposals (300) (238) (530) (66) (1,134)
Write offs (4,394) (680) (701) (1,484) (7,259)
Reclassifications 3 3 (3) (3) -
Reclassification
to assets classified
as held for sale
(Note 24) (2,644) (29) (1,651) (1,473) (5,797)
Effect of movement
in exchange rates (217) (3) (152) (133) (505)
At 31 December
2020 115,034 86,522 34,809 302,868 539,233
Accumulated depreciation
and impairment
losses
At 1 January 2020 78,077 21,175 15,376 21,237 135,865
Charge 14,974 21,921 5,386 6,477 48,758
Impairment loss 1,144 2,020 2,018 3,534 8,716
Disposals (288) (130) (298) (37) (753)
Write offs (4,339) (557) (575) (1,473) (6,944)
Reclassifications (36) - - 36 -
Reclassification
to assets classified
as held for sale
(Note 24) (1,890) (25) (832) (490) (3,237)
Effect of movement
in exchange rates (169) (3) (74) (41) (287)
At 31 December
2020 87,473 44,401 21,001 29,243 182,118
Net Book Value
At 31 December
2020 27,561 42,121 13,808 273,625 357,115
In the total impairment loss of EUR8.7 million, an amount of the
EUR8.3 million relates to the Sports B2C CGU. Refer to Note 18.
Computer Gaming Office furniture Buildings, Total
software machines and equipment leasehold
and hardware buildings
and improvements
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Cost
At 1 January 2019 106,229 71,095 26,197 330,840 534,361
Additions 18,173 28,472 6,596 8,261 61,502
Acquisitions through
business
combinations - 359 91 9 459
Disposals (917) (4,729) (1,181) (459) (7,286)
Write offs (14,953) (3,217) (755) (230) (19,155)
Reclassifications (22) 167 1,741 (1,886) -
Reclassification
to inventory - (24,280) - - (24,280)
Reclassification
to assets classified
as held for sale (238) - (193) (32,850) (33,281)
Effect of movement
in exchange rates 42 2 (123) 2 (77)
At 31 December
2019 108,314 67,869 32,373 303,687 512,243
Accumulated depreciation
and impairment
losses
At 1 January 2019 77,439 22,295 10,910 13,629 124,273
Charge 16,664 21,007 5,630 8,284 51,585
Impairment loss 13 - 9 873 895
Disposals (887) (4,542) (682) (99) (6,210)
Write offs (14,948) (3,212) (729) (161) (19,050)
Reclassifications (38) 44 392 (398) -
Reclassification
to inventory - (14,418) - - (14,418)
Reclassification
to assets classified
as held for sale (187) - (171) (891) (1,249)
Effect of movement
in exchange rates 21 1 17 - 39
At 31 December
2019 78,077 21,175 15,376 21,237 135,865
Net Book Value
At 31 December
2019 30,237 46,694 16,997 282,450 376,378
At 1 December
2019 28,790 48,800 15,287 317,211 410,088
NOTE 17 - LEASES
Set out below are the carrying amounts of right of use assets
recognised and the movements during the period:
Office leases Hosting Total
EUR'000 EUR'000 EUR'000
At 1 January 2020 69,109 5,550 74,659
Additions/modifications 14,460 6,270 20,730
Reclassification to assets
classified as held for sale
(Note 24) (4,243) - (4,243)
Acquisitions through business
Combinations (Note 34A -
34B) 149 - 149
Amortisation charge (16,554) (5,284) (21,838)
Impairment loss (2,755) - (2,755)
At 31 December 2020 60,166 6,536 66,702
In the total impairment loss of EUR2.8 million, an amount of the
EUR2.0 million relates to the Sports B2C CGU. Refer to Note 18.
Office rent Hosting costs Total
EUR'000 EUR'000 EUR'000
At 1 January 2019 78,368 5,076 83,444
Additions/modifications 9,909 5,209 15,118
Reclassification of lease
incentive (4,161) - (4,161)
Reclassification to assets
classified as held for sale (585) - (585)
Acquisitions through business
Combinations 3,765 - 3,765
Amortisation charge (17,360) (4,735) (22,095)
Impairment loss (827) - (827)
At 31 December 2019 69,109 5,550 74,659
Set out below are the carrying amounts of lease liabilities and
the movements during the period:
2020 2019
EUR'000 EUR'000
At 1 January 90,789 90,867
Additions/modifications 21,534 14,709
Reclassification to assets classified as
held for sale (Note 24) (5,589) (615)
Acquisitions through business
Combinations (Notes 34A - 34B) 161 4,170
Accretion of interest 5,859 6,281
Payments (27,222) (27,228)
Foreign exchange movements (2,966) 2,605
At 31 December 82,566 90,789
Current 21,019 25,515
Non current 61,547 65,274
82,566 90,789
The maturity analysis of lease liabilities is disclosed in Note
38B.
The following are the amounts recognised in the consolidated
statement of comprehensive income:
2020 2019
EUR'000 EUR'000
Amortisation expense of right of use assets 21,838 22,095
Interest expense on lease liabilities 5,859 6,281
Impact of early termination of lease contracts (1,110) (394)
Variable lease payments (included in distribution
costs ) 311 -
Variable lease payments (included in administrative
expenses) 301 -
27,199 27,982
*Rent concessions have been provided to the group companies as a
result of the COVID-19 pandemic. The Group elected to account for
qualifying rent concessions in the same way as they would if they
were not lease modifications; resulting in accounting for the
concession as a variable lease payment. The amount recognised in
the statement of comprehensive income to reflect changes in lease
payments that arose from rent concessions to which the Group has
applied the practical expedient is EUR0.6 million.
NOTE 18 - INTANGIBLE ASSETS
Patents, Technology Development Customer Goodwill Total
domain IP costs list
names & Affiliates
& license
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Cost
At 1 January
2020 218,353 101,847 305,316 633,491 974,767 2,233,774
Additions 16,829 155 58,489 1,074 1,238 77,785
Acquisitions
through business
combinations 125 2,992 - 4,597 14,888 22,602
Disposals (38) - - - - (38)
Write offs (26) - (5,179) - - (5,205)
Reclassifications - - - 802 (802) -
Reclassification
to assets
classified
as held for
sale (Note
24) (31,566) (18,379) (38,446) (97,860) (217,572) (403,823)
Effect of
movement in
exchange rates (2,953) (1,719) (3,431) (9,154) (20,351) (37,608)
At 31 December
2020 200,724 84,896 316,749 532,950 752,168 1,887,487
Accumulated
amortisation
and impairment
losses
At 1 January
2020 73,088 68,625 179,208 324,263 89,194 734,378
Charge 34,860 11,876 52,478 49,881 (11) 149,084
Impairment
loss 105 - 1,800 2,895 29,080 33,880
Reclassification
to assets
classified
as held for
sale (Note
24) (11,147) (13,650) (27,821) (59,465) - (112,083)
Write offs - - (4,883) - - (4,883)
Effect of
movement in
exchange rates (1,008) (1,276) (2,421) (5,389) - (10,094)
At 31 December
2020 95,898 65,575 198,361 312,185 118,263 790,282
Net Book Value
At 31 December
2020 104,826 19,321 118,388 220,765 633,905 1,097,205
During the year, the research and development costs net of
capitalized development costs were EUR90.0 million (2019: EUR93.5
million).
Patents, Technology Development Customer Goodwill Total
domain IP costs list
names & Affiliates
& license
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Cost
At 1 January
2019 199,136 106,226 264,690 631,625 961,110 2,162,787
Additions 18,884 975 65,495 250 4,261 89,865
Write offs (636) (1,106) (10,922) - (14) (12,678)
Reclassifications 743 - (743) - - -
Transfer to
assets classified
as held for
sale (506) (4,650) (13,708) (526) (15,572) (34,962)
Assets acquired
on business
combinations 10 - - - 18,452 18,462
Effect of
movement in
exchange rates 722 402 504 2,142 6,530 10,300
At 31 December
2019 218,353 101,847 305,316 633,491 974,767 2,233,774
Accumulated
amortisation
and impairment
losses
As of 1 January
2019 42,044 57,676 146,997 271,937 - 518,654
Charge 31,556 15,668 49,600 51,730 - 148,554
Impairment - 840 6,951 324 105,748 113,863
Transfer to
assets classified
as held for
sale (32) (4,650) (13,666) (526) (15,572) (34,446)
Write offs (636) (1,106) (10,922) - - (12,664)
Effect of
movement in
exchange rates 156 197 248 798 (982) 417
At 31 December
2019 73,088 68,625 179,208 324,263 89,194 734,378
Net Book Value
At 31 December
2019 145,265 33,222 126,108 309,228 885,573 1,499,396
At 1 January
2019 157,092 48,550 117,693 359,688 961,110 1,644,133
In accordance with IAS 36, the Group regularly monitors the
carrying value of its intangible assets, including goodwill.
Goodwill is allocated to fifteen cash generating units ("CGU")
(2019: fifteen). Two of these CGUs were transferred to assets
classified as held for sale.
