TIDMFLTR
RNS Number : 7834V
Flutter Entertainment PLC
12 August 2022
12 August 2022
Flutter Entertainment plc - 2022 Interim Results
Strong recreational player growth; US profitable in Q2; Group in
line with expectations
Flutter Entertainment plc (the "Group") announces interim
results for six months ended 30 June 2022.
Reported(1) Adjusted(2)
H1 H1 H1 H1
2022 2021 2022 2021 CC(3)
GBPm GBPm YoY % GBPm GBPm YoY % YoY %
--------------------------- ------- ------- ----- ----- ------ ----- -----
Average monthly players(4)
('000s) 8,716 7,625 +14%
------
Group Revenue 3,388 3,053 +11% 3,388 3,053 +11% +9%
Group EBITDA(5) 434 562 -23% 476 597 -20% -19%
------
Group EBITDA excluding
US 608 684 -11% -10%
------
(Loss)/Profit after
tax (112) (86) 177 306 -42%
------
(Loss)/Earnings per
share (pence) (64.7p) (50.4p) 97.2p 171.1p -43%
-----
Net Debt at period end(6) 3,004 2,682
--------------------------- ------- ------- ----- ----- ------ ----- -----
Operational Highlights:
-- Group: Positive revenue momentum of +9% driven by recreational player growth
- Average monthly players ('AMPs') 1.1m or 14% higher at 8.7m
-- US: Adjusted EBITDA positive in Q2
- Sports betting market share accelerated to 51%(7) in Q2 driven
by FanDuel's superior product, efficient customer acquisition and
strong operational execution
- Increasingly profitable player base underpinning confidence in
full year 2023 EBITDA profit(8)
-- Group ex-US:
- UK & Ireland: H1 performance reflects safer gambling
initiatives and prior year Covid frequency benefit; product
improvements delivered in H1 support expected return to revenue
growth in H2
- Australia: AMPs 10% higher with strong customer retention driving revenue growth
- International: Investments in high growth markets generating
strong returns, partially offsetting known headwinds; Acquisition
of Sisal completed on 4th August 2022
- Three-year compound growth in revenue of 10% and in Adjusted
EBITDA of 6% demonstrating growth through regulatory change, driven
by operational execution, scale and diversification
-- Sustainability: Positive Impact Plan launched in March; Safer
gambling tool usage at 34.8% of online customers, two percentage
points up from December 2021(9)
Financial Highlights:
-- Adjusted EBITDA of GBP476m (Reported EBITDA of GBP434m), in line with expectations
- Increased US investment as the business scales and builds
towards full year profitability in 2023(8)
- Proactive safer gambling initiatives and International
regulatory changes improved sustainability of Group
-- Reported loss after tax of GBP112m (2021: GBP86m) after
GBP286m charge for amortisation of acquired intangibles
-- Net debt increased GBP322m year-on-year to GBP3,004m at 30
June 2022 including H1 completion of Tombola acquisition. Leverage
ratio of 3.4 times(6) (June 2021: 2.3 times), or 2.6 times
excluding US losses
Outlook:
-- H2 has started in line with expectations. No discernible
signs of a consumer slow down currently, but we are closely
monitoring key spend indicators given the uncertain macro economic
outlook. Assuming normalised sports results, we anticipate full
year EBITDA to be in line with market expectations:
- US: Net revenue ahead of expectations at between GBP2.3bn and
GBP2.5bn ($2.85bn - $3.1bn) and Adjusted EBITDA loss of between
GBP225m and GBP275m
- Group ex-US : Adjusted EBITDA of between GBP1,290m and
GBP1,390m including a five-month contribution from Sisal (completed
4 August)
-- Hosting an investor day on our US business on 16 November 2022
Peter Jackson, Chief Executive, commented:
"The first half of 2022 was positive for the Group with
significant progress made against the strategic objectives we
outlined in March. We expanded our recreational customer base by
over one million players in the half and increased the proportion
of customers using safer gambling tools to over one third.
We are particularly pleased with momentum in the US where we
extended our leadership in online sports betting with FanDuel
claiming a 51% share of the market and number one position in 13 of
15 states, helping contribute to positive earnings in Q2. We remain
firmly on the path to profitability in 2023, driven by our
compelling customer economics and disciplined investment.
Outside of the US, the business remains well positioned thanks
to its leadership positions in its mature markets and the
investment we are making in attractive, high growth markets such as
India, Canada and Brazil. In the UK, while the delay in publishing
the Gambling Act Review White Paper has been disappointing, we are
confident that the safer gambling changes we have already made to
date position us well for the future. In Australia, we delivered
another excellent performance with revenue and players continuing
to grow. We were also delighted to welcome Sisal to the Group
earlier this month, a business that performed strongly during
H1.
The second half of the year has started well and we look forward
to the start of the football seasons in both the US and Europe.
Being part of the Flutter Group provides unique strategic
advantages to our portfolio of brands, giving access to expertise,
technology and resources to drive performance and capitalise on
further growth opportunities we see ahead."
Analyst briefing:
The Group will host a questions and answers call for institutional
investors and analysts this morning at 9:30am (BST). Ahead of that
call, a pre-recorded presentation will be made available on the Group's
corporate website ( www.flutter.com/investors ) from 8:00am. To dial
into the conference call, participants need to register here where
they will be provided with the dial in details to access the call.
Contacts:
Investor Relations:
Paul Tymms, Group Director of Investor
Relations and FP&A + 44 75 5715 5768
Ciara O'Mullane, Director of Investor
Relations + 353 87 947 7862
Liam Kealy, Director of Investor Relations + 353 87 665 2014
Press:
Kate Delahunty, Group Director of Corporate
Communications + 44 78 1077 0165
Lindsay Dunford, Group Head of Corporate
Affairs + 44 79 3197 2959
Rob Allen, Group Head of Corporate Campaigns + 44 75 5444 1363
Billy Murphy, Drury Communications + 353 1 260 5000
James Murgatroyd, Finsbury + 44 20 7251 3801
----------------------------------------------------- --------------------
Business review (2-5)
The scale and diversification of the Group have been transformed
during the last three years with the US accounting for over one
third of Group revenue in Q2. FanDuel has strengthened its clear
leadership position in US online sports betting, gaining market
share through a combination of superior product, efficient customer
acquisition and strong operational execution. Our US business was
profitable during Q2 (GBP16m/$22m) and remains firmly on track to
be EBITDA positive for the full year 2023(8) .
During the same period the Group's ex-US business has also grown
and been reshaped. We have expanded our gold medal positions in the
UK&I and Australia. With the recent acquisition of Sisal in
Italy providing another number one position in one of the world's
largest regulated markets, our International division is on a more
sustainable footing with 86% of revenue from regulated or
regulating markets(10) . These strong podium positions are combined
with high growth opportunities in a number of markets that have
significant long term market potential. The Group's track record of
operational execution, combined with its scale and diversification
give us confidence that the ex-US Group can continue to outgrow
regulatory headwinds.
Being part of the Flutter Group provides unique strategic
advantages to our portfolio of brands, driving both revenue growth
and operating efficiencies. Our people have industry leading sports
betting and gaming expertise, with high levels of talent and idea
sharing in the Group. Our products enable the broadest and deepest
range of options for local hero brands, while our technology stack
delivers scalable, reliable platforms for growth. Our strong cash
generation profile allows us to allocate resources to power the
'flywheel' at a local market level.
In March, we launched our sustainability strategy, the Positive
Impact Plan. Good progress has been made in the half with (i) Safer
gambling tool usage two percentage points higher at 34.8%(9) of
AMPs, (ii) the launch of global advocacy and Pride groups and (iii)
significant time (nearly 2,200 hours) and monetary (GBP1.1m)
donations as we continue to contribute positively to the
communities in which we operate.
H1 2022 review
The Group delivered positive top line momentum with revenue
growth of 9% driven by a 14% increase in our recreational player
base. Adjusted EBITDA of GBP476m included a GBP132m investment loss
from our US division. The Group ex-US had Adjusted EBITDA of
GBP608m, a 10% decline on the prior year, with continued growth in
Australia, offset by our proactive safer gambling initiatives in
the UK&I and regulatory changes in International markets, all
as previously guided. Excluding these guided items, Group ex-US
Adjusted EBITDA was 4% higher year-on-year.
US
Our US division delivered another excellent performance during
H1. Quarterly revenue exceeded $750m for the first time in Q2 with
positive Adjusted EBITDA of $22m in the same period. We expanded
our clear number one position in the market, growing online sports
betting market share(7) to 51% in Q2 and an overall combined online
share of 36%(7) , clearly demonstrating our significant operational
and structural advantages over the rest of the market. This
competitive lead is delivered by winning in two key areas: (i)
customer acquisition and (ii) product.
Customer acquisition: The strength of the FanDuel brand, coupled
with strategic partnerships including Turner Sports and Pat McAfee,
have ensured we are accessing the broader population of sports
bettors more quickly, leading to faster adoption curves as each
state launches. In the four years since launch, FanDuel has refined
its state launch 'play book', converting customers from our daily
fantasy sports database at a faster rate with each new state.
Combined with a disciplined and efficient approach to marketing
investment, FanDuel's cost per acquisition(11) has remained
attractive at under $300.
Product: FanDuel has the best sports betting product in the
market, benefitting from Flutter's global pricing and risk
management capabilities. We are continually improving, with
incremental features such as 'Same Game Parlay+', helping FanDuel
fortify its sportsbook leadership position and maintain its
competitive edge. Penetration of higher margin parlay products was
over 80% of customers in Q2 and is a major factor in FanDuel's
superior monetisation of customers. Retention rates also remain
strong as customers favour FanDuel's market leading product. US
customer cohorts are exhibiting reassuringly familiar
characteristics to those in our existing established businesses,
with each cohort's revenue growing year-on-year as the customer
base matures.
We continue to improve our iGaming proposition, with the launch
of FanDuel branded live dealer tables in the first half as well as
adding new content to our platform. Through leveraging our market
leading gaming capabilities in the Group, we are focusing on
growing our market share in our existing five iGaming states and
ensuring we are well positioned to leverage our sportsbook
penetration as future states regulate.
Execution across customer acquisition and product continues to
deliver attractive customer economics with payback periods of 12-18
months. As noted at our preliminary results announcement dated 1
March 2022, customer acquisition is now being funded by profits
from existing customers. As the existing customers continue to
become an increasingly large proportion of our total customer base,
profits will increase, delivering an expected EBITDA profit for the
full year 2023(8) . This pattern can be evidenced in H1, where
sportsbook and iGaming contribution was more than three times
greater than for the entire year in 2021.
In states that launched before 2021, bonus and marketing spend
is reducing toward levels observed in existing businesses and
profit margins are increasing. Operating leverage is also clearly
evident as we have grown revenue more than twice as fast as other
operating costs since H1 2019, with further operating efficiency
expected as our US footprint expands. We estimate that New Jersey
EBITDA margin is already 17%(12) despite the early stage of the
market and continued disciplined investment behind the strong
customer economics we see.
Group excluding the US
UK & Ireland
Revenue declined 4% as a result of our proactive safer gambling
actions and the prior year Covid-related increase in player days,
which has now moderated towards pre-Covid levels. The significant
actions taken in 2021 to improve the sustainability of our business
in advance of the Government's review of the Gambling Act had an
annualised revenue impact of GBP48m during H1, in line with
previous guidance. While the delay to the publication of the UK
Gambling Act Review White Paper has been disappointing, our
proactive safer gambling actions position us well for the future.
In Ireland, we welcome and fully support the recent progress
towards regulation, and we are meaningfully contributing to the
legislative process.
Online performance has improved sequentially with Q2 just 4%
lower versus 20% lower in Q1. This included a return to
year-on-year gaming revenue growth in June 2022 as we lapped the
introduction of some of these safer gambling measures, giving us
confidence of delivering growth in H2. This growth will be driven
by continued expansion of our recreational customer base, which has
increased at a compound rate of 13% since 2019. Combined with our
safer gambling initiatives just 5% of revenue, excluding Tombola,
came from the highest value tier in H1. The proportion of revenue
from our lowest value tier has increased by 14% percentage points
since H1 2019 to 43%.
In H1, Sky Bet released a number of improvements to its pre-game
sports betting product, including the launch of 'BuildABet', which
has already been used by nearly one-third of football customers.
Further enhancements are planned for H2. On the gaming side, Paddy
Power continues to innovate its offering with branded slots content
and free-to-play initiatives proving popular with direct gaming
customers. Over 80% of customers are playing with our daily
engagement tool 'Wonder Wheel', which is powering record gaming
customer volumes and retention levels.
As we further integrate the businesses, we have also identified
a range of efficiency initiatives:
-- Optimising the efficiency of marketing and promotional spend
by delivering more value to the right customers at the right time
and a greater allocation of spend to our more recreational
brands
-- Integrating more of the SBG technology stack onto proprietary platforms
-- Removing team structure complexity
These initiatives will both help offset the current high
inflationary headwinds we are seeing, and ensure the UK&I
division is well-placed ahead of the pending Gambling Act
Review.
Australia
Sportsbet delivered another strong performance, once again
demonstrating excellent execution across product, value and brand.
Following significant retail restrictions in H2 2021, we focused on
retaining customers through targeted generosity initiatives ahead
of the new AFL and NRL season in H1. As a result AMPs were 10%
higher year-on-year, driving revenue growth of 5% despite the
adverse impact of year-on-year sports results. Penetration of our
long-established Same Game Multi product continues to increase and
a number of new product features were rolled out during Q2, helping
to drive player engagement levels. 'Same Game Multi Cash Out' and
'Same Game Multi Bet Tracker' have proven very popular with
punters, further enhancing our market leading product.
We remain well positioned to capitalise on the recent Point of
Consumption ('POC') tax changes announced in Queensland, New South
Wales and the Australian Capital Territory which will cost an
estimated GBP22m in 2022 with an annualised impact in 2023 of
GBP73m (AUD $125m). Sportsbet has a strong track record of managing
regulatory risk, having taken meaningful market share and grown
profits after the initial implementation of POC taxes in 2019.
International
In our International division, we continue to refine our
approach to the diverse range of markets we operate in. This
consists of four categories where we will:
-- Consolidate our existing #1 positions and drive market share
growth across Italy, Georgia, Armenia and Spain. Following the
Sisal acquisition, Italy now accounts for approximately 50% of the
division's EBITDA
-- Invest for leadership in the high growth regulated and
regulating markets including Canada, Brazil and India. We will
continue to innovate with PokerStars virtual reality poker and
casino products, a top five experience in the Oculus app store and
the highest revenue generating freemium product on the market
-- Optimise return on investment in key regulated markets by
supporting the liquidity they provide with targeted marketing
spend. While these markets have some attractive qualities, our
current lack of scale limits the returns from increasing
investment. This covers several, mostly European, regulated
markets
-- Maintain existing position in the tail of remaining
unregulated or non-regulating markets, which now make up 14% of
revenue for the International division, of which the largest market
is 0.3% of Flutter Group revenue(10)
The acquisition of Junglee in January 2021 is a great example of
our investment in a high growth market. India is one of the fastest
growing gaming market globally powered by both a doubling of
India's internet and smartphone penetration, and a 45% increase in
disposable income over the last five years. The online gaming
market is expected to reach GBP4.2bn by 2026, from GBP1.4bn in
2021, of which rummy is the fastest growing segment, accounting for
57% of revenue(13) . Junglee is the fastest growing rummy brand and
now number two in the rummy market. Product leadership and
increased investment in player acquisition has resulted in compound
growth of 73% in gross gaming revenue and 112% in players since H1
2019. Since acquisition, Flutter has added its global gaming
product expertise and sophisticated marketing capabilities to
accelerate Junglee's growth, in tandem with excellent execution
from the local team.
Capital structure and balance sheet update(6)
The Group had gross debt of GBP3,785m(14) at 30 June 2022 and a
net debt position of GBP3,004m (30 June 2021: GBP2,682m) which
represents a leverage ratio of 3.4x. During the period the Group
acquired Tombola for a cash cost of GBP410m in January and post
period end the Group completed the acquisition of Sisal on 4 August
2022 utilising existing debt facilities.
This acquisition will result in an increased leverage ratio in
the near term of 4.1 times or 3.3 times excluding US losses. As
previously highlighted, the Group continues to generate significant
free cash flow which will facilitate de-levering quickly. In
addition, as the US business becomes profitable this will transform
the earnings and debt profile of the Group.
The Group remains committed to its medium-term leverage target
of 1-2 times at which point the Board will review the Group's
dividend policy.
Other updates
As previously disclosed, the Group is in a legal arbitration
process with FOX Corporation with respect to its option to acquire
an 18.6% stake in FanDuel and related issues. The arbitration
hearing commenced in June and, should the parties not reach a
negotiated agreement in the interim, we expect a binding decision
from the arbitrator in October 2022. The Group continues to
vigorously defend its position.
Current trading/outlook
In the first 5 weeks to 7 August, Group revenue was in line with
our expectations. We currently see no discernible signs of a
consumer slow down and resultant reduced spending levels across our
businesses. However, we will continue to closely monitor key spend
indicators as we move through H2 given the uncertain macro economic
outlook. Assuming normalised sport results for the remainder of the
year, the Group anticipates:
-- US revenue of between GBP2.3bn - GBP2.5bn ($2.85bn - $3.1bn)
and an Adjusted EBITDA loss of between GBP225m - GBP275m. This
assumes we launch online in Kansas in Q4 2022
-- Group ex-US Adjusted EBITDA in line with market expectations
of between GBP1,290m - GBP1,390m, including a five-month
contribution from Sisal, which completed on 4 August 2022, and
Australian point of consumption tax changes
The Group also anticipates for 2022:
-- An effective Group ex-US corporate tax rate for the full year
of between 22% - 24% including Sisal
-- Capital expenditure of between GBP360m - GBP390m including Sisal
-- A weighted average cost of debt for H2 of 3.4%
Operating and financial review(1-6)
Group
H1 H1 CC
2022 2021 Change Change
Unaudited Adjusted GBPm GBPm % %
------------------------------------ ------- ------- ------- -------
Average monthly players ('000s) 8,716 7,625 +14%
Sports revenue 2,118 1,894 +12% +10%
Gaming revenue 1,270 1,159 +10% +8%
------- ------- ------- -------
Total revenue 3,388 3,053 +11% +9%
Cost of sales (1,353) (1,109) +22% +20%
Cost of sales as a % of net revenue 39.9% 36.3% +360bps +350bps
------- ------- ------- -------
Gross profit 2,036 1,944 +5% +3%
Sales and marketing (819) (728) +12% +9%
------- ------- ------- -------
Contribution 1,216 1,215 -% -1%
Other operating costs (686) (563) +22% +19%
Corporate costs (55) (55) -1% -6%
------- ------- ------- -------
Adjusted EBITDA(2,5) 476 597 -20% -19%
Adjusted EBITDA margin % 14.1% 19.6% -550bps -500bps
Depreciation and amortisation (143) (125) +14% +11%
------- ------- ------- -------
Adjusted operating profit 334 472 -29% -28%
Net finance expense (57) (74) -23%
------- ------- ------- -------
Adjusted profit before tax 277 398 -30%
Taxation (100) (91) +10%
------- ------- ------- -------
Adjusted profit for the period 177 307 -42%
Adjusted basic earnings per share 97.2p 171.1p -43%
Net debt(6) at period end 3,004 2,682 +12%
------------------------------------ ------- ------- ------- -------
Note: Junglee, acquired in January 2021, Singular, acquired in
September 2021 and Tombola, acquired in January 2022, have been
included on a reported basis due to materiality. A full analysis of
the Group's reported performance can be found at pages 16-17. A
reconciliation to the Group's consolidated income statement is
included in Appendix 2.
During the half we increased our recreational customer base by
over one million monthly players to 8.7m, 14% higher than the prior
year. The rapid expansion of our US business has been key to this
growth, along with good underlying player momentum in the UK&I
and Australia. This resulted in revenue growth of 9% to GBP3.4bn,
including a 50% increase in the US. Outside of the US, the increase
in revenue as a result of strong customer retention in Australia
and the addition of Tombola was offset by regulatory changes in
International markets and our proactive safer gambling initiatives
in the UK&I, both of which put our business on a more
sustainable footing for growth.
Cost of sales as a percentage of net revenue increased by 350
basis points to 39.9% with a greater proportion of revenue coming
from higher direct cost markets.
Sales and marketing costs increased by 9% in line with revenue
growth. Marketing spend in the US increased 29% as we acquired
large volumes of new players but reduced as a percentage of
revenue, declining by 620 basis points. Other operating costs
increased 19% or 9% for Group ex-US where the return of retail and
addition of Tombola more than offset synergies and cost
efficiencies in the UK&I. Corporate costs remain tightly
controlled.
Adjusted EBITDA was GBP476m with the US investment-led loss
increasing by GBP46m to GBP132m, despite being profitable in Q2. As
expected, Group ex-US Adjusted EBITDA was 10% lower due to the
regulatory changes and safer gambling initiatives noted above.
Excluding these headwinds, Adjusted EBITDA increased 4% in H1.
The Group's Adjusted effective tax rate in the period was 36.2%
(HY 2021: 22.9%), primarily driven by the changing mix of taxable
earnings across geographies. The Group ex-US effective tax rate in
the period was 22% with the full-year 2022 adjusted Group ex-US
effective tax rate expected to be between 22% and 24% (FY2021:
18.5%). This includes Sisal and reflects upward pressure due to
profits earned in higher tax geographies.
Adjusted basic earnings per share reduced from 171p to 97p
reflecting the lower Adjusted EBITDA and the increased tax charge
in the current period.
Net debt at 30 June 2022 was GBP3,004m, a GBP322m increase on
prior year, primarily due to the acquisition of Tombola in January
2022 and settlement of a historic legal case with the state of
Kentucky offsetting the free cash flow generated by the operating
activities of the Group.
A full analysis of the Group's reported performance can be found
at pages 16-17.
US(3)
H1 H1 CC
2022 2021 Change Change
Unaudited Adjusted GBPm GBPm % US$
------------------------------------ ------- ------- ------- -------
Average monthly players ('000s) 2,188 1,470 +49%
Sportsbook stakes 10,911 5,072 +115% +102%
Sportsbook net revenue margin 6.0% 6.2% -20bps -20bps
Sports revenue 770 452 +70% +58%
Gaming revenue 281 200 +41% +31%
------- ------- ------- -------
Total revenue 1,051 652 +61% +50%
Cost of sales (544) (293) +86% +73%
Cost of sales as a % of net revenue 51.8% 44.9% +680bps +700bps
------- ------- ------- -------
Gross profit 507 359 +41% +31%
Sales and marketing (399) (292) +37% +29%
------- ------- ------- -------
Contribution 108 67 +60% +38%
Other operating costs (240) (154) +56% +46%
------- ------- ------- -------
Adjusted EBITDA(2,5) (132) (87) +52% +53%
Adjusted EBITDA margin (12.5%) (13.3%) +70bps -30bps
Depreciation and amortisation (31) (22) +39% +29%
------- ------- ------- -------
Adjusted operating profit (162) (108) +50% +48%
------------------------------------ ------- ------- ------- -------
The US division includes FanDuel, FOXBet, TVG, PokerStars and
Stardust brands, offering regulated real money and free-to-play
sports betting, casino, poker, daily fantasy sports and online
racing wagering products to customers across various states in the
US and in Canada.
Revenue grew 50% to GBP1.1bn ($1.4bn) in H1 with an Adjusted
EBITDA loss of GBP132m ($176m). This was driven by efficient
customer acquisition in new and existing states, our superior
product driving strong customer economics and good operating
efficiencies, offset by the cost of our sportsbook launch in New
York where tax rates are higher. Within this performance FanDuel
Group represented 97% of revenue and 80% of Adjusted EBITDA
loss.
Sports revenue grew 58% with sportsbook revenue increasing by
91%. This was driven by staking growth which more than doubled
year-on-year to over GBP10.9bn ($14.2bn). Our continued sportsbook
expansion aided growth, with five new US states as well as Ontario,
Canada added to our offering since H1 last year (Arizona in Q3
2021, Connecticut in Q4 2021 and New York, Louisiana and Wyoming in
Q1 2022). A full six-month of revenues from Michigan and Virginia,
which launched part way during Q1 2021 also provided a benefit to
growth.
Net revenue margin of 6.0% was 40 basis points below
expectations (GBP41m) due to a run of adverse sports results in Q1.
Excluding this impact, net revenue margin would have been broadly
flat year-on-year. Our improving product mix and superior pricing
and risk management capabilities funded additional promotional
generosity to acquire customers in the period in both new and
existing states and also offset the impact of GBP63m in favourable
sports results in the prior year.
Gaming revenue was 31% higher driven by an increase in AMPs of
40% and the full six months of revenue from the three additional
gaming states launched in the prior year; Michigan (Q1 2021), West
Virginia (Q2 2021) and Connecticut (Q4 2021).
Cost of sales as a percentage of net revenue increased by seven
percentage points primarily reflecting the launch of the FanDuel
sportsbook in New York, where the gaming tax rate is 51%,
materially higher than in other states.
Sales and marketing increased by 29% as we continued to invest
in customer acquisition both in new and existing states. As a
proportion of revenue, sales and marketing declined by 620 basis
points as our business continues to scale and acquisition
investment in existing states, which are an increasingly large
proportion of our business, reduces.
Other operating costs increased 46%. Adjusting for the
year-on-year impact of sports results, operating costs would have
declined by around four percentage points as a proportion of
revenue demonstrating operating leverage. This is despite the
business still being at a relatively early stage in its
expansion.
UK & Ireland
UK & Ireland UK & Ireland UK & Ireland Retail
Total Online
--------------------- ---------------------
H1 H1 H1 H1 H1 H1
2022 2021 Change 2022 2021 Change 2022 2021 Change
------------------------------
Unaudited Adjusted GBPm GBPm % GBPm GBPm% GBPm GBPm %
------------------------------ ----- ----- ------- ----- ----- ------ ----- ------- ----------
Average monthly players
('000s) 3,704 3,303 +12%
Sportsbook stakes 5,185 6,091 -15% 4,494 5,885 -24% 691 207 +234%
Sportsbook net revenue
margin 10.9% 10.7% +20bps 10.6% 10.6% 0bps 13.2% 12.5% +70bps
Sports revenue 630 738 -15% 538 712 -24% 92 26 +253%
Gaming revenue 462 397 +16% 418 382 +10% 44 16 +183%
----- ----- ------- ----- ----- ------- ----- ------- ----------
Total revenue 1,092 1,135 -4% 956 1,094 -13% 136 41 +227%
Cost of sales (335) (342) -2% (304) (332) -8% (31) (10) +218%
Cost of sales as
a % of net revenue 30.7% 30.1% +60bps 31.8% 30.4% +140bps 22.8% 23.4% -70bps
----- ----- ------- ----- ----- ------- ----- ------- ----------
Gross profit 757 793 -5% 652 762 -14% 105 32 +230%
Sales and marketing (197) (207) -5% (194) (204) -5% (3) (3) +13%
----- ----- ------- ----- ----- ------- ----- ------- ----------
Contribution 559 587 -5% 458 558 -18% 101 29 +251%
Other operating costs (239) (227) +5% (155) (160) -3% (83) (68) +23%
----- ----- ------- ----- ----- ------- ----- ------- ----------
Adjusted EBITDA(2,5) 321 359 -11% 303 398 -24% 18 (39) -147%
Adjusted EBITDA margin 29.4% 31.6% -220bps 31.6% 36.4% -470bps 13.5% (93.6%) +10,710bps
Depreciation and amortisation (63) (63) +1% (44) (42) +5% (19) (21) -7%
----- ----- ------- ----- ----- ------- ----- ------- ----------
Adjusted operating
profit 258 297 -13% 259 356 -27% (1) (59) -98%
------------------------------ ----- ----- ------- ----- ----- ------- ----- ------- ----------
The UK & Ireland division operates Paddy Power, Betfair, Sky
Betting & Gaming and Tombola brands online, as well as retail
operations in the UK and Ireland.
Revenue declined by 4% and Adjusted EBITDA was GBP38m lower at
GBP321m. The Covid-related restrictions in the prior year result in
complex year-on-year comparatives in our online and retail
businesses.
UK & Ireland Online
Revenue was 13% lower in H1, sequentially improving from -20% in
Q1 to -4% in Q2, due to the:
-- Annualisation of our proactive safer gambling measures
introduced across 2021 reducing revenue by GBP48m
-- Peak in Covid related player engagement during H1 2021, with
average player days down 10% in H1 2022
-- Benefit of the European football championships in June 2021,
generating revenue of GBP43m in H1 2021
-- Addition of Tombola in January 2022 which added eight
percentage points of growth (pro forma including Tombola H1 -19%,
Q2 -11%)
The relative impact of these factors by product is reflected in
the 24% decline of sports revenue compared to 10% growth in gaming
revenue. Sportsbook net revenue margin was in line year-on-year,
with both periods benefitting from approximately 100 basis points
in favourable sports results.
AMPs grew 12% (flat including Tombola's highly recreational
customer base on a pro forma basis) with strong acquisition and
retention of gaming customers in Paddy Power being offset by the
factors above.
Cost of sales as a percentage of revenue increased by 140 basis
points to 31.8% reflecting higher transaction fees and streaming
costs.
Sales and marketing decreased by 5% (pro forma including Tombola
-13%) reflecting the European football championships investment in
the prior year. Sales and marketing was 20.3% of revenue in H1, in
line with the prior full year. Other operating costs were 3% lower
in H1 (pro forma including Tombola -11%) with synergies and cost
efficiencies offsetting the inflationary increases in employee pay
and data.
Online Adjusted EBITDA declined GBP95m year-on-year to
GBP303m.
UK & Ireland Retail
Retail revenue more than trebled in the half, with our estate
open for all of H1. In the prior year, our shops were closed from
January to April in the UK and to May in Ireland due to
Covid-related restrictions. In the UK estate, both sports and
gaming revenue has returned to 2019 levels while in our Ireland
estate revenue is at 69% of H1 2019, reflecting the slower return
of retail footfall in Ireland.
Other operating costs increased by 23% reflecting our shops
being open across the half. The business generated GBP18m of
Adjusted EBITDA in H1.
Currently, we have 614 (June 2021: 624) retail outlets with 362
in the UK and 252 in Ireland. Since June 2021 we have opened 5
shops in the UK and closed 15 shops in Ireland as part of normal
business practice.
Australia (3)
H1 H1 CC
2022 2021 Change Change
Unaudited Adjusted GBPm GBPm % A$
------------------------------------ ----- ----- ------- -------
Average monthly players ('000s) 993 906 +10%
Sportsbook stakes 5,209 5,000 +4% +4%
Sportsbook net revenue margin 11.8% 11.7% +10bps +10bps
Total revenue 612 585 +5% +5%
Cost of sales (290) (275) +5% +5%
Cost of sales as a % of net revenue 47.3% 47.0% +30bps +30bps
----- ----- ------- -------
Gross profit 322 310 +4% +4%
Sales and marketing (54) (59) -9% -10%
----- ----- ------- -------
Contribution 269 252 +7% +7%
Other operating costs (50) (51) -2% -3%
----- ----- ------- -------
Adjusted EBITDA(2,5) 219 201 +9% +10%
Adjusted EBITDA margin 35.8% 34.3% +150bps +180bps
Depreciation and amortisation (14) (13) +4% +5%
----- ----- ------- -------
Adjusted operating profit 206 188 +9% +11%
------------------------------------ ----- ----- ------- -------
The division encompasses Sportsbet, which offers online sports
betting in the Australian market.
Sportsbet delivered another excellent performance during H1 as
Adjusted EBITDA increased by 10% to GBP219m. This was driven by a
combination of a 10% increase in the player base leading to good
top line momentum as well as continued operating leverage improving
EBITDA margins by 180 basis points.
Customer growth was aided by strong retention of players who
migrated online during H2 2021 when Covid restrictions were at
their peak. Staking growth of 4% and an increase in net revenue
margin of 10 basis points to 11.8%, delivered revenue growth of 5%
in the period. Sports results represented a headwind year-on-year
with 50 basis points of favourable results in H1 2022 compared to a
140 basis point benefit in H1 2021. This headwind, along with a
further step up in promotional generosity spend was more than
offset by structural margin improvements due to increased
penetration of higher margin products and improvements to pricing
and risk management capabilities.
Our continued focus on a personalised approach to promotional
spend and generosity led to an increase in cost of sales by 30
basis points as a percentage of revenue as taxes are levied on
gross gaming revenue, resulting in a higher effective tax rate.
Sales and marketing also reflected this dynamic, declining by 10%
primarily driven by promotional spend shifting to within our net
revenue margin of 11.8%.
Other operating costs were roughly flat year-on-year with
Adjusted EBITDA of GBP219m.
International(3)
H1 H1 CC
2022 2021 Change Change
Unaudited Adjusted GBPm GBPm % %
------------------------------------ ----- ----- ------- -------
Average monthly players ('000s) 1,831 1,945 -6%
Sportsbook stakes 710 871 -18% -18%
Sportsbook net revenue margin 9.0% 9.1% -10bps -10bps
Sports revenue 106 118 -10% -10%
Gaming revenue 527 562 -6% -7%
----- ----- ------- -------
Total revenue 633 680 -7% -8%
Cost of sales (184) (199) -8% -8%
Cost of sales as a % of net revenue 29.1% 29.3% -20bps -20bps
----- ----- ------- -------
Gross profit 449 481 -7% -7%
Sales and marketing (169) (171) -1% -3%
----- ----- ------- -------
Contribution 280 310 -10% -10%
Other operating costs (158) (131) +20% +18%
----- ----- ------- -------
Adjusted EBITDA(2,5) 122 179 -32% -31%
Adjusted EBITDA margin 19.3% 26.3% -700bps -630bps
Depreciation and amortisation (33) (25) +31% +22%
----- ----- ------- -------
Adjusted operating profit 89 154 -42% -40%
------------------------------------ ----- ----- ------- -------
International includes PokerStars, Adjarabet, Betfair and
Junglee brands which offer online poker, casino, sports betting,
rummy and daily fantasy products. Excludes PokerStars US business
and Betfair UK and Ireland operations.