Management determines which of these CGU's are significant in
relation to the total carrying value of goodwill as follows:
-- Carrying value exceeds 10% of total goodwill; or
-- Significant acquisitions during the year; or
-- Significant contingent consideration exists at the reporting date.
Based on the above criteria in respect of the goodwill,
management has concluded that the following are significant:
Carrying Carrying
value value
2020 2019
EUR'000 EUR'000
Markets (included in held for sale) - 168,039
Services 109,903 110,142
Sports B2B 132,487 132,487
Snai 237,205 229,500
Statscore 12,410 -
492,005 640,168
Management reviews CGUs for impairment bi-annually, or on the
occurrence of an impairment indicator. As a consequence of the
COVID-19, some revenue streams have experienced significant
reductions due to lack of sporting events and closure of the retail
betting shops. Even though partial recovery has been achieved, the
effects of the virus and the second covid-19 wave has extended the
closures with intermittent lockdowns effected in early 2021. With
the exception of Markets, which is included in held for sale, the
recoverable amounts of CGUs have been determined from value in use
calculations based on cash flow projections covering 5 years plus a
terminal value, which have been updated for COVID-19 and
management's probability-based estimates of the impact on future
periods based on different scenarios. Management has considered the
ongoing economic uncertainty caused by the global pandemic, and the
higher level of judgement and uncertainty in forecasts.
An impairment loss has been recognised during the year totalling
EUR41.2 million in the Sports B2C CGU (within the B2C segment),
primarily as a result of the impact of COVID-19 on its retail
operations, the estimated recovery period, and the uncertainty in
future cash flows. This has caused full write down of the carrying
value of the Sports B2C CGU. The impairment loss was first taken to
reduce the carrying amount of the goodwill allocated to the CGU
being EUR27.9 million with the remaining impairment allocated to
all other assets within the CGU (other intangible assets EUR3.0
million, Property, plant and equipment EUR8.3 million and Right of
use asset EUR2.0 million). No further goodwill impairment has been
recognised during the year as the recoverable amounts are higher
than the carrying amounts for the remaining CGUs (2019: Nil).
There is a potential risk for future impairment should there be
a significant change in the economic outlook, versus those trends
management anticipates in our forecasts, as a result of the ongoing
impact of COVID-19.
With the exclusion of CGU's deemed sensitive to impairment from
a reasonably possible change in key assumption, which have been
reviewed in further detail below, management forecasts for 2021
anticipate growth of between 0% and 10% when compared to pre-COVID
levels. Forecasts for the subsequent periods (years 2-5) applied an
annual growth rate for revenue and expenses of between 34% and 41%
based on the underlying economic environment in which the CGU
operates. Beyond this period, management has applied an annual
growth rate of 2%. Management has included appropriate capital
expenditure requirements to support the forecast growth and assumed
the maintenance of the current level of licenses. Management has
applied post tax discount rates to the cash flow projections
between 11% and 17%.
Certain CGUs which are referred below are considered sensitive
in changes of assumptions used for the calculation of the value in
use.
The Sports B2C CGU (which comprises the B2C sports operation in
Germany and Austria) is a significant CGU for the Group and has
been significantly impacted by COVID-19. Management have assessed
probability-based scenarios for the future cash flows of the CGU,
which has resulted in an impairment of EUR41.2 million (2019: Nil).
The recoverable amount of the CGU has been calculated at a negative
EUR4.5 million, based on value in use. The recoverable amount of
the Sports B2C CGU has been determined using cashflow forecasts
that include annual revenue growth rates of between 49% to 417%
over the 2-5 year forecast period (when compared to pre-COVID
levels), long term growth rate of 2% and discount rate of 18.9%. No
reasonable possible changes in assumptions would materially impact
the impairment recognised, accordingly, no sensitivity analysis has
been presented.
The recoverable amount of the Poker CGU, with net assets of
EUR30.7 million, has been determined using cashflow forecasts that
include annual revenue growth rates of 2% over the 2-5 year
forecast period, 2% long term growth rate and a post tax discount
rate of 14%. The recoverable amount would equal the carrying amount
of the CGU if the discount rate applied was higher by 78% or
revenue growth was lower by 7.9%.
The Bingo Retail CGU, with net assets of EUR24.5 million, has
been significantly impacted by COVID-19. The recoverable amount of
the Bingo Retail CGU has been determined using a cashflow forecasts
that include annual revenue growth rates of between 0% to 4% over
the 2-5 year forecast period, and 2% long term growth rate and a
post tax discount rate of 14.2%. The recoverable amount would equal
the carrying amount of the CGU if the discount rate applied was
higher by 30.7% or revenue growth was lower by 6%.
The recoverable amount of the Eyecon CGU, with net assets of
EUR28.9 million, has been determined using cashflow forecasts that
include annual revenue growth rates of between 8% to 10% over the
2-5 year forecast period, 2% long term growth rate and a post tax
discount rate of 12.2%. The recoverable amount would equal the
carrying amount of the CGU if the discount rate applied was higher
by 35.8% or revenue growth was lower by 4.6%.
The recoverable amount of the Quickspin CGU, with net assets of
EUR65.8 million, has been determined using cashflow forecasts that
include annual revenue growth rates of between 7.50% to 17% over
the 2-5 year forecast period, 2% long term growth rate and a post
tax discount rate of 11%. The recoverable amount would equal the
carrying amount of the CGU if the discount rate applied was higher
by 26.3% or revenue growth was lower by 2.5%.
The Statscore CGU with net assets of EUR13.5 million has been
deemed as a sensitive CGU due to the startup activities of the unit
and first year performance under Playtech group. The recoverable
amount of the Statscore CGU has been determined using cashflow
forecasts that include annual revenue growth rates of between 17%
to 50% over the 2-5 year forecast period, 2% long term growth rate
and a post tax discount rate of 18%. The recoverable amount would
equal the carrying amount of the CGU if the discount rate applied
was higher by 39.6% or revenue growth was lower by 4.1%.
NOTE 19 - INVESTMENTS
2020 2019
EUR'000 EUR'000
A. Investment in joint ventures - 22,405
B. Investment in associates 1,495 13,075
C. Investment in structured agreements 39,190 16,785
D. Other investments 9,757 1,130
50,442 53,395
A. Investment in joint ventures
The Group has joint venture in International Terminal Leasing
("ITL"), however the carrying amount is Nil as the Group has
recovered the full amount of the initial investment. Any future
profits are recognised directly to the consolidated statement of
comprehensive income.
The agreement with Wplay was accounted for as a joint
arrangement on inception due to the terms in place giving the Group
joint control. During 2020, the contract was renegotiated resulting
in Playtech's control being reassessed as significant influence and
the interest has been reclassified as an investment in structured
agreements.
Movements in the carrying value of the investment during the
year are as follows:
2020 2019
EUR'000 EUR'000
Investment in joint venture at 1 January 22,405 408
Additions during the year - 22,405
Reclassification to structured entities (Note
19c) (22,405) -
Share of profit 121 621
Return of investment (121) (653)
Subsidiary acquired in steps - (376)
Investment in joint venture at 31 December - 22,405
B. Investment in equity accounted associates
Investment in BGO
In August 2014, the Group acquired 33.33% of the shares of BGO
Limited, a company incorporated in Alderney, for a total
consideration of GBP10 million (EUR12.5 million). In 2015 the Group
invested an additional GBP0.7 million (EUR0.9 million). During
2020, the Group disposed of the shares in BGO for a total
consideration of EUR1. As a result of this transactions, the Group
realised a loss on disposal of EUR8.9 million recognised in the
consolidated statement of comprehensive income.
Other individually immaterial investments
At 31 December 2020 the Group's value of other investments was
EUR1.5 million (2019: EUR5.3 million). During 2020, the Board of
Directors made a decision to dispose of its shareholding in two
associates and as such their value of EUR2.2 million were
transferred to assets held for sale (refer to Note 24D).
Furthermore, during the current year the Group acquired an
additional 40% of Statscore SP Z.O.O ("Statscore"). Prior to the
acquisition and as at 31 December 2019 the Group held 45% of
Statscore and was accounted for as an investment in associate. This
transaction resulted in a total fair value gain on acquisition of
EUR6.5 million, which was the difference between the total carrying
value of the investment in associate of EUR1.5 million and its fair
value of EUR8.0 million at the point of acquisition. The gain was
recognised in the consolidated statement of comprehensive income.
The step-acquisition is further discussed in Note 34A.