Strong revenue growth in our 'consolidate and invest' markets
including India, Brazil, Georgia, Armenia and Canada was offset by
the previously guided impact of regulatory changes and the
challenging Covid-related comparatives. Adjusted EBITDA of GBP122m,
a decline of GBP57m, reflects a GBP98m Adjusted EBITDA impact from
these known headwinds:
-- Combined impact of market exits in the Netherlands (GBP20m)
and Russia/Ukraine (GBP20m), along with a gaming tax change in
Germany (GBP20m) of GBP60m
-- Covid restrictions boosted online activity by an estimated GBP38m in the prior period
Revenue in H1 of GBP633m, a decline of 8%, reflected these
headwinds. Excluding market exits and tax changes, revenue
increased by 4%. Revenue growth in our 'consolidate and invest'
markets was 14% and these markets represented 56% of the
International division in H1 (72% including Sisal on a pro forma
basis). This growth was largely offset by the unwind of the prior
year Covid-related boost to revenue in our remaining markets.
Cost of sales as a % of net revenue is broadly in line
year-on-year at 29.1%.
Sales and marketing declined by 3% in H1 reflecting the ongoing
investment in our 'consolidate and invest' markets offset by
savings elsewhere. Other operating costs increased by 18% in H1.
This partly reflects the annualisation of the increased resources
put into the business to stabilise and improve our capabilities
across product, technology and customer operations, along with the
expansion of Junglee in India. We continue to monitor opportunities
for improved operational efficiencies as we further integrate our
International businesses.
Statutory review(1)
Group
H1 H1
------------------------------------ ------- -------
2022 2021 Change
------------------------------------ ------- ------- ---------------
Unaudited GBPm GBPm %
------------------------------------ ------- ------- ---------------
Sports revenue 2,118 1,894 +12%
Gaming revenue 1,270 1,159 +10%
------- ------- ---------------
Total revenue 3,388 3,053 +11%
Cost of sales (1,353) (1,122) +21%
Cost of sales as a % of net revenue 39.9% 36.8% +310 bps
Gross profit 2,036 1,931 +5%
Operating costs (1,602) (1,368) +17%
------- ------- ---------------
EBITDA 434 562 -23%
EBITDA margin % 12.8% 18.4% -560 bps
Amortisation of acquisition related
intangibles (286) (276) +4%
Depreciation and amortisation (145) (125) +16%
Gain on disposal 2 - +100%
------- ------- ---------------
Operating profit 5 162 -97%
Net finance expense (57) (85) -33%
------- ------- ---------------
(Loss)/ profit before tax (51) 77
Taxation (61) (163) -63%
------- ------- ---------------
Loss after tax (112) (86)
------- ------- ---------------
Basic loss per share (64.7p) (50.4p)
Diluted loss per share (64.7p) (50.4p)
Net current liabilities (439) (327)
Net assets 10,226 10,724
Net cash from operating activities 264 427 -38%
------------------------------------ ------- ------- ---------------
Note: A full analysis of the Group's adjusted performance can be
found at pages 8-15. A reconciliation of the Group's adjusted
performance to the Group's consolidated income statement is
included in Appendix 2.
H1 revenue grew 11% to GBP3.4bn driven by the rapid expansion of
our US business, where revenue was 50% higher, strong customer
retention in Australia and the addition of Tombola.
Cost of sales as a percentage of net revenue increased by 310
basis points to 39.9% with a greater proportion of revenue coming
from higher direct cost markets.
Operating costs were 17% higher in H1 driven by the US, where we
increased marketing investment to acquire large volumes of new
customers and scaled up our operational capabilities.
Reported EBITDA was GBP128m lower at GBP434m due to the
increased US investment-led loss, regulatory changes in
International markets and proactive safer gambling initiatives in
the UK&I.
A reduced tax charge in the period of GBP61m resulted in a loss
after tax of GBP112m, GBP26m higher than H1 2021. The lower tax
charge was primarily due to a one off deferred tax charge of
GBP105m in the prior year relating to the UK's main corporate tax
rate change from 19% to 25% applicable from 1 April 2023. Loss per
share of 64.7p decreased in line with the movement in the loss
after tax.
Net current liabilities increased from GBP112m at 31 December
2021 to GBP439m at 30 June 2022 mainly due to the purchase of
Tombola in January 2022 for GBP410m which was financed from the
Group's cash resources. As in previous years, the Group regularly
operates in a net current liability position due to the Group's
operating model whereby it receives payments for nearly all
revenues in advance with material cost items paid in arrears.
Net assets reduced in the period from GBP10.3bn at 31 December
2021 to GBP10.2bn due to a reported loss after tax of GBP112m and
the recognition of a GBP204m liability relating to the exercise of
the Adjarabet put option. This was partially offset by the foreign
currency translation impact relating to goodwill and intangible
assets.
Net cash flow from operating activities reduced from GBP427m to
GBP264m mainly due to EBITDA reducing by GBP128m. Other factors
included a higher working capital outflow compared to the prior
year period and higher tax payments. These were partially offset by
amounts paid in respect of the Kentucky litigation in the prior
year period.
A full analysis of the Group's Adjusted performance can be found
at pages 8-15.
Separately disclosed items
H1 H1
2022 2021
Unaudited GBPm GBPm
------------------------------------------------------ ----- -----
Amortisation of acquisition related intangible assets (286) (276)
Transaction fees and associated costs (10) -
Restructuring and integration initiatives (32) (22)
Greece tax expense - (13)
------------------------------------------------------ ----- -----
Operating loss impact of separately disclosed items (328) (310)
Financial expense - (11)
------------------------------------------------------ ----- -----
Loss before tax impact of separately disclosed items (328) (321)
Tax credit / (charge) on separately disclosed items 39 (72)
------------------------------------------------------ ----- -----
Total separately disclosed items (289) (392)
------------------------------------------------------ ----- -----
Separately disclosed items do not relate to business as usual
activity of the Group, are items that are volatile in nature or
non-cash purchase price accounting amortisation and therefore are
excluded from Adjusted profits.
Amortisation of acquisition related intangible assets increased
GBP10m to GBP286m in H1. The current period will include a charge
for Tombola, which was acquired in January 2022.
Transaction and associated costs of GBP10m were incurred for the
acquisition of Tombola and Sisal, along with legal fees for the FOX
arbitration.
Restructuring and integration costs primarily relate to the
integration with TSG.
The tax credit of GBP39m primarily relates to a deferred tax
credit in respect of the amortisation of acquisition-related
intangibles.
Cash flow and financial position
H1 H1
2022 2021
Unaudited GBPm GBPm
--------------------------------------------------------- -------------------- --------------------
Adjusted EBITDA 476 597
Capex (156) (138)
Working capital (41) 18
Corporation tax (132) (92)
Lease liabilities paid (21) (27)
-------------------- --------------------
Adjusted free cash flow 127 358
Cash flow from separately disclosed items (39) (24)
-------------------- --------------------
Free cash flow 87 333
Interest cost (46) (70)
Other borrowing costs (2) (5)
Amounts paid in respect of Kentucky settlement - (71)
Purchase of shares by the Employee Benefit Trust ("EBT") - (89)
Acquisitions and disposals (410) (51)
Cash transferred in acquisitions/ disposals 15 18
Other (3) (4)
-------------------- --------------------
Net (decrease)/increase in cash (360) 61
-------------------- --------------------
Net debt(6) at start of year (2,647) (2,814)
Foreign currency exchange translation (241) 26
Change in fair value of hedging derivatives 244 45
-------------------- --------------------
Net debt as at 30 June (3,004) (2,682)
--------------------------------------------------------- -------------------- --------------------
Note: Prepared on a net cash/debt basis including borrowings,
debt related derivatives and cash and cash equivalents - available
for corporate use but excluding cash and cash equivalents -
customer balances. A reconciliation to the Group's consolidated
statement of cash flows is included in Appendix 4.
Adjusted free cash flow of GBP127m in H1 compared with GBP358m
in the prior year. This reduction reflects:
-- Capital expenditure of GBP156m which was GBP18m higher,
primarily driven by continued investment in product and technology
in the US
-- Corporate tax payments increased by GBP40m reflecting the
change in the geographic mix of profits in H1 as a greater
proportion of profits were earned in jurisdictions with higher tax
rates, as well as the timing of payments and refunds in the
period
-- A working capital outflow due to an unwind of accruals at 31
December 2021 and the prepayment of some US marketing assets during
H1 when compared with a working capital benefit in the prior
year
Cash flow from separately disclosed items of GBP39m principally
relates to restructuring and integration costs in relation to the
combination with TSG.
Interest costs were GBP24m lower than in the prior year due to
the debt refinancing in July 2021 which significantly reduced the
effective cost of debt for the Group.
The acquisition of Tombola in January resulted in a cash outflow
of GBP410m.
As at 30 June 2022, the Group had net debt of GBP3,004m,
excluding customer balances, representing a leverage ratio of 3.4x
times(6) . The Group continues to hedge the impact of currency
fluctuations on its leverage ratio through cross currency swap
agreements. Changes in the fair value of these hedging derivatives
are reflected in net debt.
Notes:
(1) Reported figures represent the IFRS reported statutory
numbers. Where amounts have been normalised for separately
disclosed items they are noted as Adjusted.
(2) "Adjusted" measures exclude items that are separately
disclosed as they are: (i) not part of the usual business activity
of the Group (ii) items that are volatile in nature and (iii)
purchase price accounting amortisation of acquired intangibles
(non-cash). Therefore, they have been reported as "separately
disclosed items (SDIs)" (see note 5 to the financial
statements).
(3) Growth rates in the commentary are in local or constant
currency(15) except reported numbers which are in nominal
currency.
(4) Average Monthly Players represent the average number of
players who have placed and/or wagered a stake and/or contributed
to rake or tournament fees during the month in the reporting
period.
(5) EBITDA is defined as profit for the period before
depreciation, amortisation, impairment, gain on disposal, financial
income, financial expense and taxation and is a non-GAAP measure.
This measure is used internally to evaluate performance, to
establish strategic goals and to allocate resources. The directors
also consider the measure to be commonly reported and widely used
by investors as an indicator of operating performance and ability
to incur and service debt, and as a valuation metric. It is a
non-GAAP financial measure and is not prepared in accordance with
IFRS and, as not uniformly defined terms, it may not be comparable
with measures used by other companies to the extent they do not
follow the same methodology used by the Group. Non-GAAP measures
should not be viewed in isolation, nor considered as a substitute
for measures reported in accordance with IFRS. All of the
adjustments shown have been taken from the financial
statements.
(6) Net debt is the principal amount of borrowings plus
associated accrued interest, minus available cash & cash
equivalents plus/minus carrying value of debt related derivatives.
Leverage is calculated using Adjusted EBITDA for the appropriate
12-month period.
(7) Online sportsbook market share is the GGR market share of
FanDuel and FOXBet for Q2 2022 in the states in which FanDuel was
live based on published gaming regulator reports in those states.
During Q2 2022 FanDuel was live in 15 states; Arizona (AZ),
Colorado (CO), Connecticut (CT), Illinois (IL), Indiana (IN), Iowa
(IA), Louisiana (LA), Michigan (MI), New Jersey (NJ), New York
(NY), Pennsylvania (PA), Tennessee (TN), Virginia (VA), West
Virginia (WV) and Wyoming (WY). During Q2 2022 FOXBet was live in 4
states; CO, NJ, MI and PA. Market share does not include AZ and IL
for June as the data has yet to be released. Combined online market
share is the GGR online sportsbook market share above plus the
combined CT, MI, NJ, PA and WV market share of our gaming
brands.
(8) 2023 profit projection is for full year 2023 including share
based compensation and FOXBet. Projections are based on our current
expectation of the timing of regulatory developments and new state
launches in 2022 and 2023, and excludes California.
(9) Global Play Well goal now measured as the 12 month rolling
average % of AMPs who use a safer gambling (Play Well) tool in the
specified reporting period. A safer gambling tool is any tool that
a customer has used (or Flutter has applied to a customer) in the
reporting period that helps to promote safer gambling. During H1,
Flutter strengthened the measurement of this metric including a
change to measure AMPs instead of active customers, apply more
consistent tool usage definitions across the Group as well as
including Adjarabet, Junglee and Tombola.
(10) Includes Sisal revenue for H1 of GBP402m.
(11) Cost per acquisition is the cumulative cost per acquisition
for FanDuel sportsbook and iGaming and represents the total media
and digital marketing spend per acquired customer including those
cross-sold from daily fantasy sports.
(12) The US business is not managed to EBITDA on a state by
state or product basis given its shared cost base. For the purposes
of illustrating FanDuel online sportsbook and iGaming state EBITDA,
operating costs have been allocated to US product verticals on a
GGR basis with an allocation to online sportsbook/casino business
of each state based on the population of that state
(13) Source: Redseer Strategy Consultants.
(14) Includes the gross value of derivatives.
(15) Constant currency ("CC") growth is calculated by
retranslating the non-sterling denominated component of H1 2021 at
H1 2022 exchange rates (see Appendix 3).
Appendix 1: Divisional Key Performance Indicators H1 2022
Unaudited adjusted
US UK & Ireland Australia International Group
CC(1) CC(1) CC(1) CC(1) CC(1)
H1 H1 % H1 H1 % H1 H1 % H1 H1 % H1 H1 %
GBPm 2022 2021 Change 2022 2021 Change 2022 2021 Change 2022 2021 Change 2022 2021 Change
-------------- ------- ------- ------- ----- ----- ------- ----- ----- ------- ----- ----- ------- ------- ------- -------
Average
monthly
players(2)
(000's) 2,188 1,470 +49% 3,704 3,303 +12% 993 906 +10% 1,831 1,945 -6% 8,716 7,625 +14%
Sportsbook
stakes 10,911 5,072 +102% 5,185 6,091 -15% 5,209 5,000 +4% 710 871 -18% 22,015 17,034 +27%
Sportsbook net
revenue
margin 6.0% 6.2% -20bps 10.9% 10.7% +20bps 11.8% 11.7% +10bps 9.0% 9.1% -10bps 8.6% 9.6% -100bps
Sports revenue 770 452 +58% 630 738 -14% 612 585 +5% 106 118 -10% 2,118 1,894 +10%
Gaming revenue 281 200 +31% 462 397 +16% 0 0 0% 527 562 -7% 1,270 1,159 +8%
------- ------- ------- ----- ----- ------- ----- ----- ------- ----- ----- ------- ------- ------- -------
Total revenue 1,051 652 +50% 1,092 1,135 -4% 612 585 +5% 633 680 -8% 3,388 3,053 +9%
Cost of Sales (544) (293) +73% (335) (342) -2% (290) (275) +5% (184) (199) -8% (1,353) (1,109) +20%
Cost of sales
as %
of net
revenue 51.8% 44.9% +700bps 30.7% 30.1% +50bps 47.3% 47.0% +30bps 29.1% 29.3% -20bps 39.9% 36.3% +350bps
Gross Profit 507 359 +31% 757 793 -4% 322 310 +4% 449 481 -7% 2,036 1,944 +3%
Sales &
marketing (399) (292) +29% (197) (207) -4% (54) (59) -10% (169) (171) -3% (819) (728) +9%
------- ------- ------- ----- ----- ------- ----- ----- ------- ----- ----- ------- ------- ------- -------
Contribution 108 67 +38% 559 587 -4% 269 252 +7% 280 310 -10% 1,216 1,215 -1%
Other
operating
costs (240) (154) +46% (239) (227) +6% (50) (51) -3% (158) (131) +18% (686) (563) +19%
Corporate
costs 0 0 0% 0 0 0% 0 0 0% 0 0 0% (55) (55) -6%
------- ------- ------- ----- ----- ------- ----- ----- ------- ----- ----- ------- ------- ------- -------
Adjusted
EBITDA (132) (87) +53% 321 359 -11% 219 201 +10% 122 179 -31% 476 597 -19%
Adjusted
EBITDA margin (12.5%) (13.3%) -30bps 29.4% 31.6% -240bps 35.8% 34.3% +180bps 19.3% 26.3% -630bps 14.1% 19.6% -500bps
Depreciation &
amortisation (31) (22) +29% (63) (63) +1% (14) (13) +5% (33) (25) +22% (143) (125) +11%
------- ------- ------- ----- ----- ------- ----- ----- ------- ----- ----- ------- ------- ------- -------
Adjusted
operating
profit/(loss) (162) (108) +48% 258 297 -13% 206 188 +11% 89 154 -40% 334 472 -28%
-------------- ------- ------- ------- ----- ----- ------- ----- ----- ------- ----- ----- ------- ------- ------- -------
(1) Constant currency ("CC") growth is calculated by
retranslating the non-sterling denominated component of H1 2021 at
H1 2022 exchange rates (see Appendix 3).