Movements in the carrying value of the investment during the
year are as follows:
2020 2019
EUR'000 EUR'000
Investment in associates at 1 January 13,075 12,448
Additions during the year - 96
Disposal during the year (8,907) -
Share of profit 955 1,020
Fair value change on step-acquisition of associate 6,520 -
Return of investment - (46)
Impairment - (443)
Subsidiary acquired in steps (7,981) -
Transfer to asset classified as held for sale
(Note 24D) (2,167) -
Investment in associates at 31 December 1,495 13,075
C. Investment in structured agreements
Caliplay
During 2014 the Group entered into a long term structured
agreement relationship with Turística Akalli, S. A. de C.V which
has since changed its name to Corporacion Caliente SAPI ("Akalli"),
the owner of Tecnologia en Entretenimiento Caliplay, S. de R.L. de
C.V ("Caliplay"), which is a leading betting and gaming operator
which operates the "Caliente" brand in Mexico (the "Caliplay
Structured Agreement").
The remuneration (including the Profit Share) due to the Group
for the provision of services under the Caliplay Structured
Agreement is recognised in revenue and revenues from these services
in the year totalled EUR33.3 million (2019: EUR11.8 million).
The Group has no equity holding in Caliplay or Akalli, but has
an option to exchange its Profit Share for an equity interest in
the Caliplay business of up to 49%. There would be no additional
exercise price payable above the cumulative payments already made
by Playtech as part of the agreement which at the balance sheet
date totaled EUR16.8 million. Management has currently assessed the
option largely as a protective right and it has not been considered
as part of the assessment of control and significant influence. In
so doing, Caliplay continues to be accounted for as a structured
agreement. The Group has not made any future funding commitments to
Caliplay and no additional financial support beyond the initial
investment has been provided.
Wplay
In 2019, the Group entered into a long term structured agreement
relationship with Aquila Global Group SAS ("Wplay"), which is a
leading gaming and betting brand in Columbia (the "Wplay Structured
Agreement").
The remuneration (including the Profit Share) due to the Group
for the provision of services under the WPlay Structured Agreement
is recognised in revenue and revenues from these services in the
year totalled EUR2.4 million (2019: Nil).
The Group has no equity holding in Wplay, but has an option to
exchange its Profit Share for an equity interest in the WPlay
business of up to 49.9%. The option is exercisable on or after
August 2021. There would be no additional exercise price payable
above the cumulative payments already made by Playtech as part of
the agreement which at the balance sheet date totalled EUR22.4
million. Under the existing agreements with Wplay, the Group has
future funding commitments totalling $6.0 million payable on
certain performance milestones but no other financial support has
been provided and no further commitment to provide financial
support exists.
Movements in the carrying value of the investment during the
year are as follows:
2020 2019
EUR'000 EUR'000
Investment in structured agreements at 1
January 16,785 16,785
Reclassification from joint ventures (Note
19a) 22,405 -
Investment in structured agreements at 31
December 39,190 16,785
D. Other investments
Guatemala
In 2020, the Group entered into a long term structured agreement
relationship with Tenlot Guatemala which is a member of the Tenlot
Group. Tenlot Guatemala has commenced its activity in 2018 and it
is currently growing its lottery business in Guatemala, expanding
its distribution network and game offering. Tenlot Guatemala's
betting and gaming business will be operated by its subsidiary
("Super Sports S.A.").
The Group has acquired a 10% equity holding in Tenlot Guatemala
for a total consideration of $5.0 million (EUR4.4 million), in June
2020. In addition, the Group was granted a 10% equity holding in
Super Sports S.A.,. The Group also has a option to exchange its
Profit Share into an equity interest of up to an additional 80% in
Super Sports S.A.. The option can be exercised any time.
Costa Rica
In 2020, the Group entered into a long term structured agreement
relationship in Costa Rica with the Tenlot Group.
The Group has acquired a 6% equity holding in Tentech CR S.A., a
member of the Tenlot Group, for a total consideration of $2.5
million (EUR2.1 million) in June 2020. Tentech CR S.A. sells
printed bingo cards in accordance with article 29 of the Law of
Raffles and Lotteries of Costa Rica ("CRC- Costa Rican Red Cross
Association").
Tenbet, another member of the Tenlot Group, operates online
bingo games and casino side games. The Group has no equity holding
in Tenbet but has an option to exchange its Profit Share into an
equity interest of up to 81% in Tenbet. The option can be exercised
at any time from the end of 18 months of Tenbet going live. Under
the existing agreements, the Group has provided Tenbet with a
credit facility of EUR1 million out of which $150,000 had been
drawn down as at 31 December 2020.
Panama
In June 2020, the Group entered into a long term structured
agreement relationship with Onjoc in Panama. The Group has no
equity holding in Onjoc, but has an option to exchange its Profit
Share into an equity interest of up to 50% in Onjoc. The option can
be exercised any time subject to certain revenue targets.
General
The Group has call options to acquire equity in connection with
its structured agreements as described above. In the case of Super
Sports, Tenbet and Onjoc, these entities had not commenced
operations at the reporting date.
NOTE 20 - OTHER NON-CURRENT ASSETS
2020 2019
EUR'000 EUR'000
Security deposits 3,245 3,767
Guarantee for gaming licenses 2,799 3,080
Deferred tax (Note 31) 3,302 1,571
Related parties (Note 36) - 3,727
Prepaid costs relating to Sun Bingo contract 49,597 16,699
Other 11,506 9,106
70,449 37,950
NOTE 21 - TRADE RECEIVABLES
2020 2019
EUR'000 EUR'000
Trade receivables 156,376 196,704
Related parties (Note 36) 15,249 9,740
Trade receivables - net 171,625 206,444
Split to:
Non current assets 18,405 13,600
Current assets 153,220 192,844
171,625 206,444
NOTE 22 - OTHER RECEIVABLES
2020 2019
EUR'000 EUR'000
Prepaid expenses 31,171 30,944
VAT and other taxes 8,914 12,472
Advances to suppliers 2,873 1,200
Related parties (Note 36) - 845
Security deposits for regulators 13,501 33,888
Prepaid costs relating to Sun Bingo contract 9,539 11,016
Receivable for legal proceedings and disputes 16,387 16,387
Other receivables 15,959 34,402
98,344 141,154
NOTE 23 - CASH AND CASH EQUIVALENTS
Cash and cash equivalents for the purposes of the statement of
cash flows comprises:
2020 2019
EUR'000 EUR'000
Continuing operations
Cash at bank 677,554 638,924
Cash at brokers - 22,718
Deposits 6,754 9,898
684,308 671,540
Less: expected credit loss (Note 38A) (627) -
683,681 671,540
Treated as held for sale
Cash at bank 124,664 2,646
Cash at brokers 249,018 -
Deposits 3,189 -
376,871 2,646
Cash and cash equivalents in the statement
of cash flows 1,061,179 674,186
Less: expected credit loss (Note 38A) (627) -
1,060,552 674,186
The Group held cash balances on behalf of operators in respect
of operators' jackpot games and poker and casino operations, as
well as and client funds with respect to B2C, CFD and client
deposits in respect of liquidity and clearing activities which are
included in the current liabilities.
2020 2019
EUR'000 EUR'000
Continuing operations
Funds attributed to jackpots 75,538 74,166
Security deposits 24,673 23,986
Client deposits - 113,879
Client funds 28,924 126,309
129,135 338,340
Treated as held for sale
Client deposits 109,495 -
Client funds 170,867 -
280,362 -
NOTE 24 - ASSETS HELD FOR SALE
2020 2019
EUR'000 EUR'000
Assets
A. Property, plant and equipment - 32,417
B. Casuals CGU 844 4,381
C. Financial CGU 465,880 -
D. Investment in associates 2,167 -
468,891 36,798
A. On 14 May 2019, the Group entered into a preliminary sale and
purchase agreement for the disposal of its real estate located in
Milan, Italy ("Area Sud" and "Area Nord"). The value of the real
estate was therefore classified as held for sale at 31 December
2019. On 21 April 2020, the sale and purchase agreement of Area Sud
was finalised for a total consideration of EUR18.8 million, of
which EUR5 million was already received on the sign off of the
preliminary agreement in the prior year, with the balance received
in the current year. Furthermore, on 21 July 2020, the sale and
purchase agreement of Area Nord was finalised for a total
consideration of EUR35.7 million, which was also received in July
2020.
As a result of these transactions, the Group realised a profit
on disposal of EUR22.1 million in the consolidated statement of
comprehensive income.
B. Following the decision made by the Board of Directors in the
prior year to dispose of the Casual and Social Gaming businesses,
the value of these divisions were classified as held for sale at 31
December 2019 and their results included in discontinued
operations. On 29 June 2020, the Group entered into an agreement
for the partial disposal of "FTX" included in this division, for a
total consideration of $1.0 million. As a result of this
transaction, the Group realised a profit of EUR0.6 million in the
consolidated statement of comprehensive income, included within the
total profit/(loss) from discontinued operations (refer to Note
8).
Post year end, on 11 January 2021, the Group entered into a
separate agreement for the disposal of "Yoyo", also included in
this division, for a total consideration of $9.5 million. This will
result in an estimated profit on disposal of EUR7.6 million, which
will be recongised in the year ended 31 December 2021. Once this
transaction is completed, the Social and Casual CGU will be fully
disposed.