(2) Average Monthly Players represent the average number of
players who have placed and/or wagered a stake and/or contributed
to rake or tournament fees during the month in the reporting
period.
Appendix 2: Reconciliation of Adjusted to statutory results
In the operating and financial review the Group's financial
performance has been presented on an Adjusted and reported basis.
The difference between the Adjusted and reported information
relates to the inclusion of separately disclosed items. The impact
of same on the income statement and earnings per share is set out
below.
Adjusted Separately Statutory
results disclosed results
items(1)
---------------- ------------
H1 H1 H1 H1 H1 H1
GBPm unaudited 2022 2021 2022 2021 2022 2021
---------------------------------- ------- ------- ----- ----- ------- -------
Sports revenue 2,118 1,894 2,118 1,894
Gaming revenue 1,270 1,159 1,270 1,159
------- ------- ----- ----- ------- -------
Total revenue 3,388 3,053 - - 3,388 3,053
Cost of sales (1,353) (1,109) (13) (1,353) (1,122)
Cost of sales as a % of net
revenue 39.9% 36.3% 39.9% 36.8%
Gross profit 2,036 1,944 - (13) 2,036 1,931
Sales and marketing (819) (728) (819) (728)
Contribution 1,216 1,215 - (13) 1,216 1,202
Other operating costs (686) (563) (686) (563)
Corporate costs (55) (55) (42) (22) (97) (77)
------- ------- ----- ----- ------- -------
EBITDA 476 597 (42) (35) 434 562
EBITDA margin 14.1% 19.6% 12.8% 18.4%
Depreciation and amortisation (143) (125) (286) (276) (429) (401)
------- ------- ----- ----- ------- -------
Operating profit 334 472 (328) (310) 5 162
Net finance expense (57) (74) - (11) (57) (85)
------- ------- ----- ----- ------- -------
Profit/ (loss) before tax 277 398 (328) (321) (51) 77
Taxation (100) (91) 39 (72) (61) (163)
------- ------- ----- ----- ------- -------
Profit/ (loss) for the period 177 306 (289) (392) (112) (86)
Profit/ (loss) attributable
to non controlling interest (5) (5) 3 3 (2) (3)
------- ------- ----- ----- ------- -------
Profit/ (loss) attributable
to equity holders 172 301 (286) (389) (114) (89)
Weighted average number of shares
('000s) 176,658 175,893 176,658 175,893
Adjusted basic EPS (pence) 97.2p 171.1p (64.7p) (50.4p)
(1) See note 5 of the financial statements.
Appendix 3: Reconciliation to constant currency growth rates
Constant currency ("cc") growth is calculated by retranslating
non-sterling denominated component of H1 2021 at H1 2022 exchange
rates as per the table below.
H1 H1
H1 H1 % 2021 2021 CC %
GBPm unaudited 2022 2021 Change FX impact CC Change
------------------------------ ------- ------- ------- --------- ------- -------
Sports revenue 2,118 1,894 +12% 33 1,927 +10%
Gaming revenue 1,270 1,159 +10% 21 1,179 +8%
------- ------- ------- --------- ------- -------
Total revenue 3,388 3,053 +11% 54 3,106 +9%
Cost of sales (1,353) (1,109) +22% (23) (1,132) +20%
Cost of sales as
a % of net revenue 39.9% 36.3% +360bps 36.4% +350bps
Gross profit 2,036 1,944 +5% 31 1,975 +3%
Sales and marketing (819) (728) +12% (23) (751) +9%
Contribution 1,216 1,215 0% 8 1,224 -1%
Other operating costs (686) (563) +22% (12) (575) +19%
Corporate costs (55) (55) -1% (3) (58) -6%
------- ------- ------- --------- ------- -------
Adjusted EBITDA 476 597 -20% (6) 591 -19%
Adjusted EBITDA margin 14.1% 19.6% -550bps 19.0% -500bps
Depreciation and amortisation (143) (125) +14% (3) (128) +11%
Adjusted operating
profit 334 472 -29% (9) 463 -28%
Revenue by division
UK & Ireland 1,092 1,135 -4% (2) 1,133 -4%
Australia 612 585 +5% 0 585 +5%
International 633 680 -7% 7 687 -8%
US 1,051 652 +61% 50 702 +50%
Adjusted EBITDA by
division
UK & Ireland 321 359 -11% 1 360 -11%
Australia 219 201 +9% (2) 199 +10%
International 122 179 -32% (3) 176 -31%
US (132) (87) +52% 1 (86) +53%
Corporate costs (55) (55) -1% (3) (58) -6%
------------------------------ ------- ------- ------- --------- ------- -------
Appendix 4: Reconciliation of Adjusted cash flow to reported
statutory cash flow
In the operating and financial review the cash flow has been
presented on a net cash basis. The difference between the net cash
basis and the reported cash flow is the inclusion of borrowings,
debt related derivatives and cash and cash equivalents - available
for corporate use but excluding cash and cash equivalents -
customer balances to determine a net cash position.
Adjusted Debt and Statutory
cash flow customer balances cash flow
adjustments
---------------- --------------------
GBPm unaudited 2022 2021 2022 2021 2022 2021
-------------------------------------------- ------- ------- --------- --------- -----
Adjusted EBITDA(1) 476 597 476 597
Capex(2) (156) (138) (156) (138)
Working capital(3) (41) 18 (41) 18
Corporation tax (132) (92) (132) (92)
Lease liabilities paid (21) (27) (21) (27)
------- ------- --------- --------- ----- -----
Adjusted free cash flow 127 358 - - 127 358
Cash flow from separately disclosed
items(4) (39) (24) (39) (24)
------- ------- --------- --------- ----- -----
Free cash flow 87 333 - - 87 333
Interest cost(5) (46) (70) (46) (70)
Other borrowing costs(5) (2) (5) (2) (5)
Amounts paid in respect of Kentucky
settlement - (71) - (71)
Purchase of shares by the EBT - (89) - (89)
Acquisitions and disposals(6) (410) (51) (410) (51)
Cash acquired in business combinations(6) 15 18 15 18
Other(7) (3) (4) (3) (4)
Movement in cash and cash equivalents
- customer balances - - 44 (34) 44 (34)
Net amounts repaid on borrowings(8) - - 178 (13) 178 (13)
------- ------- --------- --------- ----- -----
Net (decrease)/increase in cash (360) 61 222 (46) (137) 15
------- ------- --------- --------- ----- -----
Net (debt)/cash at start of year(9) (2,647) (2,814) 4,276 4,005 1,629 1,191
Foreign currency exchange translation (241) 26 252 (44) 11 (18)
Change in fair value of hedging derivatives 244 45 (244) (45) - -
Net (debt)/cash as at 30 June(9) (3,004) (2,682) 4,507 3,870 1,503 1,188
-------------------------------------------- ------- ------- --------- --------- ----- -----
(1) Adjusted EBITDA includes the following line items in the
statutory cash flow: Profit for the period, separately disclosed
items, tax expense, financial income, financial expense and
depreciation and amortisation.
(2) Capex includes purchase of property, plant and equipment,
purchase of intangible assets, capitalised internal development
expenditure, lease incentive received and payment of contingent
deferred consideration.
(3) Working capital includes (increase)/decrease in trade and
other receivables, increase in trade, other payables and
provisions, employee equity-settled share-based payments expense
before separately disclosed items and investments and foreign
currency exchange loss/(gain).
(4) Cash flow from separately disclosed items relates to
transaction fees, along with restructuring and integration
costs.
(5) Interest and other borrowing costs includes interest paid,
interest received and fees in respect of borrowing facilities.
(6) The combination of acquisition and disposals of (GBP410m)
and cash acquired in business combinations (GBP15m) reconciles to
the statutory cash flow amounts for purchase of businesses net of
cash acquired (GBP395m).
(7) Other includes proceeds from the disposal of assets,
proceeds from the issue of shares on exercise of employee options,
dividends paid to non-controlling interest, lease interest paid and
other.
(8) Net amounts repaid on borrowings includes principle
repayments on USD First Lien Term Loan B and additional draw downs
and repayments on the GBP Revolving Credit Facilities.
(9) Net (debt)/cash comprises principal outstanding balance of
borrowings, accrued interest on those borrowings, derivatives held
for hedging debt instruments, cash and cash equivalents - available
for corporate use and cash and cash equivalents - customer
balances.
STATEMENT OF DIRECTORS RESPONSIBILITIES
For the half-year ended 30 June 2022
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007 ("Transparency Directive"), and the
Transparency Rules of the Central Bank of Ireland.
In preparing the condensed set of financial statements included
within the half-yearly financial report, the Directors are required
to:
-- prepare and present the condensed set of financial
information in accordance with IAS 34 Interim Financial Reporting
as adopted by the EU, the Transparency (Directive 2004/109/EC)
Regulations 2007 ("Transparency Directive"), and the Transparency
Rules of the Central Bank of Ireland; the Transparency Directive
and the Transparency Rules of the Central Bank of Ireland;
-- ensure the condensed set of financial information has adequate disclosures;
-- select and apply appropriate accounting policies; and
-- make accounting estimates that are reasonable in the circumstances.
The Directors are responsible for designing, implementing and
maintaining such internal controls as they determine is necessary
to enable the preparation of the condensed set of financial
statements that is free from material misstatement whether due to
fraud or error.
We confirm that to the best of our knowledge:
1) the condensed set of consolidated financial statements in the
half-yearly financial report of Flutter Entertainment plc for the
six months ended 30 June 2022 ("the interim financial information")
which comprises the Condensed Consolidated Interim Income
Statement, the Condensed Consolidated Interim Statement of Other
Comprehensive Income, the Condensed Consolidated Interim Statement
of Financial Position, the Condensed Consolidated Interim Statement
of Cash Flows, the Condensed Consolidated Interim Statement of
Changes in Equity and related explanatory notes, have been
presented and prepared in accordance with International Accounting
Standard 34, Interim Financial Reporting, as adopted by the EU, the
Transparency Directive and Transparency Rules of the Central Bank
of Ireland.
1) the interim financial information presented, as required by
the Transparency Directive, includes:
a) an indication of important events that have occurred during
the first six months of the financial year, and their impact on the
condensed set of financial statements;
b) a description of the principal risks and uncertainties for
the remaining six months of the financial year;
c) related parties' transactions that have taken place in the
first six months of the current financial year and that have
materially affected the financial position or the performance of
the enterprise during that period; and
d) any changes in the related parties' transactions described in
the last annual report that could have a material effect on the
financial position or performance of the enterprise in the first
six months of the current financial year.
On behalf of the board
Peter Jackson Jonathan Hill
Chief Executive Officer Chief Financial Officer
11 August 2022
Principal risks
The principal risks and uncertainties which are considered to
have a material impact on the Group's future performance and
strategic objectives are set out on the following pages. The
principal risks and uncertainties are consistent with those defined
in the Group's Annual Report & Accounts 2021, available at
www.flutter.com.
This is not intended to be an exhaustive and extensive analysis
of all risks which may affect the Group. Additional risks and
uncertainties currently deemed to be less material, or not
presently known to Management, may also have an adverse effect on
the performance and strategic objectives of the Group.
Changes to Legal, Regulatory and Licensing landscape
Why we need to manage How we manage and mitigate the risk
this
The complex and constantly
evolving regulatory * We have dedicated internal and external Legal,
environments in which Regulatory, Compliance and Tax teams covering all
we operate, in terms regions with responsibility for working with, and
of multiple jurisdictions, advising management on any upcoming regulatory
tax regimes and licensing changes, to set appropriate policies, processes and
obligations, can make controls to adapt and ensure compliance.
it commercially challenging
for the us to operate,
or impact our ability * We are improving our regulatory profile with an
to grow at pace. increased proportion of revenues coming from
regulated markets and a continuous focus on reducing
exposure to higher risk jurisdictions.
* For material markets, we invest significantly in
external counsel advice to conduct ongoing monitoring
and to guide and support strategic decision making
and planning associated with these markets.
* We invest continuously in the flexibility of our
in-house technology which is key for entering or
remaining in markets and allowing for adaptability
and flexibility of our products as market conditions
and obligations change.
* Flutter and its divisions have dedicated Corporate
Affairs teams, and hold memberships with relevant
associations and industry groups working with
regulators and governments to influence and drive
proportionate, transparent and reasonable regulation
and taxation in all markets.
Cyber Resilience and Protection of Data
Why we need to manage How we manage and mitigate the risk
this
We are dependent on
technology to support * We invest significantly in cyber security resources,
our products, business capabilities, and technologies, and work with a
activities and customer variety of external security specialists to ensure
operations. Cyber maturity security arrangements and systems are appropriate for
and capabilities across our evolving threat and continue to follow leading
our expanding Group practice.
vary and may increase
the number of potential
attack vectors or internal * The Group Chief Information Security Officer works
threats, which could with the Group and divisional information security
lead to financial loss, teams to devise and advance our strategy for cyber
data breaches, regulatory security, enhance our control assurance capabilities
action and reputational and governance.
damage.
* The Flutter cyber security team owns and reports on
the Group-wide cyber policy detailing our key cyber
topics and control standards, with periodic review
and approval, in addition to internal and external
annual assessment of security maturity.
* Flutter cyber assurance framework has been
established, with risk assessments ongoing to provide
assurance that security controls implemented protect
against key risk topics.
US growth execution and competition
Why we need to manage How we manage and mitigate the risk
this
The successful execution
of our commercial and * We continue to establish and maintain strong
growth strategy for the commercial relationships with our market access
US business across its partners and strategic media partners to secure
brands and partnerships access to new markets and maintain growth.
is critical to our long-term
ambitions.
* We continue to invest in people, product and brands
to acquire further market share and to maintain the
agility, scalability and leading market positions for
our products.
* In addition, we also have dedicated external advisers,
internal expertise and resources to support with the
monitoring and assessment of the US competitive
landscape to take appropriate actions.
* We continue to develop our in-house technology stack,
including the adoption of our proprietary global
betting platform for the provision of sports betting,
to continuously improve our offering and meet
evolving stakeholder needs.
* Our dedicated US Legal, Risk and Compliance teams
work closely with the business teams to monitor
ongoing compliance across multiple jurisdictions to
continuously improve our processes and controls to
ensure compliance with our federal and state
obligations.
International technology transformation
Why we need to manage How we manage and mitigate the risk
this
Challenges to transform,
expand and scale our * Full restructure by CIO and key new leadership roles
capabilities, given in International Technology function, recruiting
variances in legacy externally and leveraging internal talent from other
entities, which may brands and divisions.
lead to lower than desired
resilience, reliability
and product agility. * Full review of the International division's
technology risk profile with clear plans and
structures in place to improve, using a risk-based
approach.
* Our revised technology strategy has been defined to
support significant market growth and expansion.
* We continue to invest in resources, software and
hardware to address themed strategic initiatives,
which address stability, process, people and
technology.
* Focused support from external advisers, strategic
partners and experts to support with technology
transformation delivery.
Global talent acquisition
Why we need to manage How we manage and mitigate the risk
this
Acquisition of key talent,
senior management and * Our employee value proposition has been amplified for
leadership positions all our divisions to attract the right talent, with
across the Group, and the skills, capabilities and experience for Flutter.
their successful retention,
to satisfy the needs
of our growing organisation * Dedicated workstreams led by the Group CPO function
is critical to achieving to align processes and identify talent acquisition
our strategic objectives. partners to support internal teams to build a
pipeline and attract the best talent for the Group
going forward.
* Flutter launched its vision, purpose and values, in
alignment with divisional perspectives, supported by
playbooks, talkshops and toolkits. Surveys continue
to be conducted to listen and learn from employees
and understand colleague engagement levels Group
wide.
* We conduct extensive market research and benchmarking
to ensure that the Group maintains an attractive
employee value proposition.
* The Group and divisional CPOs address our talent
matters in a prioritised manner and build capability
to address gaps and facilitate talent mobility.
Compliance with existing legal, regulatory and licensing landscape
Why we need to manage How we manage and mitigate the risk
this
The interpretation and
ongoing compliance with * For the jurisdictions in which we hold a licence,
complex and multiple dedicated Divisional Compliance teams work closely
regulatory and legislative with the business teams to monitor ongoing compliance
requirements applicable and continuously enhance our processes and controls
to the Group's activities to ensure compliance with regulatory frameworks and
in the markets in which licence requirements.
it operates underpins
the sustainability and
reputation of our business. * We have a number of Group-led overarching policies
and compliance programmes to govern processes across
divisions and thereby ensure compliance with
applicable laws and regulations.
* Detailed policy and procedures across each division
ensure local regulatory requirements are documented,
monitored and reviewed periodically.
* Annual compliance training, including Anti-Bribery
and Corruption ("ABC"), Data Protection ("DP") and
Anti-Money Laundering ("AML"), is mandatory for all
staff, as well as regular, targeted training and
awareness sessions.
* Divisional and Group management provide periodic
legal and regulatory updates through established
governance forums at both divisional and Group level
Committees.
Global talent management and retention
Why we need to manage How we manage and mitigate the risk
this
The people who work within
Flutter are key to our * Flutter Workforce Engagement Committee established to
success. Insufficient ensure the Group has a culture that underpins its
management and retention vision, values and strategy, and to provide an
of key individuals may employee voice to the Board.
impact our ability to
deliver on our strategic
and operational objectives. * The Remuneration Committee and wider reward
programmes review the structures in place for our
people with the objective to incentivise, motivate
and retain talent to support the delivery of the
Group's long-term strategy.
* We communicate through different platforms to
underscore key career development opportunities,
highlight employee recognition programmes and bring
attention to strategic programmes such as DEI.
* Regular engagement surveys take place for all
colleagues to ensure we understand the values and
behaviours that are important to staff and the brands
they support.
* The Group and divisional CPO functions continue to
drive health and wellbeing initiatives as part of our
dynamic Future Ways of Working approach.
Third parties and key suppliers
Why we need to manage How we manage and mitigate the risk
this
Across our divisions
and Group, we place reliance * Strategic and critical suppliers are subject to
upon certain critical regular business and quality reviews to ensure
suppliers of technology, ongoing relationship and performance management.
marketing, sports content
and media which are fundamental
to our business and product * The Group Procurement and Third Party Assurance
offerings. The effective functions maintain a Risk Heatmap to monitor
management of critical strategic and critical suppliers and ensure
third party relationships, continuity of critical services.
performance and regulatory
expectations is key to
our strategic objectives. * As part of our procurement processes, we employ
dedicated resources supplemented by subject matter
expertise within risk, compliance, legal and
technology assurance to protect and enhance value,
demonstrate our high standards of corporate integrity,
and reinforce organisational resilience.
* Where possible, we limit reliance on a single
supplier to reduce potential single point of failure.
Safer gambling strategy
Why we need to manage How we manage and mitigate the risk
this
Safer Gambling underpins
every element of the * Group Safer Gambling strategy is embedded into our
Group's strategy, and businesses from how we identify and interact with
is a key pillar of our at-risk customers through to how we communicate to a
Positive Impact Plan. broad group of stakeholders and how we encourage
We want to demonstrate Safer Gambling tool usage.
consistency and global
alignment with our Safer
Gambling strategy to * We leverage and share policies, processes and
protect our customers practices across the Group to enhance the strategic
who are at risk of the approach to Safer Gambling and demonstrate our
potential negative effects serious commitment to ESG.
of gambling and to ensure
we grow our business
sustainably. * A leading range of tools are provided on all our
brand sites to support customers in managing their
spend and play, and the Group and its brands are
continually working to improve and enhance our tools
and site content to enable us to identify and
interact with at-risk customers.
* The Group works closely with leading external third
parties to facilitate internal teams to enhance our
understanding, and capabilities in relation to
identification of problem gambling through the use of
artificial intelligence.
* The Group continues to invest significantly in
improvements for tackling the problem through
donations to research, treatment, education
initiatives, as well as through driving collaboration
across the industry with other operators, charities
and regulatory bodies.
Technology resilience - availability and stability
Why we need to manage How we manage and mitigate the risk
this
We have a critical dependency
on our in-house technology, * We invest in our proprietary technology and resources
and on certain material to improve IT resilience, eliminate single points of
third parties, to maintain failure and drive better performance.
the stability and availability
of our customer-facing
products, as well as * We have established a standard scale to better
the ability to recover compare the IT disaster recovery resilience levels in
in a timely manner from each division and ensure adequate improvement plans
severe disruption with are developed and tracked to mitigate any material
minimal impact on our risks.
customers, data and
products.
* We have dedicated resources to develop, enhance and
test our disaster recovery capability for our key
products across all our brands of the Group.
* Key global metrics on critical systems and platforms
which are regularly monitored and reported on
identify any potential emerging issues on our brands
or customer-facing technologies.
* We have a defined formal incident management process
in place for identifying, escalating and resolving
issues and a post-incident process to ensure we
continuously improve our proprietary technology.
Consolidated Interim Income Statement
For the six months ended 30 June 2022
2022 2021
Unaudited Note GBPm GBPm
------------------------------------ ---- ------------------------------------ ------------------------------------
Continuing operations
Revenue 4 3,388.2 3,052.5
Cost of sales (1,352.6) (1,121.9)
------------------------------------ ---- ------------------------------------ ------------------------------------
Gross profit 2,035.6 1,930.6
Operating costs excluding
depreciation,
amortisation and gain on disposal (1,601.5) (1,368.2)
------------------------------------ ---- ------------------------------------ ------------------------------------
EBITDA(1) 434.1 562.4
Amortisation of acquisition-related
intangible assets (286.1) (275.5)
Depreciation and amortisation of
other assets (144.6) (125.0)
Gain on disposal 1.9 -
------------------------------------ ---- ------------------------------------ ------------------------------------
Operating profit 5.3 161.9
Financial income 6 0.7 -
Financial expense 6 (57.4) (84.9)
------------------------------------ ---- ------------------------------------ ------------------------------------
(Loss) / profit before tax (51.4) 77.0
Tax expense 7 (60.8) (163.0)
------------------------------------ ---- ------------------------------------ ------------------------------------
Loss for the period (112.2) (86.0)
------------------------------------ ---- ------------------------------------ ------------------------------------
Attributable to:
Equity holders of the Company (114.3) (88.6)
Non-controlling interest 2.1 2.6
------------------------------------ ---- ------------------------------------ ------------------------------------
(112.2) (86.0)
------------------------------------ ---- ------------------------------------ ------------------------------------
Earnings per share
Basic 8 (GBP0.647) (GBP0.504)
Diluted 8 (GBP0.647) (GBP0.504)
------------------------------------ ---- ------------------------------------ ------------------------------------
1 EBITDA is defined as profit for the period before
depreciation, amortisation, impairment, gain on disposal, financial
income, financial expense and tax expense / credit. It is
considered by the Directors to be a key measure of the Group's
financial performance.
Notes 1 to 20 on pages 36 to 58 form an integral part of these
condensed consolidated financial statements.
Consolidated Interim Statement of Other Comprehensive Income
For the six months ended 30 June 2022
2022 2021
Unaudited GBPm GBPm
---------------------------------------------- --------------------------------- --------------------------------
Loss for the period (112.2) (86.0)
----------------------------------------------- --------------------------------- --------------------------------
Other comprehensive income / (loss):
Items that are or may be reclassified
subsequently to profit or loss:
Effective portion of changes in fair
value of cash flow hedges 269.7 (156.0)
Fair value of cash flow hedges transferred
to the income statement (244.2) 164.7
Foreign exchange loss on net investment
hedges, net of tax(1) (41.0) (56.3)
Foreign exchange gain / (loss) on translation
of the net assets of foreign currency
denominated entities 222.4 (105.5)
Debt instruments at FVOCI (2.3) (0.6)
----------------------------------------------- --------------------------------- --------------------------------
Other comprehensive income / (loss) 204.6 (153.7)
----------------------------------------------- --------------------------------- --------------------------------
Total comprehensive income / (loss)
for the period 92.4 (239.7)
----------------------------------------------- --------------------------------- --------------------------------
Attributable to:
Equity holders of the Company 86.2 (242.5)
Non-controlling interest 6.2 2.8
----------------------------------------------- --------------------------------- --------------------------------
Total comprehensive income / (loss)
for the period 92.4 (239.7)
----------------------------------------------- --------------------------------- --------------------------------
1 Foreign exchange loss on net investment hedges is presented
including an income tax charge of GBP4.7m (six months ended 30 June
2021: GBP1.7m) which relates to the tax effect of the Group's
hedging activities.
Notes 1 to 20 on pages 36 to 58 form an integral part of these
condensed consolidated financial statements.
Consolidated Interim Statement of Financial Position
As at 30 June 2022
30 June 2022 31 December
2021
Unaudited Audited
Note GBPm GBPm
-------------------------------------- ---- ------------------------------------ ----------------------------------
Assets
Property, plant and equipment 478.8 451.4
Intangible assets 4,959.6 4,875.6
Goodwill 9 9,706.3 9,346.8
Deferred tax assets 7.5 8.2
Non-current tax receivable 32.9 21.5
Investments 11 6.0 5.5
Derivative financial assets 15 275.5 68.0
Financial assets - restricted cash 7.6 7.4
Other receivables 11 28.3 29.3
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total non-current assets 15,502.5 14,813.7
Trade and other receivables 11 250.5 203.9
Cash and cash equivalents - customer
balances 721.7 677.6
Cash and cash equivalents - available
for corporate use 781.2 951.7
Current investments at FVOCI -
customer
deposits 89.0 83.0
Current tax receivable 54.4 45.6
Total current assets 1,896.8 1,961.8
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total assets 17,399.3 16,775.5
-------------------------------------- ---- ------------------------------------ ----------------------------------
Equity
Issued share capital and share premium 480.7 477.6
Shares held by Employee Benefit
Trust 16 (4.0) (4.0)
Cash flow hedge reserve 16 48.2 22.7
Other reserves 151.7 (61.7)
Retained earnings 9,544.9 9,816.3
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total equity attributable to equity
holders of the Parent 10,221.5 10,250.9
Non-controlling interest 4.1 37.5
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total equity 10,225.6 10,288.4
Liabilities
Trade and other payables 12 1,317.0 1,096.4
Customer balances 775.1 721.0
Derivative financial liabilities 15 50.1 74.0
Provisions 13 71.9 71.3
Current tax payable 45.5 42.3
Lease liability 51.9 47.0
Borrowings 14 24.2 22.1
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total current liabilities 2,335.7 2,074.1
Trade and other payables 12 21.9 19.8
Derivative financial liabilities 15 16.5 55.1
Provisions 13 49.5 47.8
Deferred tax liabilities 518.3 498.0
Non-current tax payable 10.7 25.2
Lease liability 239.2 217.4
Borrowings 14 3,981.9 3,549.7
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total non-current liabilities 4,838.0 4,413.0
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total liabilities 7,173.7 6,487.1
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total equity and liabilities 17,399.3 16,775.5
-------------------------------------- ---- ------------------------------------ ----------------------------------
Notes 1 to 20 on pages 36 to 58 form an integral part of these
condensed consolidated financial statements.
On behalf of the Board
Peter Jackson Jonathan Hill
Chief Executive Officer Chief Financial Officer
11 August 2022
Consolidated Interim Statement of Cash Flows
For the six months ended 30 June 2022
2022 2021 Restated
(1)
Unaudited Note GBPm GBPm
------------------------------------------------ ----- --------------------------- ---------------------------
Cash flows from operating activities
Loss for the period (112.2) (86.0)
Tax expense 60.8 163.0
Financial income (0.7) -
Financial expense 57.4 84.9
Amortisation of acquisition related intangible
assets 286.1 275.5
Depreciation and amortisation of other
assets 144.6 125.0
Gain on disposal (1.9) -
Separately disclosed items included within
EBITDA 5 42.2 34.6
Employee equity-settled share-based payments
expense 16 50.1 35.5
Foreign currency exchange gain (16.1) (11.8)
------------------------------------------------ ----- --------------------------- ---------------------------
Cash from operations before changes in
working capital 510.3 620.7
Increase in trade and other receivables (38.6) (36.5)
(Decrease) / increase in trade, other payables
and provisions (36.6) 30.3
------------------------------------------------ ----- --------------------------- ---------------------------
Cash generated from operating activities 435.1 614.5
Taxes paid (131.7) (92.0)
------------------------------------------------ ----- --------------------------- ---------------------------
Cash generated from operations, net of
taxes paid 303.4 522.5
Transaction fees, restructuring and integration
costs paid 5 (39.3) (24.5)
Amounts paid in respect of Kentucky litigation - (71.1)
------------------------------------------------ ----- --------------------------- ---------------------------
Net cash from operating activities 264.1 426.9
------------------------------------------------ ----- --------------------------- ---------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (26.6) (33.4)
Purchase of intangible assets (20.8) (23.9)
Capitalised internal development expenditure (93.1) (66.4)
Purchase of businesses net of cash acquired 10 (395.2) (33.7)
Payment of contingent deferred consideration 10 (15.3) (19.0)
Proceeds from disposal of assets 3.8 -
Interest received 0.7 -
Movement in cash and cash equivalent -
customer balances 44.1 (33.6)
Other (0.3) (2.6)
------------------------------------------------ ----- --------------------------- ---------------------------
Net cash used in investing activities (502.7) (212.6)
------------------------------------------------ ----- --------------------------- ---------------------------
Cash flows from financing activities:
Proceeds from the issue of shares on exercise
of employee options 16 3.1 8.0
Dividend paid to non-controlling interest 16 (5.4) (5.1)
Payment of lease liabilities (20.9) (26.8)
Payment of lease interest (4.7) (3.9)
Lease incentive received - 4.8
Proceeds from borrowings 14 275.0 -
Repayment of borrowings 14 (96.6) (12.9)
Interest paid 14 (46.8) (70.0)
Financing fees paid in respect of borrowing
facilities (2.3) (4.6)
Ordinary shares of the Company acquired
by the Employee Benefit Trust 16 - (89.0)
------------------------------------------------ ----- --------------------------- ---------------------------
Net cash from / (used in) financing activities 101.4 (199.5)
------------------------------------------------ ----- --------------------------- ---------------------------
Net (decrease)/increase in cash and cash
equivalents (137.2) 14.8
Cash and cash equivalents at start of period 1,629.3 1,191.3
Foreign currency exchange gain/(loss) on
cash and cash equivalents 10.8 (18.1)
------------------------------------------------ ----- --------------------------- ---------------------------
Cash and cash equivalents at end of period 1,502.9 1,188.0
Presented on the Statement of Financial
Position within:
Cash and cash equivalents - customer balances 721.7 554.3
Cash and cash equivalents - available for
corporate use 781.2 623.1
Assets held for sale - 10.6
------------------------------------------------ ----- --------------------------- ---------------------------
1,502.9 1,188.0
------------------------------------------------ ----- --------------------------- ---------------------------
(1) See Note 2 for details of restatement.
Notes 1 to 20 on page 36 to 58 form an integral part of these
condensed consolidated financial statements.
Consolidated Interim Statement of Changes in Equity
For the six months ended 30 June 2022
Total
Issued Shares equity
Number share held by Foreign attributable
of ordinary capital Employee Cash Fair exchange Share-based to shareholders
shares and share Benefit flow hedge value translation Other payment Retained of the Non-controlling Total
in issue premium Trust reserve reserve(1) reserve(1) reserves(1) reserve(1) earnings Company interest equity
Unaudited m GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
Balance at 1
January
2022 175.6 477.6 (4.0) 22.7 (1.7) (194.2) 2.5 131.7 9,816.3 10,250.9 37.5 10,288.4
Total comprehensive income / (loss)
for the year
Loss for the
period - - - - - - - - (114.3) (114.3) 2.1 (112.2)
Foreign exchange
translation
including net
investment
hedges - - - - - 182.0 - - - 182.0 4.1 186.1
Effective
portion of
changes in fair
value
of cash flow
hedges - - - 269.7 - - - - - 269.7 - 269.7
Fair value of
cash flow
hedges
transferred to
the income
statement - - - (244.2) - - - - - (244.2) - (244.2)
Financial assets
at
FVOCI - - - - (2.3) - - - - (2.3) - (2.3)
Tax on foreign
exchange
hedging - - - - - (4.7) - - - (4.7) - (4.7)
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
Total
comprehensive
income / (loss)
for
the period - - - 25.5 (2.3) 177.3 - - (114.3) 86.2 6.2 92.4
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
Transactions with owners of the Company,
recognised directly in equity
Shares issued on
exercise
of employee
share options
(Note 16) 0.2 3.1 - - - - - - - 3.1 - 3.1
Liability
recognised
on put option
(Note
12) - - - - - - - - (169.8) (169.8) (34.2) (204.0)
Equity-settled
transactions
- expense
recorded in
the income
statement - - - - - - - 50.1 - 50.1 - 50.1
Tax on
share-based
payments - - - - - - - - 1.0 1.0 - 1.0
Exercise of
share options - - - - - - - (11.7) 11.7 - - -
Dividend paid to
non-controlling
interest (Note
16) - - - - - - - - - - (5.4) (5.4)
Total
contributions
by and
distributions
to owners of
the Company 0.2 3.1 - - - - - 38.4 (157.1) (115.6) (39.6) (155.2)
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
Balance at 30
June
2022 175.8 480.7 (4.0) 48.2 (4.0) (16.9) 2.5 170.1 9,544.9 10,221.5 4.1 10,225.6
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
(1) Included in other reserves in the Statement of Financial
Position.
Notes 1 to 20 on pages 36 to 58 form an integral part of these
condensed consolidated financial statements.