C. At 31 December 2020 the Board decided to classify its
Financials segment as held for sale. The results of these
operations are presented as discontinued operations in the
Consolidated Statement of Comprehensive Income and the comparatives
have been restated to show the discontinued operation separately
from the continuing operations. Management is committed to a plan
to discontinue the Financials division with a sale expected by the
end of 2021 and therefore all assets and liabilities relating to it
have been presented separately in the Consolidated Balance Sheet.
Results of the discontinued operations for the years presented can
be found in Note 8.
The carrying value of the disposal group classified as held for
sale at year end was compared to its recoverable amount through a
sale, less costs to sell. A potential buyer has been identified and
the negotiations are at an advanced stage. The expected selling
price is $200.0 million out of which $170.0 relates to cash
consideration, $15.0 deferred consideration and $15.0 contingent
consideration subject to certain conditions. In addition, the Group
will retain the movement of the working capital which is expected
to be $48.7 million. Expected selling costs amounting to $4.7
million.
As a result of this, an impairment was recognised of EUR221.3
million in the consolidated statement of comprehensive income,
included in discontinued operations (see Note 8). The difference
between this and the impairment loss stated below of EUR219.6
million is due to the difference between the average foreign
exchange rate used in the income statement versus the spot rate at
31 December 2020 used in the balance sheet, which is recognised in
the foreign exchange reserve, noting that this CGU trades and
reports in US dollars. The total value at the date of transfer of
the financials CGU is as follows:
Transferred Impairment As at
to HFS 31 December
2020
EUR'000 EUR'000 EUR'000
Assets
Property, plant and equipment 2,560 2,560
Right of use assets 4,243 4,243
Goodwill 217,572 (217,572) -
Other intangibles 74,168 (1,992) 72,176
Trade receivables 833 833
Cash and cash equivalents 376,475 376,475
Other receivables 9,593 9,593
685,444 (219,654) 465,880
Liabilities
Deferred tax liability 6,188
Trade payables 1,795
Client deposits 109,495
Client funds 170,867
Income tax payable 3,810
Lease liability 5,589
Other payables 10,868
308,612
Net assets Financials 157,268
The total major class of assets and liabilities of the disposal
groups (Casual and Financial CGU) classified as held for sale as at
31 December 2020, are as follows:
EUR'000
Assets
Property, plant and equipment 2,610
Right of use assets 4,502
Intangible assets 72,203
Trade receivables 940
Cash and cash equivalents 376,871
Other receivables 9,598
Assets classified as held for sale 466,724
Liabilities
Deferred tax liability 6,318
Trade payables 1,820
Client deposits 109,495
Client funds 170,867
Income tax payable 3,861
Lease liability 5,782
Other payables 11,026
Liabilities directly associated with the asset
classified as held for sale 309,169
The cumulative foreign exchange losses recognised in other
comprehensive income in relation to the discontinued operation as
at 31 December 2020 were EUR21.3 million.
NOTE 25 - SHAREHOLDERS' EQUITY
A. Share Capital
Share capital is comprised of no par value shares as
follows:
2020 2019
Number of Number of
Shares Shares
Authorised* N/A N/A
Issued and paid up 299,328,354 303,791,693
The Group has no authorised share capital but is authorised
under its memorandum and article of association to issue up to
1,000,000,000 shares of no par value.
In 2020 the Group cancelled 4,463,339 shares as part of its
share repurchase program for a total consideration of EUR10.1
million (2019: 13,552,910 shares for a total consideration of
EUR65.1 million).
B. Employee Benefit Trust
In 2014 the Group established an Employee Benefit Trust (refer
to Note 5E) by acquiring 5,517,241 shares for a total consideration
of EUR48.5 million. During the year 200,827 shares (2019: 200,214)
were issued to executive management after meeting the performance
conditions at a cost of EUR1.7 million (2019: EUR1.7 million). As
at 31 December 2020, a balance of 1,724,539 (2019: 1,925,366)
shares remains in the trust with a cost of EUR14.5 million (2019:
EUR16.2 million).
C. Share options exercised
During the year 217,788 (2019: 212,624) share options were
exercised, of which 16,961 were cash-settled (2019: 12,410). During
the period, Tradetech LTIP Share options with book value totalling
EUR12.2 million became fully vested and in order to reflect the
expected settlement in cash, they have been reclassified from
equity to liabilities.
D. Distribution of Dividend
The Group did not pay any dividends during the current year. As
per the announcement to the market in March 2020, the 2019 final
dividend of EUR0.12 per share was not proposed at the Annual
General Meeting. In June 2019, the Group distributed EUR37,159,079
as a final dividend for the year ended 31 December 2018 (EUR0.12
per share). In October 2019, the Group distributed EUR18,866,968 as
an interim dividend in respect of the period ended 30 June 2019
(EUR0.061 per share). A number of shareholders waived their rights
to receive dividends amounting to EUR480,890.
E. Reserves
The following describes the nature and purpose of each reserve
within owner's equity:
Reserve Description and purpose
Additional paid Share premium (i.e. amount subscribed for
in capital share capital in excess of nominal value)
Employee benefit Cost of own shares held in treasury by the
trust trust
Put/Call options Fair value of put/call options as part of
reserve business acquisition
Foreign exchange Gains/losses arising on re-translating the
reserve net assets of overseas operations
Employee termination Gains/losses arising from the actuarial re-measurement
indemnities of the employee termination indemnities
Non controlling The portion of equity ownership in a subsidiary
interest not attributable to the the owners of the
Company
Retained earnings Cumulative net gains and losses recognised
in the consolidated statement of comprehensive
income
F. Non controlling interest
During 2020, the Group acquired additional interest in Playtech
BGT Sports Ltd (from 90% at 31 December 2019 to 100% at 31 December
2020) and Sunfox Game GmbH (from 93.3% at 31 December 2019 to 100%
at 31 December 2020). The total carrying amount of the subsidiaries
net liabilities in the Group's consolidated financial statements on
the date of the acquisition was EUR3.9 million.
2020
EUR'000
Carrying amount of non-controlling interest
acquired (4,369)
Consideration paid to non-controlling interest (36,711)
(41,080)
The decrease in equity attributable to the owners of the Company
comprised:
-- A net decrease in retained earnings of EUR20.7 million (made
up from an overall decrease in retained earnings of EUR37.0
million, offset by the transfer of EUR16.4 million from the
put/call options reserve).
-- An additional loss of EUR20.4 million recognised in the
retained earnings from the date of the initial recognition until
the exercise of the option
-- A decrease in the put/call option reserve of EUR16.4 million
(transferred to retained earnings)
NOTE 26 - LOANS AND BORROWINGS
The main credit facility of the Group is a revolving credit
facility ("RCF") up to EUR317.0 million available until November
2023 with an option to extend for an additional year. Interest
payable on the loan is based on Euro Libor rates. As at 31 December
2020 the credit facility drawn amounted to EUR308.9 million (31
December 2019: EUR64.4 million).
The Group took a prudent and disciplined approach to its banking
relationships and proactively approached its lenders and agreed to
amend the covenants in its RCF for the 31 December 2020 and 30 June
2021 tests as follows:
-- Leverage: Net Debt/Adjusted EBITDA revised to 5:1 for the
year ended 31 December 2020 and 4.5:1 for the last twelve months to
30 June 2021 (31 December 2019: 3:1)
-- Interest cover: Adjusted EBITDA/Interest revised to 3:1 for
the year ended 31 December 2020 and 3.5:1 for the last twelve
months to 30 June 2021 (31 December 2019: 4:1)
The covenants will return to previous levels of 3x Net
Debt/Adjusted EBITDA and 4x Interest/Adjusted EBITDA from 31
December 2021 onwards, or sooner should the Company decide to make
shareholder distributions within those periods.
As at 31 December 2020 and 2019 the Group met these financial
covenants. The covenants are monitored on a regular basis by the
finance department, including modelling future projected cash flows
under a number of scenarios to stress-test any risk of covenant
breaches, the results of which are reported to management.
NOTE 27 - BONDS
Convertible 2018 Bond 2019 Bond Total
bonds
EUR'000 EUR'000 EUR'000 EUR'000
As of 1 January 2019 287,149 523,706 - 810,855
Issue of bonds - - 345,672 345,672
Notional interest expenses
on convertible bonds 9,851 - - 9,851
Interest expenses on bonds - 1,315 497 1,812
Repayment of bond (297,000) - - (297,000)
As at 31 December 2019 - 525,021 346,169 871,190
Interest expenses on bonds - 1,319 620 1,939
As at 31 December 2020 - 526,340 346,789 873,129
Convertible bonds
On 12 November 2014 the Group issued EUR297.0 million of senior,
unsecured convertible bonds maturing in November 2019 and
convertible into fully paid Ordinary Shares of Playtech plc (the
"Bonds"). The net proceeds of issuing the Bonds, after deducting
commissions and other direct costs of issue, totaled EUR291.1
million.
The Bonds were fully repaid on 19 November 2019 at their
principal amount.
Bonds
(a) 2018 Bond
On 12 October 2018, the Group issued EUR530 million of senior
secured notes ('2018 Bond') maturing in October 2023. The net
proceeds of issuing the 2018 Bond after deducting commissions and
other direct costs of issue totalled EUR523.4 million . Commissions
and other direct costs of issue have been offset against the
principal balance and are amortised over the period of the
bond.
The issue price was 100% of its principal amount and bears
interest from 12 October 2018 at the rate of 3.75% per annum
payable semi-annually, in arrears, on 12 April and 12 October
commencing on 12 April 2019.
The fair value of the bond at 31 December 2020 was EUR539
million (31 December 2019: EUR552 million).
(b) 2019 Bond
On 7 March 2019, the Group issued EUR350 million of senior
secured notes ('2019 Bond') maturing in March 2026. The net
proceeds of issuing the 2019 Bond after deducting commissions and
other direct costs of issue totalled EUR345.7 million . Commissions
and other direct costs of issue have been offset against the
principal balance and are amortised over the period of the
bond.
The issue price is 100% of its principal amount and bears
interest from 7 March 2019 at a rate of 4.25% per annum payable
semi-annually, in arrears, on 7 September and 7 March commencing on
7 September 2019.
The fair value of the bond at 31 December 2020 was EUR363
million (31 December 2019: EUR373 million).
As at 31 December 2020 and 2019 the Group met the required
interest cover financial covenant of 2:1 Interest/Adjusted EBITDA
ratio (31 December 2019: 2:1), for the combined 2018 and 2019
Bonds.
NOTE 28 - PROVISIONS FOR RISKS AND CHARGES
Legal and
regulatory Contractual Other Total
EUR'000 EUR'000 EUR'000 EUR'000
As of 1 January 2019 6,481 2,858 2,756 12,095
Acquisitions through
business combinations - - 318 318
Charged to the statement
of comprehensive income 5,177 (400) 2,744 7,521
Utilised / realised
in the year (503) (91) 168 (426)
31 December 2019 11,155 2,367 5,986 19,508
Charged to the statement
of comprehensive income 736 2,000 (1,497) 1,239
Utilised / realised
in the year (1,568) (11) (1,091) (2,670)
31 December 2020 10,323 4,356 3,398 18,077
Provision for legal and regulatory issues and
The Group is subject to proceedings and potential claims
regarding complex legal matters (including those related to
previous acquisitions), which are subject to a differing degree of
uncertainty. Provisions are held for various legal and regulatory
issues that relate to matters arising in the normal course of
business, including in particular various disputes that arise in
relation to the operation of the various licenses held by the
Group's subsidiary Snaitech. The uncertainty is due to complex
legislative and licensing frameworks in the various territories in
which the Group operates. The Group also operates in certain
jurisdictions where legal and regulatory matters can take
considerable time for the required local processes to be completed
and the matters resolved.
Contractual claims
The Group is subject to historic claims relating to contractual
matters that arise with customers in the normal course of business.
The Group consider they have a robust defense to the claims raised,
and have provided for the likely settlement where an outflow of
funds is probable. The uncertainty relates to complex contractual
dealings with a wide range of customers in various jurisdictions,
and because as noted above the Group operates in certain
jurisdictions where contractual disputes can take considerable time
to be resolved in the local legal system. A potential legal claim
has arisen in respect of a previous acquisition which may result in
a settlement, as a result an immaterial provision has been
recorded. The amount has not been separately disclosed as to do so
is considered to be prejudicial to the position of the Group.
All provisions have been reviewed and estimated by the Group's
Board of Directors on the basis of the information available at the
date of preparation of these financial statements and, where
considered required, supported by updated legal opinions from
independent professionals.
Given the uncertainties inherent, it is difficult to predict
with certainty the outlay (or the timing thereof) which will derive
from these matters. It is therefore possible that the value of the
provisions may vary further to future developments. The Group
monitors the status of these matters and consults with its advisors
and experts on legal and tax-related matters in arriving at the
provisions recorded. The provisions included represent the
Directors best estimate of the potential outlay and none of the
matters provided for are individually material to the financial
statements.
NOTE 29 - CONTINGENT CONSIDERATION AND REDEMPTION LIABILITY
2020 2019
EUR'000 EUR'000
Non-current contingent consideration consists of:
Acquisition of Rarestone Gaming PTY Ltd - 2,520
Interest in Aquila Global Group SAS ("Wplay") 3,918 -
3,918 2,520
Non-current redemption liability consists of:
Acquisition of Statscore SP Z.O.O. (Note 34A) 4,590 -
4,590 -
Total non-current contingent consideration and redemption liability 8,508 2,520
Current contingent consideration consists of:
Acquisition of Playtech BGT Sports Limited - 5,000
Acquisition of Rarestone Gaming PTY Ltd - 1,284
Interest in Aquila Global Group SAS ("Wplay") - 16,050
Other acquisitions 1,162 4,318
1,162 26,652
Current redemption liability consists of:
Acquisition of Playtech BGT Sports Limited - 31,860
Other acquisitions - 93
- 31,953
Total current contingent consideration and redemption liability 1,162 58,605
During the year, the Group exercised its option to acquire the
remaining 10% of Playtech BGT Sports Limited for a total
consideration of EUR41.6 million all settled by 31 December 2020.
This included settlement of previous contingent consideration
liabilities and other contractual amounts due. As a result of this
acquisition, the put call option reserve decreased by EUR16.3
million.
The maximum contingent consideration and redemption liability
payable is as follows:
2020 2019
EUR'000 EUR'000
Acquisition of ACM Group - 129,295
Acquisition of Eyecon Limited 25,045 26,456
Acquisition of Rarestone Gaming PTY Ltd - 4,143
Acquisition of HPYBET Austria GmbH 15,000 15,000
Acquisition of Playtech BGT Sports - 95,000
Interest in Aquila Global Group SAS ("Wplay") 4,892 21,285
Acquisition of Statscore SP Z.O.O. 15,000 -
Other acquisitions 7,250 4,015
67,187 295,194
NOTE 30 - TRADE PAYABLES
2020 2019
EUR'000 EUR'000
Suppliers 35,124 52,219
Customer liabilities 12,492 10,124
Other 78 77
47,694 62,420
NOTE 31 - DEFERRED TAX LIABILITY
The movement on the deferred tax liability is as shown
below:
2020 2019
EUR'000 EUR'000
At the beginning of the year 76,767 71,598
Transferred to asset classified as held
for sale (6,188) 1,028
Arising on the acquisitions during the
year 357 1,125
Reversal of temporary differences, recognised
in the statement of comprehensive income 1,700 2,923
Foreign exchange movements (775) 93
At the end of the year 71,861 76,767
Split as:
Deferred tax liability on acquisitions 71,472 90,645
Deferred tax liability 4,520 1,020
Deferred tax asset (set off with deferred
tax liability) (829) (13,327)
75,163 78,338
Deferred tax asset (Note 20) (3,302) (1,571)
71,861 76,767
Deferred tax assets and liabilities are offset only when there
is a legal enforceable right of offset, in accordance to IAS 12. On
31 December 2020, the Directors continued to recognise deferred tax
assets arising from temporary differences and tax losses
carryforward with the latter only to the extent that it is probable
that future taxable profit will be available against which the
unused tax losses can be utilised. This assessement is based on
Board approved forecasts including expected future taxable
profits.
NOTE 32 - OTHER PAYABLES
2020 2019
EUR'000 EUR'000
Non current liabilities
Payroll and related expenses 8,936 9,247
Non current guarantee deposits - 839
Other 3,497 4,158
12,433 14,244
Current liabilities
Payroll and related expenses 72,224 66,056
Accrued expenses 53,374 46,318
Related parties (Note 36) 47 77
VAT payable 5,801 4,954
Interest payable 10,441 10,346
Other payables 5,890 14,110
147,777 141,861
NOTE 33 - GAMING AND OTHER TAXES PAYABLE
2020 2019
EUR'000 EUR'000
Gaming tax 126,591 98,288
Other 358 -
126,949 98,288
NOTE 34 - ACQUISITIONS DURING THE YEAR
A. Acquisition of Statscore SP Z.O.O.
On 13 January 2020, the Group acquired an additional 40% of
Statscore SP Z.O.O. ("Statscore") for a total cash consideration of
EUR6.5 million. Prior to the acquisition, the Group held 45% of
Statscore which was accounted for as an associate (refer to Note
19B). The book value of the investment in associate (net of share
of losses) was EUR1.5 million at the point of acquisition and the
equivalent fair value was EUR8.0 million, resulting in a fair value
gain of EUR6.5 million recognised in the consolidated statement of
comprehensive income. The remaining 15% of the shares are held by
the founder.
Additional consideration capped at EUR2.2 million in cash will
be payable subject to the employment of the founder as well as
achieving target EBITDA. In this respect, this has been treated as
employment remuneration.