Consolidated Interim Statement of Changes in Equity
For the six months ended 30 June 2021
Total
Issued Shares equity
Number share held Cash Foreign attributable
of ordinary capital by Employee flow Fair exchange Share-based to shareholders
shares and share Merger Treasury Benefit hedge value translation Other payment Retained of the Non-controlling Total
in issue premium reserve shares Trust reserve reserve reserve reserves reserve earnings Company interest equity
Unaudited m GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ------------------ --------------------- -------------------------- --------------------- ---------------------
Balance at 1
January
2021 177.0 2,481.7 7,982.9 (40.7) (5.8) (10.3) (0.4) 49.6 2.3 100.8 405.0 10,965.1 30.8 10,995.9
Total comprehensive income
/ (loss) for the year
Loss for the
period - - - - - - - - - - (88.6) (88.6) 2.6 (86.0)
Foreign exchange
translation
including net
investment
hedges - - - - - - - (160.3) - - - (160.3) 0.2 (160.1)
Tax on foreign
exchange
hedging - - - - - - - (1.7) - - - (1.7) - (1.7)
Effective
portion of
changes in fair
value
of cash flow
hedges - - - - - (156.0) - - - - - (156.0) - (156.0)
Fair value of
cash
flow hedges
transferred
to the income
statement - - - - - 164.7 - - - - - 164.7 - 164.7
Debt Instruments
at
FVOCI - - - - - - (0.6) - - - - (0.6) - (0.6)
---------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ------------------ --------------------- -------------------------- --------------------- ---------------------
Total
comprehensive
income / (loss)
for
the period - - - - - 8.7 (0.6) (162.0) - - (88.6) (242.5) 2.8 (239.7)
---------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ------------------ --------------------- -------------------------- --------------------- ---------------------
Transactions with owners of the Company,
recognised directly in equity
Shares issued on
exercise
of employee
share options
(Note 16) 0.3 8.0 - - - - - - - - - 8.0 - 8.0
Business
combinations
(Note 10) - - - - - - - - - - - - 16.2 16.2
Ordinary shares
of
the Company
acquired
by the Employee
Benefit
Trust (Note 10) - - - - (89.0) - - - - - - (89.0) - (89.0)
Equity-settled
transactions
- expense
recorded
in income
statement - - - - - - - - - 36.6 - 36.6 - 36.6
Tax on
share-based
payments - - - - - - - - - - 1.1 1.1 - 1.1
Transfer to
retained
earnings on
exercise
of share
options and
vesting of
share awards - - - - - - - - - (16.4) 16.4 - - -
Dividend paid to
non-controlling
interest - - - - - - - - - - - - (5.1) (5.1)
Total
contributions
by and
distributions
to owners of
the Company 0.3 8.0 - - (89.0) - - - - 20.2 17.5 (43.3) 11.1 (32.2)
---------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ------------------ --------------------- -------------------------- --------------------- ---------------------
Balance at 30
June
2021 177.3 2,489.7 7,982.9 (40.7) (94.8) (1.6) (1.0) (112.4) 2.3 121.0 333.9 10,679.3 44.7 10,724.0
---------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ------------------ --------------------- -------------------------- --------------------- ---------------------
Notes 1 to 20 on pages 36 to 58 form an integral part of these
condensed consolidated financial statements.
Notes to the Condensed Consolidated Interim Financial
Statements
1. General information
Flutter Entertainment plc (the "Company") is a company
incorporated in the Republic of Ireland. The Condensed Consolidated
Financial Statements of the Company for the six months ended 30
June 2022 comprise the Company and its subsidiaries (together
referred to as the "Group"). These Condensed Consolidated Interim
Financial Statements are unaudited but have been reviewed by KPMG,
the Group's auditor, whose report is set out on the last page of
this document.
The financial information presented herein does not comprise
full statutory financial statements and therefore does not include
all of the information required for full annual financial
statements. Full statutory financial statements for the year ended
31 December 2021, prepared in accordance with International
Financial Reporting Standards ("IFRSs") as adopted by the EU
together with an unqualified audit report thereon under Section 391
of the Irish Companies Act 2014, will be annexed to the annual
return and filed with the Registrar of Companies in Ireland.
These Condensed Consolidated Interim Financial Statements were
approved for issue by the Board of Directors of Flutter
Entertainment plc on 11 August 2022.
2. Basis of preparation and accounting policies
The Condensed Consolidated Interim Financial Statements have
been prepared in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007, the Transparency Rules of the
Central Bank of Ireland and with IAS 34 'Interim Financial
Reporting' as adopted by the EU.
The Condensed Consolidated Interim Financial Statements are
prepared on the historical cost basis except for derivative
financial instruments (which include betting transactions), equity
securities, certain financial assets which have been designated as
FVOCI, contingent deferred consideration and share-based payments,
all of which are stated at fair value (grant date fair value in the
case of equity-settled share-based payments). The Condensed
Consolidated Interim Financial Statements are presented in pounds
sterling and are rounded to the nearest GBP0.1 million.
Going concern
The Group reported EBITDA of GBP434.1m and a loss after tax of
GBP112.2m for the six months ended 30 June 2022. This includes
GBP430.7m of depreciation and amortisation charged against profit
in the period. The net cash generated from operating activities
during the period ended 30 June 2022 was GBP264.1m. The balance
sheet at 30 June 2022 reported a net current liability position of
GBP438.9m. During the six months ended 30 June 2022, the Group is
in compliance with all covenants related to its lending
arrangements.
The Directors have considered the available financial resources
which include, at 30 June 2022, GBP781.2m of cash and cash
equivalents and a GBP482.0m Revolving Credit Facility with undrawn
capacity of GBP277.0m. Whilst there are certain loan repayments due
within the next 12 months of GBP24.2m, the Group's lending
facilities primarily fall due in 2026 as set out in more detail in
Note 14. As a consequence, the Directors believe that the Group is
well placed to manage its business risks successfully. See
'Principal Risks and Uncertainties' in this report for more
detail.
The Group's forecasts to the next 12 months indicate that it
will continue to have significant financial resources, continue to
settle its debts as they fall due and operate well within its
banking covenants as outlined in Note 14 for at least a period of
12 months from the date of the approval of these consolidated
financial statements. 12 months from the date of the approval of
these consolidated financial statements was selected as the going
concern period as it represents the period in which the Group has
prepared detailed forecasts for a proportion of the period and it
also reduces the degree of judgement and estimation uncertainty
involved in both the forecasts and the downside scenarios.
When preparing the forecasts, the Group has included the cash
outflows and related financing associated with the Sisal
acquisition as detailed in Note 20. Various downside scenarios over
and above those already included in the base case model on the
potential impact of further reductions to cash flows due to reduced
customer discretionary income, changes in the legal, regulatory and
licencing landscape and the Group's cyber and IT resilience have
been considered in respect of these forecasts. The impact of these
items involves significant judgement and estimation
uncertainty.
In the event that it were necessary to draw down additional debt
funding, the Directors have a reasonable expectation that this
could be achieved within the confines of its existing debt
facilities and financial covenant requirements.
Accounting policies
The financial information contained in these Condensed
Consolidated Interim Financial Statements has been prepared in
accordance with the accounting policies set out in the Group's last
annual financial statements in respect of the year ended 31
December 2021 except as set out below.
2. Basis of preparation and accounting policies (continued)
In April 2022, the IFRS Interpretations Committee issued an
agenda decision clarifying the definition of cash and cash
equivalents in the statement of cash flows stating that cash
amounts that are only restricted by an obligation to a third party
meet the definition of cash under IAS 7 Statement of Cash Flows.
The title of the agenda decision is Demand Deposits with
Restrictions on Use arising from a Contract with a Third Party (IAS
7 Statement of Cash Flow).
Prior to this clarification, the Group had not treated cash
amounts that were restricted due to, for example gaming regulatory
requirements to hold cash to match customer liabilities, as cash
and cash equivalents in the statement of cash flows and had instead
classified these balances as financial assets - restricted
cash.
The Group considers these cash balances to not be available to
the Group and will disaggregate these cash balances from the cash
balances that are available to the Group, for general corporate
purposes in accordance with IAS 1 paragraph 55.
In accordance with this clarification, the Group has made a
voluntary change in accounting policy and has presented cash and
cash equivalents for the purpose of its cash flow including these
restricted balances and has restated the prior period accordingly
as follows.
31 December 31 December 31 December 30 June 30 June 30 June 31 December 31 December 31 December
2021 2021 2021 2021 2021 2021 2020 2020 2020
Originally Reclassification Restated Originally Reclassification Restated Originally Reclassification Restated
reported reported reported
------------ ------------- ---------------- ------------- ------------- ---------------- ------------- ------------- ---------------- -------------
Financial
asset -
restricted
cash 677.6 (677.6) - 554.3 (554.3) - 587.9 (587.9) -
------------ ------------- ---------------- ------------- ------------- ---------------- ------------- ------------- ---------------- -------------
Cash and
cash
equivalents
- customer
balances - 677.6 677.6 - 554.3 554.3 - 587.9 587.9
Cash and
cash
equivalents
- available
for
corporate
use 951.7 - 951.7 623.1 - 623.1 603.4 - 603.4
Assets held
for sale - - - 10.6 - 10.6 - - -
------------ ------------- ---------------- ------------- ------------- ---------------- ------------- ------------- ---------------- -------------
Cash and
cash
equivalents 951.7 677.6 1,629.3 633.7 554.3 1,188.0 603.4 587.9 1,191.3
------------ ------------- ---------------- ------------- ------------- ---------------- ------------- ------------- ---------------- -------------
The change in the classification for the purpose of statement of
cash flows did not impact the Statement of Financial Position other
than to rename the captions.
3. Judgements and estimates
The preparation of interim financial statements in conformity
with IFRS requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an on-going
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
Judgements
In preparing these Condensed Consolidated Financial Statements,
the significant judgements in applying the Group's accounting
policies and the key sources of estimation uncertainty were
consistent with those that applied to the Consolidated Financial
Statements as at and for the year ended 31 December 2021 and are
detailed below:
Valuation of tax assets and liabilities
Whilst we maintain good communication with key tax authorities,
given the global nature of our business and the complex
international tax landscape, there remain areas of tax uncertainty
and therefore there is a level of uncertainty with regards to the
measurement of our tax assets and liabilities. Uncertainties have
been measured using the best estimate of the likely outcome. This
assessment relies on estimates and assumptions and may involve a
series of judgements about future events.
3. Judgements and estimates (continued)
Where uncertain tax treatments exist, the Group assesses whether
it is probable that a tax authority will accept the uncertain tax
treatment applied or proposed to be applied in its tax filings. The
Group assesses each uncertain tax treatment as to whether it should
be considered independently or whether some tax treatments should
be considered collectively based on what the Group believes
provides a better estimate of the resolution of the uncertainty.
The Group considers whether it is probable that the relevant
authority will accept each uncertain tax treatment, or group of
uncertain tax treatments, assuming that the taxation authority will
have full knowledge of all relevant information when doing so. The
key judgements include the valuation of tax assets and
liabilities
New information may become available that causes the Group to
change its judgement regarding the adequacy of existing tax assets
and liabilities; such changes to tax assets and liabilities will
impact the income tax in the period in which such a determination
is made. Management uses in-house tax experts, professional firms
and previous experience when assessing tax risks and the Group
believes that the position for all tax assets and liabilities at 30
June 2022 is adequate based on its assessment of the range of
factors outlined above but given the inherent uncertainty, it is
possible that resolution of tax uncertainties may differ from the
amounts provided for.
FOX Corporation
As announced on 2 October 2019, in order to achieve economic
alignment of Flutter's and TSG's strategic third party
relationships across their respective US businesses, concurrent
with the Combination with TSG, the Group entered into an
arrangement with FOX, pursuant to which FSG Services, a
wholly-owned subsidiary of FOX, had an option to acquire an 18.6%
equity interest in FanDuel Group at its fair market value in July
2021. Under the terms of the agreement an arbitration mechanism was
put in place in the event of a disagreement between the two parties
relating to the option.
In April 2021, FOX filed an arbitration claim against the Group
with respect to its option to acquire an 18.6% equity interest in
FanDuel seeking the same price that the Group paid for the
acquisition of 37.2% of FanDuel from Fastball Holdings LLC in
December 2020, based on an $11.2 billion valuation for FanDuel. In
the Group's opinion this valuation would be materially favourable
for FOX compared to the fair market valuation as of July 2021.
Arbitration proceedings remain ongoing and a ruling in the
arbitration is expected in late Quarter 3, 2022 or Quarter 4
2022.
The fair market value of the call option as at 30 June 2022 is
required to reflect the value that a market participant would have
paid for such an option, with the option exercise price, reflecting
the conditions that would have existed at 30 June 2022. Given the
market assessment of comparable US assets, it is management's view
that there has been no increase in the market value of FanDuel
since the valuation date of the option, and therefore it is
determined that the value of the option is out of the money for FOX
and the derivative has close to nominal value at 30 June 2022.
Estimates
Determining the fair value of some assets and liabilities
requires estimation of the effects of uncertain future events on
those assets and liabilities at the end of the reporting period.
The following discussion sets forth key sources of estimation
uncertainty at the end of the reporting period that management
believes have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year.
Measurement of the recoverable amounts of cash generating units
containing goodwill, indefinite life licences and intangible
assets
The Group reviews the carrying value of goodwill for impairment
annually (or more frequently if there are indications that the
value of goodwill may be impaired) by comparing the carrying values
of these cash generating units with their recoverable amounts
(being the higher of value in use and fair value less costs to
sell). The impairment review is performed on a "value-in-use"
basis, which requires estimation of future net operating cash
flows, the time period over which they will occur, an appropriate
discount rate and an appropriate growth rate. Certain of these
estimates and assumptions are subjective in nature.
The Group has reviewed the performance in the first half of
2022, in the UK&I Online, Retail, International, Australia and
US CGUs and based on this and in conjunction with the headroom that
existed at 31 December 2021, is satisfied that no impairment has
arisen during the six months ended 30 June 2022.
4. Operating segments
Reportable business segment information
The Group's four reportable segments are:
-- UK & Ireland;
-- Australia;
-- International; and
-- US.
UK & Ireland
The UK & Ireland ("UK&I") segment is comprised of the
operations of Sky Betting & Gaming, Paddy Power, Betfair and
from January 2022, Tombola (see Note 10). Revenues are earned from
sports betting (sportsbook and the exchange sports betting product)
and gaming services (games, casino, bingo and poker). Until August
2021, this segment also included the results of Oddschecker (odds
comparison website) at which point the business was disposed.
Services are provided primarily via the internet but also through
licensed bookmaking shop estates.
Australia
The Australia segment is comprised of the operations of the
Sportsbet brand and earns its revenues from sports betting services
provided to Australian customers using primarily the internet.
International
The International segment is comprised of PokerStars, Betfair
International, Adjarabet and Junglee Games. The International
segment earns most of its revenues from poker, casino, rummy and
sports betting through various brands and mainly via the
internet.
US
The US segment is comprised of the FanDuel, TVG, FOX Bet,
Stardust and PokerStars brands' and earns its revenues from sports
betting, daily fantasy sports and gaming services (casino and
poker) provided to customers, using primarily the internet, with a
proportion of US sports betting services also provided through a
small number of retail outlets.
Corporate
Corporate administrative costs (Board, Finance, Legal, Internal
Audit, HR, Property and other central functions) cannot be readily
allocated to individual operating segments and are not used by the
CODM for making operating and resource allocation decisions. These
are shown in the reconciliation of reportable segments to Group
totals.
The accounting policies in respect of operating segments
reporting are the same as those described in the basis of
preparation and summary of significant accounting policies set out
in the Company's last annual financial statements in respect of the
year ended 31 December 2021.
The Group does not allocate income tax expense or financing
income and expenses to reportable segments. Treasury management is
centralised for the UK&I, Australia, International and US
segments.
Assets and liabilities information is reported internally in
total and not by reportable segment and, accordingly, no
information is provided in this note on assets and liabilities
split by reportable segment.
Seasonality
The Group's sportsbook revenue is driven by a combination of the
timing of sporting and other events and the Group's results derived
from those events. The Covid pandemic caused some postponement and
cancellation of sporting events across the world and skewed results
for the comparative period in particular. Gaming and other revenue
is not as dependent on the sporting calendar.