As part of the acquisition, the Group now holds a call option to
purchase the remaining 15% of Statscore as follows:
(1) To purchase 7.5% within three months of the third
anniversary if certain conditions are met and regardless of whether
the founder remains employed. The option price, which is capped at
EUR5.0 million, depends on the last twelve month EBITDA Target of
EUR4.0 million and is measured as follows:
(a) If EBITDA Target is satisfied, then the option price is
seven times EBITDA of the last twelve months multiplied by the
percentage of the additional acquisition.
(b) If EBITDA Target is not satisfied, then the option price is
five times EBITDA of the last twelve months multiplied by the
percentage of the additional acquisition.
(2) To purchase 7.5% within three months of the six years
anniversary if certain conditions are met and regardless of whether
the founder remains employed. The option price, which is capped at
EUR10.0 million, depends on the last twelve month EBITDA Target of
EUR8.0 million and is measured as follows:
(a) If EBITDA Target is satisfied, then the option price is nine
times EBITDA of the last twelve months multiplied with the
percentage of the additional acquisition.
(b) If EBITDA Target is not satisfied, then the option price is
seven times EBITDA of the last twelve months multiplied by the
percentage of the additional acquisition.
The founder has an irrecoverable put option to require the Group
to purchase the 15% of Statscore subject to certain conditions.
The initial fair value of this option of EUR3.6 million was
recognised as a non-current redemption liability and was reflected
in the Groups' consolidated statement of changes in equity within
the put/call option reserve. The fair value as at 31 December 2020,
which was calculated using the Monte Carlo simulation methodology,
was EUR4.6 million.
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill, are as follows:
Fair value on acquisition
EUR'000
Property, plant and equipment 9
Intangible assets 3,506
Right of use of asset 111
Other non-current assets 5
Trade and other receivables 111
Cash and cash equivalent 60
Deferred tax liability (666)
Tax liabilities (2)
Lease liability (123)
Trade payables and other payables (579)
Non-controlling interests (365)
Net identified assets (85% acquired) 2,067
Goodwill 12,410
Fair value of consideration 14,477
EUR'000
Cash consideration 6,500
Fair value of existing equity interest 7,977
Total consideration 14,477
Adjustments to fair value include the following:
Amount Amortisation
EUR'000%
Customer relationship 514 16.7%
IP Technology 2,992 10%
3,506
Management used the income approach, and in particular the
Relief from Royalty method, to determine the value in use of the
Customer relationships. The discount rate assumed is equivalent to
the WACC for the Customer relationships.
The MPEEM income approach was used by management to determine
the value in use of the IP Technology. The discount rate assumed is
equivalent to the WACC for the IP Technology.
A reasonable movement in the inputs to the valuation
methodologies does not materially change the intangible asset
values.
The main factor leading to the recognition of goodwill is the
assembled workforce with vast experience and strong past
performance, other future revenue and cost synergies. In accordance
with IAS36, the Group will regularly monitor the carrying value of
net assets relating to Statscore.
Management has not disclosed Statscore contribution to the
Group's profit since the acquisition nor has it disclosed the
impact the acquisition would have had on the Group's revenue and
profits if it had occurred on 1 January 2020, because the amounts
are not material.
B. Acquisition of Best In Game S.r.l.
On 17 June 2020, the Group acquired 100% of Best In Game
S.r.l.("Best In Game"), an Italian gaming company active in the
online segment.
The Group paid a total cash consideration of EUR13.3
million.
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill, are as follows:
Fair value on acquisition
EUR'000
Intangible assets 3,047
Right of use of asset 38
Other receivables 329
Cash and cash equivalent 8,449
Other non current liabilities (166)
Deferred tax liability (815)
Lease liability (38)
Trade payables and other payables (160)
Progressive and operators jackpot (84)
Client funds (62)
Tax liabilities (813)
Net identified assets 9,725
Goodwill 3,604
Fair value of consideration 13,329
EUR'000
Cash consideration 13,329
Cash purchased (8,449)
Net cash payable 4,880
Adjustments to fair value include the following:
Amount Amortisation
EUR'000%
Customer relationship 2,922 12.5
Management also used the income approach, and in particular the
Relief from Royalty method, to determine the value in use of the
Customer relationships within Best In Game. The discount rate
assumed is equivalent to the WACC for the Customer
relationships.
A reasonable movement in the inputs to the valuation methodology
does not materially change the intangible asset values.
The main factor leading to the recognition of goodwill is
synergies and further strategic aspects. The acquisition forms part
of the Snaitech CGU.
Management has not disclosed Best In Game contribution to the
Group's profit since the acquisition nor has it disclosed the
impact the acquisition would have had on the Group's revenue and
profits if it had occurred on 1 January 2020, because the amounts
are not material.
NOTE 35 - ACQUISITIONS IN PREVIOUS YEAR
A. Acquisition of Areascom SpA
On 28 January 2019, the Group acquired 100% of Areascom SpA
("Areascom") for a total cash consideration of EURNil, and as part
of this transaction recapitalised the business by injecting EUR15.5
million equity capital.
B. Other acquisitions
During the prior year, the Group acquired of the shares of
various companies for a total cash consideration of EUR1.4 million.
One of these was a stepped acquisition from 50% to 100% which gave
a fair value at the date of transition to subsidiary of EUR0.4
million (Note 19A).
NOTE 36 - RELATED PARTIES
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the other party's making of financial or operational
decisions, or if both parties are controlled by the same third
party. Also, a party is considered to be related if a member of the
key management personnel has the ability to control the other
party.
The joint ventures, structured agreements and associates are
related parties of the Group by virtue of the Group's significant
influence over those arrangements.
During the year ended 31 December 2020, group companies entered
into the following transactions with related parties who are not
members of the Group:
2020 2019
EUR'000 EUR'000
Revenue
Associates and joint ventures 3,715 1,974
Structured agreements 58,504 32,795
62,219 34,769
Share of profit from joint ventures 121 621
Share of profit from associates 955 1,020
Operating expenses
Structured agreements and associates 209 1,016
Interest income
Structured agreements and associates 188 1,310
The following are the balances with related parties:
2020 2019
EUR'000 EUR'000
Associates - 3,727
Total non-current related parties receivable - 3,727
Associates and joint ventures - 942
Structured agreements 15,249 9,643
Total current related parties receivable 15,249 10,585
Structured agreements and associates 47 77
Total current related parties payable 47 77
2020 2019
EUR'000 EUR'000
Directors compensation
Short-term benefits of directors 2,981 3,136
Share-based benefits of directors - 40
Bonuses to executive directors 707 2,040
3,688 5,216
Total compensation for the key management personnel (which also
includes the directors compensation) is EUR14.7 million (2019:
EUR14.5 million)
NOTE 37 - SUBSIDIARIES
Details of the Group's principal subsidiaries as at the end of
the year are set out below:
Name Country of Proportion Nature of business
incorporation of voting
rights and
ordinary share
capital held
Playtech Software Isle of Man 100% Main trading company
Limited of the Group, owns the
intellectual property
rights and licenses
the software to customers.
Video B Holding British Virgin 100% Trading company for
Limited Islands the Videobet software,
owns the intellectual
property rights of Videobet
and licenses it to customers.
Playtech Services Cyprus 100% Activates the ipoker
(Cyprus) Limited Network in regulated
markets. Owns the intellectual
property of GTS, Ash
and Geneity businesses
VB (Video) Cyprus Cyprus 100% Trading company for
Limited the Videobet product
to Romanian companies
Virtue Fusion Alderney 100% Online bingo and casino
(Alderney) Limited software provider
Intelligent Gaming UK 100% Casino management systems
Systems Limited to land based businesses
VF 2011 Limited Alderney 100% Holds license in Alderney
for online gaming and
Bingo B2C operations
PT Turnkey Services Isle of Man 100% Holding company of the
Limited Turnkey Services group
PT Entertenimiento Bulgaria 100% Poker & Bingo network
Online EAD for Spain
PT Marketing Services British Virgin 100% Marketing services to
Limited Islands online gaming operators
PT Operational British Virgin 100% Operational & hosting
Services Limited Islands services to online gaming
operators
S-Tech Limited British Virgin 100% Live games services
Islands & to Asia
branch office
in the Philippines
PT Network Management British Virgin 100% Manages the ipoker network
Limited Islands
Videobet Interactive Sweden 100% Trading company for
Sweden AB the Aristocrat Lotteries
VLT's
V.B. Video (Italia) Italy 100% Trading company for
S.r.l. the Aristocrat Lotteries
VLT's
Finalto (IOM) Isle of Man 100% Owns the intellectual
Limited (ex. Tradetech property rights and
Markets Limited) marketing and technology
contracts of the financial
division
Safecap Limited Cyprus 100% Primary trading company
of the Financial division.
Licensed investment
firm and regulated by
Cysec
TradeFXIL limited Israel 100% Financial division sales,
client retention, R&D
and marketing
ICCS BG Bulgaria 100% Financial division back
office customer support
Magnasale Limited Cyprus 100% Financial division.
Licensed and regulated
investment firm
Stronglogic Services Cyprus 100% Maintains the financial
Limited division marketing function
for EU operations
Quickspin AB Sweden 100% Owns video slots intellectual
property
Best Gaming Technology Austria 100% Trading company for
GmbH sports betting
Playtech BGT Sports Cyprus 100% Owns sports betting
Limited intellectual property
solutions and trading
company for sports betting
ECM Systems Ltd UK 100% Owns bingo software
intellectual property
and bingo hardware
Consolidated Financial Denmark 100% Owns the intellectual
Holdings AS property which provides
brokerage services,
liquidity and risk management
tool
CFH Clearing Limited UK 100% Primary trading company
of CFH Group
Eyecon Limited Alderney 100% Develops and provides
online gaming slots
Finalto Trading UK 100% Regulated FCA broker
Limited (ex. Tradetech providing trading, risk
Alpha Limited) management and liquidity
solutions
Rarestone Gaming Australia 100% Development company
PTY Ltd
HPYBET Austria Austria 100% Operating shops in Austria
GmbH GmbH
Snaitech SPA Italy 100% Italian retail betting
market and gaming machine
market
OU Playtech (Estonia) Estonia 100% Designs, develops and
manufactures online
software
Techplay Marketing Israel 100% Marketing and advertising
Limited
OU Videobet Estonia 100% Develops software for
fixed odds betting terminals
and casino machines
(as opposed to online
software)
Playtech Bulgaria Bulgaria 100% Designs, develops and
manufactures online
software
PTVB Management Isle of Man 100% Management
Limited
Techplay S.A. Israel 100% Develops online software
Software Limited
CSMS Limited Bulgaria 100% Consulting and online
technical support, data
mining processing and
advertising services
to parent company
Mobenga AB Limited Sweden 100% Mobile sportsbook betting
platform developer
PokerStrategy Gibraltar 100% Operates poker community
Ltd business
Snai Rete Italia Italy 100% Italian retail betting
S.r.l. market
PT Services UA Ukraine 100% Designs, develops and
LTD manufactures software
Trinity Bet Operations Malta 100% Retail and Digital Sports
Ltd Betting
Euro live Technologies Latvia 100% Global broadcaster providing
SIA innovative video stream
services for users worldwide
Gaming Technology UK 100% Provision of B2B services
Solutions Limited within Bingo, Virtual
Sports, Sports Betting
and Games Development
NOTE 38 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Group has exposure to the following risks arising from
financial instruments:
-- Credit risk
-- Liquidity risk
-- Market risk
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure
them from previous periods unless otherwise stated in this
note.
The principal financial instruments of the Group, from which
financial instrument risks arises, are as follows:
-- Trade receivables and other receivables
-- Cash and cash equivalents
-- Investments in equity securities
-- Trade and other payables
-- Bonds
-- Loans and borrowings
-- Deferred and contingent consideration and redemption liability
Financial instrument by category
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy.
Measurement Carrying amount Fair value
Category
2020 2019 Level Level Level
1 2 3
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Non-current financial assets
Equity securities FVTPL 3,222 1,130 3,222 - -
Amortised
Trade receivables cost 18,405 13,600 - - -
Current financial assets
Amortised
Trade receivables cost 153,220 192,844 - - -
Amortised
Other receivables cost 98,344 141,154 - - -
Cash and cash Amortised
equivalents cost 683,641 671,540 - - -
Non current liabilities
Amortised
Bonds cost 873,129 871,190 - - -
Amortised
Loans and borrowings cost 308,875 64,396 - - -
Amortised
Lease liability cost 61,547 65,274 - - -
Contingent consideration
and redemption
liability FVTPL 8,508 2,520 - - 8,508
Current liabilities
Amortised
Trade payables cost 47,694 62,420 - - -
Amortised
Lease liability cost 21,019 25,515 - - -
Amortised
Other payables cost 147,777 141,861 - - -
Progressive operators'
jackpots and Amortised
security deposits cost 100,211 98,152 - - -
Amortised
Client deposits cost - 113,879
Amortised
Client funds cost 28,924 126,309
Contingent consideration
and redemption
liability FVTPL 1,162 58,605 - - 1,162
The fair value of the contingent consideration and redemption
liability is calculated by discounting the estimated cash flows.
The valuation model considers the present value of the expected
future payments, discounted using a risk adjusted discount
rate.
The carrying amount does not materially differ from the fair
value of the financial assets and liabilities.
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Group's finance function. The overall objective of the Board is to
set policies that seek to reduce risk as far as possible without
unduly affecting the Group's competitiveness and flexibility.
Further details regarding these policies are set out below:
A. Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk
from its operating activities (primarily trade receivables) and
from its financing activities, including deposits with banks and
financial institutions. After the impairment analysis performed at
the reporting date, the expected credit losses ("ECL") are EUR2.5
million (2019: EURNil).
Cash and cash equivalents
The Group held cash and cash equivalents of EUR684.3 million as
at 31 December 2020 (2019: EUR671.5 million). The cash and cash
equivalents are held with bank and financial institution
counterparties, which are rated Caa- to AA+, based on Moody's
ratings.
Impairment on cash and cash equivalents has been measured on a
12-month expected credit loss basis and reflects the short
maturities of the exposures. The Group considers that its cash and
cash equivalents have low credit risk based on the external credit
ratings of the counterparties. The Group uses a similar approach
for assessment of ECLs for cash and cash equivalents to those used
for trade receivables. The ECL on cash balances as at 31 December
2020 is EUR0.6 million.
The possible effects of an increase of 0.1% in the ECL rate of
cash balances would be an increase in ECL of EUR0.4 million. The
possible impact of a decrease of 0.1% in the ECL rate of trade
receivables would be a decrease in ECL of EUR0.4 million.
Total Financial Financial
institutions institutions
with A- and below A- rating
above rating and no rating
EUR'000 EUR'000 EUR'000
Continuing operations
At 31 December 2020 684,308 340,211 344,097
At 31 December 2019 671,540 450,464 221,076
Discontinued operations
At 31 December 2020 376,871 313,093 63,778
At 31 December 2019 2,646 1,622 1,024
Trade receivables
The Group's exposure to credit risk is influenced mainly by the
individual characteristics of each customer. However, management
also considers the factors that may influence the credit risk of
its customer base, including the default risk associated with the
industry and country in which customers operate.
As at 31 December 2020, the Group has trade receivables of
EUR171.6 million (2019: EUR206.4 million) which is net of an
allowance for ECL of EUR1.9 million (2019: Nil).
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. To measure the ECL, trade
receivables have been grouped based on shared credit risk
characteristics and the days past due. The expected loss rates are
calculated based in past default experience and an assessment of
the future economic environment. The ECL is calculated with
reference to the ageing and risk profile of the balances.
The carrying amounts of financial assets represent the maximum
credit exposure.
Set out below is the movement in the allowance for expected
credit losses of trade receivables
31 December Total Not past 1-2 More than
2020 due months 2 months
overdue past due
EUR'000 EUR'000 EUR'000 EUR'000
Expected
credit loss
rate 1.1% 0.8% 0.9% 1.8%
Gross
carrying
amount 173,504 93,441 33,600 46,463
Expected
credit loss (1,879) (752) (307) (820)
Trade
receivables
- Net 171,625 92,689 33,293 45,643
ECL for the year ended 31 December 2019 was immaterial.
The possible effects of an increase of 0.1% in the ECL rate of
trade receivables would be an increase in ECL of EUR0.2 million.
The possible impact of a decrease of 0.1% in the ECL rate of trade
receivables would be a decrease in ECL of EUR0.2 million.
Impairment losses on trade receivables and contract assets are
presented as net impairment losses within operating profit.
Subsequent recoveries of amounts previously written off are
credited against the same line item.
The movement in the allowance for impairment in respect of trade
receivables during the year was as follows:
2020 2019
EUR'000 EUR'000
Balance 1 January 55,528 52,950
Charged to statement of comprehensive income 12,733 6,293
Provision acquired through business combination - 472
Utilised (6,684) (4,187)
Transfer to asset classified as held for
sale (55) -
Balance 31 December 61,522 55,528
B. Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset. The Group's objective when managing liquidity is
to ensure, as far as possible, that it will have sufficient
liquidity to meet its liabilities when they are due, under both
normal and stressed conditions, without incurring unacceptable
losses of risking damage to the Group's reputation. Please refer to
Note 2 for the steps taken by management to reduce liquidity risk
of the Group.
The following are the remaining contractual maturities of
financial liabilities at the reporting date. The amount are the
gross and undiscounted, and include contractual interest payments.
Balances due withing 1 year equal their carrying balances as the
impact of discounting is not significant.