4. Operating segments (continued)
Reportable business segment information for the six months ended
30 June 2022:
UK&I Australia International US Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ----------------- ----------------- ---------------------- ------------ ------------------ ------------------
Revenue from
external
customers 1,091.8 612.1 633.6 1,050.7 - 3,388.2
Cost of sales (335.0) (289.7) (184.0) (543.9) - (1,352.6)
-------------------- ----------------- ----------------- ---------------------- ------------ ------------------ ------------------
Gross profit 756.8 322.4 449.6 506.8 - 2,035.6
Operating costs
excluding
depreciation and
amortisation
before separately
disclosed
items (436.3) (103.1) (327.1) (638.6) (54.2) (1,559.3)
-------------------- ----------------- ----------------- ---------------------- ------------ ------------------ ------------------
Adjusted EBITDA(1)
before separately
disclosed
items 320.5 219.3 122.5 (131.8) (54.2) 476.3
Depreciation and
amortisation
before separately
disclosed
items (63.4) (13.7) (32.8) (31.8) (2.9) (144.6)
Profit on disposal
before
separately
disclosed
items 0.2 - - 1.2 0.5 1.9
-------------------- ----------------- ----------------- ---------------------- ------------ ------------------ ------------------
Reportable segment
profit / (loss)
before
separately
disclosed
items 257.3 205.6 89.7 (162.4) (56.6) 333.6
Amortisation of
acquisition-related
intangible assets
(Note
5) (135.7) (11.4) (130.1) (8.9) - (286.1)
Reportable segment
profit / (loss)
after
amortisation of
acquisition-related
intangibles 121.6 194.2 (40.4) (171.3) (56.6) 47.5
Transaction fees and
associated costs(2) (9.9)
Restructuring and
integration
costs(2) (32.3)
------------------
Operating profit 5.3
-------------------- ----------------- ----------------- ---------------------- ------------ ------------------ ------------------
Reportable business segment information for the six months ended
30 June 2021:
UK&I Australia International US Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- --------------- ------------------ ------------------------- --------- -------------------- ---------------
Revenue from
external
customers 1,135.2 585.4 679.9 652.0 - 3,052.5
Cost of sales before
separately
disclosed
items (341.8) (275.2) (199.3) (292.7) - (1,109.0)
-------------------- --------------- ------------------ ------------------------- --------- -------------------- ---------------
Gross profit before
separately
disclosed
items 793.4 310.2 480.6 359.3 - 1,943.5
Operating costs
excluding
depreciation and
amortisation
before separately
disclosed
items (434.3) (109.3) (301.9) (445.8) (55.2) (1,346.5)
-------------------- --------------- ------------------ ------------------------- --------- -------------------- ---------------
Adjusted EBITDA(1) 359.1 200.9 178.7 (86.5) (55.2) 597.0
Depreciation and
amortisation
before separately
disclosed
items (62.6) (13.1) (25.1) (21.9) (2.3) (125.0)
-------------------- --------------- ------------------ ------------------------- --------- -------------------- ---------------
Reportable segment
profit / (loss)
before
separately
disclosed
items 296.5 187.8 153.6 (108.4) (57.5) 472.0
Greece Tax Expense - - (12.9) - - (12.9)
Amortisation of
acquisition-related
intangible assets
(Note
5) (112.8) (10.6) (138.8) (13.3) - (275.5)
Reportable segment
profit / (loss)
after
amortisation of
acquisition-related
intangibles and
Greece
tax expense 183.7 177.2 1.9 (121.7) (57.5) 183.6
Restructuring and
integration
costs(2) (21.7)
---------------
Operating profit 161.9
-------------------- --------------- ------------------ ------------------------- --------- -------------------- ---------------
1 Adjusted EBITDA which is a non-GAAP measure in the above
segment note is defined as profit for the six months before
separately disclosed items, depreciation, amortisation, impairment,
gain on disposal, financial income, financial expense and tax
expense / credit. It is considered by the Directors to be a key
measure of the Group's financial performance.
2 The Group does not allocate transaction fees and restructuring
and integration costs to reportable segments.
4. Operating segments (continued)
Reconciliation of reportable segment information to Group
totals:
2022 2021
-------------- ------------------------------------------------------------ ---------------------------------------------------------
Before Before
separately Separately separately Separately
disclosed disclosed disclosed disclosed
items items Total items items Total
GBPm GBPm GBPm GBPm GBPm GBPm
Gross profit 2,035.6 - 2,035.6 1,943.5 (12.9) 1,930.6
Operating
costs
excluding
depreciation,
amortisation
and gain on
disposal (1,559.3) (42.2) (1,601.5) (1,346.5) (21.7) (1,368.2)
-------------- ------------------- ------------------ ------------------- ------------------ ------------------ -----------------
EBITDA(1) 476.3 (42.2) 434.1 597.0 (34.6) 562.4
Depreciation
and
amortisation (144.6) (286.1) (430.7) (125.0) (275.5) (400.5)
Gain on
disposal 1.9 - 1.9 - - -
Operating
profit 333.6 (328.3) 5.3 472.0 (310.1) 161.9
Net finance
costs (56.7) - (56.7) (74.2) (10.7) (84.9)
Profit /
(loss)
before tax 276.9 (328.3) (51.4) 397.8 (320.8) 77.0
Tax expense (100.3) 39.5 (60.8) (91.4) (71.6) (163.0)
-------------- ------------------- ------------------ ------------------- ------------------ ------------------ -----------------
Profit /
(loss)
for the
period 176.6 (288.8) (112.2) 306.4 (392.4) (86.0)
-------------- ------------------- ------------------ ------------------- ------------------ ------------------ -----------------
1 EBITDA is defined as profit for the six months before
depreciation, amortisation, impairment, gain on disposal, financial
income, financial expense and tax expense / credit. It is
considered by the Directors to be a key measure of the Group's
financial performance.
See Note 5 for further detail on separately disclosed items.
Disaggregation of revenue under IFRS 15:
Group revenue disaggregated by product line for the six months
ended 30 June 2022:
UK&I Australia International US Total
GBPm GBPm GBPm GBPm GBPm
----------- ----------------------- ------------------------ ---------------------- ---------------------- ---------------------
Sports
revenue(1) 629.7 612.1 106.4 770.1 2,118.3
Gaming
revenue(2) 462.1 - 527.2 280.6 1,269.9
----------- ----------------------- ------------------------ ---------------------- ---------------------- ---------------------
Total Group
revenue 1,091.8 612.1 633.6 1,050.7 3,388.2
----------- ----------------------- ------------------------ ---------------------- ---------------------- ---------------------
Group revenue disaggregated by product line for the six months
ended 30 June 2021(:)
UK&I Australia International US Total
GBPm GBPm GBPm GBPm GBPm
----------- ---------------------- ------------------------ ---------------------- ---------------------- ---------------------
Sports
revenue(1) 737.9 585.4 118.1 452.5 1,893.9
Gaming
revenue(2) 397.3 - 561.8 199.5 1,158.6
----------- ---------------------- ------------------------ ---------------------- ---------------------- ---------------------
Total Group
revenue 1,135.2 585.4 679.9 652.0 3,052.5
----------- ---------------------- ------------------------ ---------------------- ---------------------- ---------------------
1 Sports revenue comprises sportsbook, exchange sports betting,
daily fantasy sports and pari-mutuel betting.
2 Gaming revenue includes Games, Poker, Casino, Rummy and
Bingo.
Geographical information
Group revenue disaggregated by geographical market for the six
months ended 30 June 2022:
UK&I Australia International US Total
GBPm GBPm GBPm GBPm GBPm
------------ ------------------------- ---------------------------- ---------------------------- ---------------------- --------------------
US - - - 1,054.4 1,054.4
UK 952.5 - 31.5 - 984.0
Australia - 612.1 - - 612.1
Rest of
World(1) 1.6 - 318.5 (3.7) 316.4
EU (excl.
Ireland)(2) 22.0 - 281.1 - 303.1
Ireland 115.7 - 2.5 - 118.2
------------ ------------------------- ---------------------------- ---------------------------- ---------------------- --------------------
Total Group
revenue 1,091.8 612.1 633.6 1,050.7 3,388.2
------------ ------------------------- ---------------------------- ---------------------------- ---------------------- --------------------
1 The Rest of World category includes multiple countries, that
individually represent less than 2% of total Group revenue.
2 The EU (excl. Ireland) category includes multiple countries,
that individually represent less than 4% of total Group
revenue.
4. Operating segments (continued)
Group revenue disaggregated by geographical market for the six
months ended 30 June 2021:
UK&I Australia International US Total
GBPm GBPm GBPm GBPm GBPm
------------ ------------------------- ---------------------------- ----------------------------- ---------------------- -----------------------
US - - - 652.0 652.0
UK 1,037.2 - 42.3 - 1,079.5
Australia - 585.4 - - 585.4
Rest of
World(1) 7.1 - 265.3 - 272.4
EU (excl.
Ireland)(2) - - 368.4 - 368.4
Ireland 90.9 - 3.9 - 94.8
------------ ------------------------- ---------------------------- ----------------------------- ---------------------- -----------------------
Total Group
revenue 1,135.2 585.4 679.9 652.0 3,052.5
------------ ------------------------- ---------------------------- ----------------------------- ---------------------- -----------------------
1 The Rest of World category includes multiple countries that
individually represent less than 2% of total Group revenue.
2 The EU (excl. Ireland) category includes multiple countries
that individually represent less than 4% of total Group
revenue.
Revenues are attributable to geographical location on the basis
of the customers location.
5. Separately disclosed items
The separately disclosed items noted in Note 4 above are
comprised as follows:
2022 2021
GBPm GBPm
-------------------------------------------- ----------------------------------- -----------------------------------
Greece tax expense - (12.9)
Transaction fees and associated costs (9.9) -
Restructuring and integration costs (32.3) (21.7)
EBITDA (42.2) (34.6)
Amortisation of acquisition-related
intangible
assets (286.1) (275.5)
Operating loss impact of separately
disclosed
items (328.3) (310.1)
Financial expense - (10.7)
-------------------------------------------- ----------------------------------- -----------------------------------
Loss before tax impact of separately
disclosed items (328.3) (320.8)
-------------------------------------------- ----------------------------------- -----------------------------------
Tax credit / (charge) on separately
disclosed
items 39.5 (71.6)
-------------------------------------------- ----------------------------------- -----------------------------------
Total separately disclosed items (288.8) (392.4)
-------------------------------------------- ----------------------------------- -----------------------------------
Attributable to:
Equity holders of the Company (286.0) (389.5)
Non-controlling interest (2.8) (2.9)
-------------------------------------------- ----------------------------------- -----------------------------------
(288.8) (392.4)
-------------------------------------------- ----------------------------------- -----------------------------------
Amortisation of acquisition-related intangible assets
Amortisation of GBP286.1m has been incurred in the period (six
months ended 30 June 2021: GBP275.5m) as a result of intangible
assets separately identified under IFRS 3 as a result of the merger
with Betfair in 2016, the acquisitions of FanDuel Limited in 2018
and Adjarabet in 2019, the Combination with TSG in 2020, the
acquisitions of Junglee and Singular in 2021 and the acquisition of
Tombola in 2022.
Transaction fees and associated costs
During the six months ended 30 June 2022, GBP9.9m of costs were
incurred relating to various acquisitions and the FOX option (see
Note 3). The costs were included as separately disclosed items as
they have not been incurred in the ordinary course of business.
Restructuring and integration costs
During the six months ended 30 June 2022 costs of GBP32.3m (six
months ended 30 June 2021: GBP21.7m) relating to incremental,
one-off costs, were incurred by the Group as a result of
significant restructuring and integration initiatives following the
Combination with TSG.
5. Separately disclosed items (continued)
Greece tax expense
In 2019, the Group was issued with a Greek tax assessment for
financial years 2012, 2013 and 2014, relating to paddypower.com's
Greek interim licence. This assessment concluded that the Group is
liable to pay EUR15.0m in taxes including penalties and interest.
This is substantially higher (by multiples) than the total
cumulative revenues ever generated by paddypower.com in Greece.
Pending the outcome of its appeal, in 2019 the Group paid the total
Greek tax assessment (including the penalties and interest) of
EUR15.0m.
In June 2021, the Athens Administrative Court of Appeal
dismissed the Group's judicial recourses. While the Group has
further appealed to the Greek Supreme Administrative Court, based
on the nature of the decision received and the points of law which
can be appealed, and in line with legal and tax advice it has
received, it decided to recognise the amount of the Greek
assessment, of EUR15.0m (GBP12.9m) as an expense in profit or loss
during the six months ended 30 June 2021.
The Group considered these cost as one-off costs and not as part
of ongoing operations in the period.
Financial expense
During the six months ended 30 June 2022 there were no foreign
exchange losses on financial instruments that required separate
disclosure, (six months ended 30 June 2021: GBP10.7m)
Tax credit on separately disclosed items
The tax credit of GBP39.5m has arisen primarily in resp ect of a
deferred tax credit of GBP36.2m in respect of the amortisation of
acquisition-related intangibles and GBP3.3m in respect of the tax
effect of other separately identifiable items.
6. Financial income and expense
Recognised in profit or loss
Six months Six months
ended ended
30 June 2022 30 June 2021
GBPm GBPm
----------------------------------------------- --------------------------------- ---------------------------------
Financial income:
On financial assets at amortised cost:
Interest income 0.7 -
----------------------------------------------- --------------------------------- ---------------------------------
Total 0.7 -
----------------------------------------------- --------------------------------- ---------------------------------
Financial expense:
Foreign exchange loss on financing instruments
associated with financing activities (Note
5) 0.2 10.7
On financial liabilities at amortised
cost:
Interest on borrowings, bank guarantees
and bank facilities 48.5 62.4
Interest on lease liabilities 4.7 3.9
Other interest 4.0 7.9
----------------------------------------------- --------------------------------- ---------------------------------
Total 57.4 84.9
----------------------------------------------- --------------------------------- ---------------------------------
Recognised in other comprehensive income / (loss):
2022 2021
GBPm GBPm
---------------------------------------------- ---------------------------------- ----------------------------------
Recognised in other comprehensive income
/ (loss):
Effective portion of changes in fair value
of cash flow hedges 269.7 (156.0)
Fair value of cash flow hedges transferred
to income statement (244.2) 164.7
---------------------------------------------- ---------------------------------- ----------------------------------
Net change in fair value of cash flow hedge
reserve 25.5 8.7
Debt instruments at FVOCI (2.3) (0.6)
Foreign exchange loss on net investment
hedges (41.0) (56.3)
Foreign exchange gain / (loss) on translation
of the net assets of foreign currency
denominated
entities 222.4 (105.5)
---------------------------------------------- ---------------------------------- ----------------------------------
Total 204.6 (153.7)
---------------------------------------------- ---------------------------------- ----------------------------------
A charge of GBP1.0m was recorded in the income statement in
respect of ineffective cash flow hedges in the six months ended 30
June 2022 (2021: charge of GBP3.4m).
7. Tax expense
Tax is accrued for the interim reporting period using
Management's best estimate of the weighted average tax rate that is
expected to be applicable to estimated total annual earnings which
may be adjusted for any significant non-recurring events. This
expected annual effective tax rate is applied to the taxable income
of the interim period.
The Group's adjusted effective tax rate before separately
disclosed items for the period was 36.2% (six months ended 30 June
2021: 22.9%), which compares to the standard Irish tax rate of
12.5%. A tax credit on separately disclosed items amounting to
GBP39.5m was recorded during the six months ended 30 June 2022 (six
months ended 30 June 2021: charge of GBP71.6m) (see Note 5).
The future effective tax rate of the Group will be principally
affected by the ongoing OECD initiative in relation to Base Erosion
and Profit Shifting. On 8 October 2021, 136 out of the 140
countries of the OECD Inclusive Framework on Base Erosion and
Profit Shifting ('IF') have politically committed to fundamental
changes to the international corporate tax system including the
proposed introduction of a global minimum corporation tax rate of
15%. The proposed rules in relation to the operation of the global
minimum corporation tax rate were published by the OECD in December
2021 followed by the publication of related commentary also
published in March 2022. While consultation in relation to the
rules and implementation issues remains ongoing, both at the OECD
and individual region/country level, the implementation date has
been delayed until 1 January 2024 at the earliest. We will continue
to monitor developments closely, but it is likely that this will
lead to an increase in the effective tax rate of the Group (as well
as an increase in ongoing compliance obligations) from as early as
2024 onwards.
8. Earnings per share
The Group presents basic and diluted earnings per share ("EPS")
data for its ordinary shares.
Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares outstanding during the
period. The weighted average number of shares has been adjusted for
amounts held as treasury shares and amounts held by the Paddy Power
Betfair plc Employee Benefit Trust ("EBT").
Diluted EPS is determined by adjusting the weighted average
number of ordinary shares outstanding for the effects of all
dilutive potential ordinary shares.
Adjusted EPS is determined by adjusting the profit attributable
to ordinary shareholders for the impact of separately disclosed
items.