Contractual cash flows
Carrying Total Within 1-5 years More than
amount 1 year 5 years
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
2020
Trade payables 47,694 47,694 47,694 - -
Progressive and other
operators' jackpots 100,211 100,211 100,211 - -
Client funds 28,924 28,924 28,924 - -
Contingent consideration
and redemption liability 9,670 10,307 1,162 4,077 5,068
Other payables 160,210 160,210 147,777 12,433 -
Loans and borrowings 308,875 321,231 6,178 315,053 -
Bonds 873,129 1,021,438 34,750 629,250 357,438
Provisions for risks
and charges 18,077 18,077 18,077 - -
Lease liability 82,566 95,861 23,294 55,901 16,666
1,629,356 1,803,953 408,067 1,016,714 379,172
2019
Trade payables 62,420 62,420 62,420 - -
Progressive and other
operators' jackpots 98,152 98,152 98,152 - -
Client deposits 113,879 113,879 113,879 - -
Client funds 126,309 126,309 126,309 - -
Contingent consideration
and redemption liability 61,125 61,175 58,605 2,570 -
Other payables 156,105 156,105 141,861 14,244 -
Loans and borrowings 64,602 69,754 1,494 68,260 -
Bonds 871,190 1,056,188 34,750 649,125 372,313
Provisions for risks
and charges 19,508 19,508 19,508 - -
Lease liability 90,789 104,919 27,949 45,400 31,570
1,664,079 1,868,409 684,927 779,599 403,883
C . Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equities prices, will
affect the Group's income or the value of its holding of financial
instruments.
The objective of market risk management is to manage and control
market risk exposures within acceptable parameters while optimizing
the return.
Currency risk
Currency risk is the risk that the value of financial
instruments will fluctuate due to changes in foreign exchange
rates.
Foreign exchange risk arises because the Group has operations
located in various parts of the world. However, the functional
currency of those operations is the same as the Group's primary
currency (Euro) and the Group is not substantially exposed to
fluctuations in exchange rates in respect of assets held
overseas.
Foreign exchange risk also arises when the Group operations
enters into foreign, and when the Group holds cash balances, in
currencies denominated in a currency other than the functional
currency.
In other
31 December 2020 In EUR In USD In GBP currencies Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Continuing operations
Cash and cash equivalents 539,044 43,771 84,938 16,555 684,308
Client funds (115,376) - (13,754) (5) (129,135)
Cash and cash equivalents
less client funds 423,668 43,771 71,184 16,550 555,173
In other
31 December 2020 In EUR In USD In GBP currencies Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Discontinued operations
Cash and cash equivalents 105,125 189,090 54,261 28,395 376,871
Client funds (68,570) (179,025) (11,583) (21,184) (280,362)
Cash and cash equivalents
less client funds 36,555 10,065 42,678 7,211 96,509
In other
31 December 2019 In EUR In USD In GBP currencies Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Continuing operations
Cash and cash equivalents 321,207 230,249 75,075 45,009 671,540
Client funds (118,209) (167,541) (23,394) (29,196) (338,340)
Cash and cash equivalents
less client funds 202,998 62,708 51,681 15,813 333,200
In other
31 December 2019 In EUR In USD In GBP currencies Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Discontinued operations
Cash and cash equivalents 1,203 977 459 7 2,646
Client funds - - - - -
Cash and cash equivalents
less client funds 1,203 977 459 7 2,646
The Group's policy is not to enter into any currency hedging
transactions.
Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate due to changes
in market interest rates. The Group's exposure to the risk of
changes in market interest rates relates primarily to the Group's
long-term debt obligations with floating interest rates. The Group
manages its interest rate risk by having a balanced portfolio of
fixed and variable rate loans and borrowings. At 31 December 2020,
approximately 26% of the Group's borrowings are at a fixed rate of
interest (2019: 7%).
Any reasonably possible change to the interest rate would have
an immaterial effect on the interest payable.
Equity price risk
The Group is exposed to market risk by way of holding some
investments in other companies on a short term basis. Variations in
market value over the life of these investments will have an
immaterial impact on the balance sheet and the statement of
comprehensive income.
NOTE 39 - RECONCILIATION OF MOVEMENT OF LIABILITIES TO CASH
FLOWS ARISING FROM FINANCING ACTIVITIES
Non-cash items
At 1 January Financing Acquisition Other At 31 December
2020 cash flows through changes 2020
business
combination
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Loans and borrowings
(Note 26) 64,813 240,624 - 3,786 309,223
2018 Bond (Note 27) 529,378 (19,875) - 21,249 530,752
2019 Bond (Note 27) 350,884 (14,875) - 15,495 351,504
Deferred and contingent
consideration and redemption
liability 61,125 (63,720) 2,493 9,772 9,670
Lease liability 90,789 (27,386) 160 24,784 88,347
Total liabilities 1,096,989 114,768 2,653 75,086 1,289,496
Non-cash items
At 1 January Financing Acquisition Other At 31 December
2019 cash flows through changes 2019
business
combination
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Loans and borrowings
(Note 26) 695 63,196 - 922 64,813
Convertible bond (Note
27) 287,323 (298,485) - 11,162 -
2018 Bond (Note 27) 528,062 (19,875) - 21,191 529,378
2019 Bond (Note 27) - 338,235 - 12,649 350,884
Deferred and contingent
consideration and redemption
liability 158,839 (48,071) 16,050 (65,693) 61,125
Lease liability - (27,230) 4,170 113,849 90,789
Total liabilities 974,919 7,770 20,220 94,080 1,096,989
Loans and borrowings and bonds include the principal and
interest payable which is part of the other payables.
NOTE 40 - CONTINGENT LIABILITIES AND PROVISION FOR RISKS AND
CHARGES
As part of the Board's ongoing compliance processes, it
continues to monitor legal and regulatory developments and their
potential impact on the Group, i ncluding, where appropriate,
taking specific expert advice.
The Group is involved in proceedings before civil and
administrative courts, and other legal or potential legal actions
related to its business, including certain matters related to
previous acquisitions. Based on the information currently
available, and taking into consideration the existing provisions
for risks, the Group currently considers that such proceedings and
potential actions will not result in an adverse effect upon the
financial statements; however where this is not considered to be
remote, they have been disclosed as contingent liabilities.
All the matters were subject to a review and estimate by the
Board of Directors based on the information available at the date
of preparation of these financial statements and, where
appropriate, supported by updated legal opinions from independent
professionals.
For a certain potential claim relating to a previous acquisition
where no proceedings have commenced, the Group has a reasonable
expectation based on the facts and circumstances (including having
considered independent legal advice) that no liability will arise;
should a liability arise (which may be offset by a reimbursement)
it is currently not possible to accurately estimate this. In
addition there can be no certainty as to the timing of any such
liability arising, and this has therefore been disclosed as a
contingent liability. The potential reimbursement has not been
recognised as a contingent asset.
The Group is subject to corporate income tax in jurisdictions in
which its companies are incorporated and registered, as well as
gaming taxes in certain licensed territories. Judgment is required
to interpret international tax laws relating to ecommerce in order
to identify and value provisions in relation to corporate income
taxes. The principal risks relating to the Group's tax liabilities,
and the sustainability of the underlying effective tax rate, arise
from domestic and international tax laws and practices in the
e-commerce environment which continues to evolve, including the
corporate tax rates in jurisdictions where the Group has
significant assets or people presence.
The Group is basing its tax provisions and gaming taxes on
current (and enacted but not yet implemented) tax rules and
practices, together with advice received, where necessary, from
professional advisers, and believes that its accruals for tax
liabilities are adequate for all open enquiry years based on its
assessment of many factors including past experience and
interpretations of tax law. The Group constantly monitors changes
in legislation and updates its tax liabilities accordingly.
However, due to different interpretations and evolving practice
there is a risk that additional liabilities could arise.
Management is not aware of any other contingencies that may have
a significant impact on the financial position of the Group.
NOTE 41 - EVENTS AFTER THE REPORTING DATE
As disclosed in Note 24, on 11 January 2021, the Group entered
into an agreement for the partial disposal of Casual and Social
Gaming Business of "Yoyo" for a total consideration of $9.5 million
resulting in an estimated profit of EUR7.6 million .
As disclosed in Note 13, the Group implemented a restructuring
in January 2021, which resulted in Playtech plc migrating its tax
residency to the United Kingdom and the Group's key operating
entity transferring its business to a UK company.
On 25 February 2021, the Company transferred 7,028,339 (2.35%)
ordinary shares of no par value that were held by the Company in
treasury to the Company's Employee Benefit Trust of which Nedgroup
Trust (Jersey) Limited is the trustee. The purpose of the transfer
was to fund certain scheduled awards, which are due to vest under
certain of the Company's employee share schemes. The transfer price
was nil. As a result of the above, the total number of Playtech
shares held in Treasury is 2,937,550 (0.96%), the total number of
ordinary shares in issue remains the same at 309,294,243 and the
total number of voting rights in the Company is 306,356,693 which
is the number which may be used by the shareholders as the
denominator for calculations by which they will determine if they
are required to notify their interest in, or a change to their
interests in, the Company under the FCA's Disclosure Guidance and
Transparency Rules.
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END
FR EFLBFFXLEBBD
(END) Dow Jones Newswires
March 11, 2021 02:00 ET (07:00 GMT)
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