The calculation of basic, diluted and adjusted EPS is as
follows:
2022 2021
--------------------------------------------- -------------------------------- ---------------------------------
Numerator in respect of basic and diluted
earnings per share (GBPm):
Loss attributable to equity holders of
the Company (114.3) (88.6)
--------------------------------------------- -------------------------------- ---------------------------------
Numerator in respect of adjusted earnings
per share (GBPm):
Loss attributable to equity holders of
the Company (114.3) (88.6)
Separately disclosed items (Note 5) 286.0 389.5
--------------------------------------------- -------------------------------- ---------------------------------
Profit for adjusted earnings per share
calculation 171.7 300.9
--------------------------------------------- -------------------------------- ---------------------------------
Weighted average number of ordinary shares
in issue during the period (in '000s)(1) 176,658 175,893
--------------------------------------------- -------------------------------- ---------------------------------
Basic earnings per share (GBP0.647) (GBP0.504)
--------------------------------------------- -------------------------------- ---------------------------------
Adjusted basic earnings per share GBP0.972 GBP1.711
--------------------------------------------- -------------------------------- ---------------------------------
Adjustments to derive denominator in respect
of diluted earnings per share (in '000s):
---------------------------------------------
Weighted average number of ordinary shares
in issue during the period 176,658 175,893
Diluted earnings per share (GBP0.647) (GBP0.504)
--------------------------------------------- -------------------------------- ---------------------------------
1 Where any potential ordinary shares would have the effect of
decreasing a loss per share, they have not been treated as
dilutive. The number of options excluded from the diluted weighted
average number of ordinary shares calculation due to their effect
being anti-dilutive is 2,187,856 (2021: 2,939,416).
The average market value of the Company's shares of GBP94.53 (30
June 2021: GBP144.90) was used to calculate the dilutive effect of
share options based on the market value for the period that the
options were outstanding.
9. Goodwill
The following CGUs, being the lowest level of asset for which
there are separately identifiable cash flows, have the following
carrying amounts of goodwill:
UK&I Irish
Online UK Retail Retail International Australia US Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
January
2022 5,766.9 18.9 20.7 2,490.3 482.4 567.6 9,346.8
Arising on
acquisitions
during the
period (Note
10) 208.7 - - - - - 208.7
Foreign
currency
translation
adjustment 0.1 - - 59.7 26.8 64.2 150.8
------------- ------------ ------------- ------------ --------------------- -------------- ----------- ------------
Balance at 30
June
2022 5,975.7 18.9 20.7 2,550.0 509.2 631.8 9,706.3
------------- ------------ ------------- ------------ --------------------- -------------- ----------- ------------
The Group reviews the carrying value of goodwill for impairment
annually (or more frequently if there are indications that the
value of goodwill may be impaired) by comparing the carrying values
of these CGUs with their recoverable amounts (being the higher of
value in use and fair value less costs to sell).
The Group has reviewed the performance in the first half of
2022, in the UK&I Online, Retail, International, Australia and
US CGUs and based on this and, in conjunction with the headroom
that existed at 31 December 2021, is satisfied that no impairment
has arisen during the six months ended 30 June 2022.
10. Business combinations and disposals
Six months ended 30 June 2022
Acquisition of Tombola
On 10 January 2022, the Group completed the acquisition of a
100% stake in Tombola, the UK market's leading online bingo
operator. Tombola is a successful bingo-led gaming company with an
emphasis on providing a low staking bingo proposition to a highly
engaged customer base. The purchase comprised of a cash payment of
GBP409.9m.
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill are as follows:
Provisional fair
values as at
10 January 2022
GBPm
---------------------------------- -------------------------------------------------
Assets
Property, plant and equipment 11.4
Intangible assets 249.0
---------------------------------- -------------------------------------------------
Total non-current assets 260.4
---------------------------------- -------------------------------------------------
Trade and other receivables 25.3
Cash and cash equivalents 14.7
---------------------------------- -------------------------------------------------
Total current assets 40.0
---------------------------------- -------------------------------------------------
Total assets 300.4
---------------------------------- -------------------------------------------------
Liabilities
Trade and other payables 42.4
Total current liabilities 42.4
Deferred tax liabilities 56.8
---------------------------------- -------------------------------------------------
Total non-current liabilities 56.8
---------------------------------- -------------------------------------------------
Total liabilities 99.2
---------------------------------- -------------------------------------------------
Net assets acquired 201.2
Goodwill 208.7
---------------------------------- -------------------------------------------------
Consideration 409.9
---------------------------------- -------------------------------------------------
The consideration is analysed as:
Consideration satisfied by cash 409.9
---------------------------------- -------------------------------------------------
Consideration 409.9
---------------------------------- -------------------------------------------------
Included within the intangible assets were GBP249.0m of
separately identifiable intangibles comprising brand, customer
relations and technology acquired as part of the acquisition, with
the additional effect of a deferred tax liability of GBP56.8m
thereon. These intangible assets are being amortised over their
useful economic lives of up to 20 years. The book value equated to
the fair value on the remaining assets as all amounts are expected
to be received.
10. Business combinations and disposals (continued)
The main factors leading to the recognition of goodwill (none of
which is deductible for tax purposes) are the expansion of the
Group's position in online bingo and the addition of further
product capabilities and expertise to leverage across the business.
The goodwill has been allocated to the existing UK&I Online
CGU.
Since the date of acquisition to 30 June 2022, Tombola has
contributed revenue of GBP85.3m and GBP2.1m of profit after tax to
the results of the Group. There is no significant difference
between these amounts and the amounts if the acquisition had
occurred on 1 January 2022.
The acquisition accounting remains provisional for one year from
the acquisition date and may change if new information is obtained
relating to conditions that existed at the acquisition date.
Six months ended 30 June 2021
Acquisition of Junglee Games
On 28 January 2021, the Group completed the acquisition of an
initial 50.1% stake in Junglee Games ("Junglee"), an Indian online
rummy operator, for US$67.3m (GBP49.3m), with US$63.5m (GBP46.5m)
paid in cash and the remainder recorded as deferred consideration
and paid subsequently in 2021. On the same date the Group entered
into call and put options which would enable the Group to acquire
an additional 7.2% stake in Junglee in exchange for cash
consideration. In June 2021, these options were exercised and the
Group acquired the additional 7.2% stake in Junglee in exchange for
cash consideration of US$7.5m (GBP5.5m) with US$7.0m (GBP5.1m) paid
in cash and the remainder recorded as deferred consideration and
paid subsequently in 2021. This has been accounted under the
anticipated acquisition method, with the combined 57.3% recognised
as acquired from 28 January 2021.
Junglee is a top three player in the legal Indian online rummy
market. The Group sees good potential to further develop Junglee's
product offering, including its recently launched daily fantasy
sports product, leveraging the Group's capabilities in this area.
The Group has put in place arrangements, consisting of call and put
options that could see its ownership in the business increase to
100% in 2025. The call and put options consideration can be
settled, at the Group's election, in cash or shares. As a
consequence of both the call and put options being only exercisable
at fair value being the future EBITDA and revenue multiple, which
are considered to be two key inputs into valuing the option, it was
determined that the fair value of the call and put options was not
material and was close to nominal value.
Included within the intangible assets were GBP42.9m of
separately identifiable intangibles comprising brand, technology
and customer relations acquired as part of the acquisition, with
the additional effect of a deferred tax liability of GBP10.8m
thereon. These intangible assets are being amortised over their
useful economic lives of up to 10 years. The book value equated to
the fair value on the remaining assets and liabilities as all
amounts are expected to be received.
The main factors leading to the recognition of goodwill (none of
which is deductible for tax purposes) is growth by combining the
Group's significant operating experience in other markets with the
local market knowledge and skills of the management team in
Junglee, driving revenue synergies over time. The goodwill has been
allocated to the existing International CGU and it has been deemed
that a separate CGU is not appropriate.
10. Business combinations and disposals (continued)
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill are as follows:
Fair values as
at
28 January 2021
GBPm
------------------------------------------------------- --------------------------------------------------
Assets
Property, plant and equipment 0.2
Intangible assets 42.9
------------------------------------------------------- --------------------------------------------------
Total non-current assets 43.1
------------------------------------------------------- --------------------------------------------------
Trade and other receivables 3.8
Cash and cash equivalents 17.7
------------------------------------------------------- --------------------------------------------------
Total current assets 21.5
------------------------------------------------------- --------------------------------------------------
Total assets 64.6
------------------------------------------------------- --------------------------------------------------
Liabilities
Trade and other payables 13.1
Total current liabilities 13.1
Deferred tax liabilities 10.8
------------------------------------------------------- --------------------------------------------------
Total non-current liabilities 10.8
------------------------------------------------------- --------------------------------------------------
Total liabilities 23.9
------------------------------------------------------- --------------------------------------------------
Net assets acquired 40.7
Goodwill 31.2
Non-controlling interest measured at the proportionate
interest method (17.1)
------------------------------------------------------- --------------------------------------------------
Consideration 54.8
------------------------------------------------------- --------------------------------------------------
The consideration is analysed as:
Consideration satisfied by cash 46.5
Put option satisfied by cash 5.1
Deferred consideration 2.8
Put option deferred consideration 0.4
------------------------------------------------------- --------------------------------------------------
Consideration 54.8
------------------------------------------------------- --------------------------------------------------
Cash (outflows) / inflows from business combinations:
Six months Six months
ended ended
30 June 2022 30 June 2021
GBPm GBPm
---------------------------------------------- --------------------------------- ----------------------------------
Cash consideration paid for acquisitions
in the period (409.9) (46.5)
Cash consideration paid for put option
exercised in the period - (5.1)
Cash acquired from acquisitions in the
period 14.7 17.8
Cash consideration - acquisitions in previous
periods (15.3) (19.0)
---------------------------------------------- --------------------------------- ----------------------------------
As presented in the statement of cash
flows:
Purchase of businesses net of cash acquired (395.2) (33.7)
Payment of contingent deferred consideration (15.3) (19.0)
---------------------------------------------- --------------------------------- ----------------------------------
During the period the Group settled in cash, deferred
consideration liabilities of GBP15.3m in relation to Betfair's
historical acquisition of HRTV, a horseracing television network
based in the US. No further payments are due in respect of this
acquisition.
11. Investments and trade and other receivables
Non-current assets
30 June 2022 31 December
2021
GBPm GBPm
-------------------- --------------------------------- ----------------------------------
Investments - FVTPL 6.0 5.5
-------------------- --------------------------------- ----------------------------------
Investments relate to a small number of individually immaterial
equity investments in various companies.
30 June 2022 31 December
2021
GBPm GBPm
--------------------------------------------- --------------------------------- ----------------------------------
Other receivables
Other receivables 11.4 11.8
Prepayments 12.7 13.8
Value-added tax and goods and services
tax 1.1 -
Deferred financing costs on Revolving Credit
Facility (see Note 14) 3.1 3.7
Total 28.3 29.3
--------------------------------------------- --------------------------------- ----------------------------------
Other receivables
Other receivables are comprised primarily of deposits for
licences and property.
Deferred financing costs on Revolving Credit Facility
In May 2020, the Group entered into a new Revolving Credit
Facility agreement as part of its financing agreements. The Group
incurred GBP5.3m of transaction costs and fees relating to the
Revolving Credit Facility, which have been capitalised and included
within non-current receivables, net of accretion of GBP3.1m (2021:
GBP3.7m), on the Consolidated Statement of Financial Position and
are recorded as financial expense over the term of the Revolving
Credit Facility agreement using the effective interest rate method.
As at 30 June 2022, GBP190.0m was drawn under the Revolving Credit
Facility (31 December 2021: nil).
Current assets
30 June 2022 31 December
2021
GBPm GBPm
--------------------------------------- --------------------------------- ----------------------------------
Trade and other receivables
Trade receivables 42.7 39.5
Other receivables 35.5 34.4
Value-added tax and goods and services
tax 2.3 5.1
Prepayments 170.0 124.9
--------------------------------------- --------------------------------- ----------------------------------
Total 250.5 203.9
--------------------------------------- --------------------------------- ----------------------------------
12. Trade and other payables
Current liabilities
31 December
30 June 2022 2021
GBPm GBPm
---------------------------------------------- ---------------------------------- ----------------------------------
Trade and other payables
Trade payables 104.1 74.2
PAYE and social security 21.5 19.7
Value-added tax, goods and services tax,
betting duties, data rights, and product
and racefield fees 239.4 220.7
Employee benefits 113.1 156.1
Contingent deferred consideration - business
combinations 5.9 21.0
Deferred consideration - business combinations 204.1 -
Accruals and other liabilities 628.9 604.7
---------------------------------------------- ---------------------------------- ----------------------------------
Total 1,317.0 1,096.4
---------------------------------------------- ---------------------------------- ----------------------------------
12. Trade and other payables (continued)
Non-current liabilities
30 June 2022 31 December
2021
GBPm GBPm
--------------------------------------------- ---------------------------------- -----------------------------------
Trade and other payables
Employee benefits 1.9 2.1
Contingent deferred consideration - business
combinations 17.3 16.9
Accruals and other payables 2.7 0.8
--------------------------------------------- ---------------------------------- -----------------------------------
Total 21.9 19.8
--------------------------------------------- ---------------------------------- -----------------------------------
Contingent deferred consideration - business combinations
The Group's contingent deferred consideration liabilities
amounted to GBP23.2m at 30 June 2022 (31 December 2021: GBP37.9m)
and relate to the following:
-- GBP5.2m (31 December 2021: GBP4.7m) deferred consideration in
respect of Diamond Game Enterprises, assumed as part of the
Combination with TSG; and
-- GBP18.0m (31 December 2021: GBP17.8m) relating to the acquisition of Singular in 2021.
Deferred consideration - business combinations
On 1 July 2022, the Group completed the acquisition of the
remaining 49% outstanding shares of Adjarabet for a cash payment of
EUR238.0m (GBP204.1m). This acquisition brings the Group's holding
in Adjarabet to 100% up from the previous controlling interest of
51%.
As outlined in previous financial statements, as part of the
acquisition of Adjarabet in 2019, a mechanism was agreed,
consisting of call and put options, which enabled the Group to
acquire the remaining 49% after three years at a valuation
equivalent to seven times the 2021 EBITDA. The call/put option
consideration can be settled, at the Group's election, in cash or
shares. As a consequence of both the put and call options being
only exercisable at fair value being the future EBITDA and earnings
multiple which are considered to be two key inputs into valuing the
option, it was determined that the fair value was not material and
was close to nominal value. During the six months ended 30 June
2022, the non-controlling interest elected to exercise the put
option and the Group entered into an arrangement with the seller to
acquire the remaining shares for a cash payment of EUR238.0m in
line with the terms of the original agreement. Upon the signing of
this agreement on 20 June 2022, the Group recognised a liability of
EUR238.0m (GBP204.1m). This liability has been recorded as a
current liability as at 30 June 2022.
Amounts held in Trust
As at 30 June 2022, GBP348.6m (31 December 2021: GBP355.6m) was
held in trust in The Sporting Exchange (Clients) Limited on behalf
of the Group's customers and is equal to the amounts deposited into
customer accounts. Neither cash and cash equivalents or restricted
cash include these balances on the basis that they are held on
trust for customers and do not belong to and are not at the
disposal of the Group.
13. Provisions
Provisions balances at 30 June 2022 and 31 December 2021 and
movements during the six months ended 30 June 2022 are outlined
below:
Employee
benefits
(long
service Onerous Gaming Other
leave) contracts tax legal Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Balance at
31 December
2021 3.5 13.7 22.4 72.0 7.5 119.1
Additional
provisions
recognised 0.5 (0.1) 2.9 - - 3.3
Amounts used
during
the year (0.4) (3.0) (3.3) (1.4) (1.0) (9.1)
Foreign
currency
translation 0.2 1.2 1.1 5.3 0.3 8.1
Balance at
30 June
2022 3.8 11.8 23.1 75.9 6.8 121.4
Presented
in:
Balance at
31 December
2021:
Current 2.2 6.6 22.4 34.5 5.6 71.3
Non-current 1.3 7.1 - 37.5 1.9 47.8
Total 3.5 13.7 22.4 72.0 7.5 119.1
Balance at
30 June
2022:
Current 2.5 6.9 23.1 34.5 4.9 71.9
Non-current 1.3 4.9 - 41.4 1.9 49.5
Total 3.8 11.8 23.1 75.9 6.8 121.4
13. Provisions (continued)
Employee benefits (long service leave)
The timing and amount of long service leave cash outflows are
primarily dependent on when staff employed at the reporting date
avail of their entitlement to leave and their expected salaries at
that time. As of 30 June 2022 and 31 December 2021, it was expected
that cash outflows would occur primarily within the following five
years.
Onerous contracts
The onerous contracts provision at 30 June 2022 relates to
various marketing and minimum guarantee contracts where the cost of
fulfilling these contracts exceeds the expected economic benefits
to be received from them.
Gaming tax
These are gaming tax provisions relating to amounts provided for
taxes in certain jurisdictions where the interpretation of tax
legislation is uncertain. When the Group disagrees with the
application of unclear tax legislation, for example when it is
applied retrospectively and / or results in a one-off
disproportionate tax equivalent to many times the profit derived by
the Group from its historic activities in that jurisdiction, the
Group continues to challenge these interpretations.
Whilst the maximum potential obligation for all ongoing cases
could be greater than the recognised provision, and the outcomes
may not be known for some time, a liability has been recorded for
the Directors' best estimate of the cash outflows that will
ultimately be required in respect of each claim. Management has not
provided a sensitivity for this provision as the range is not
considered to be material. Management notes this is a key estimate;
however, it is not a key judgement that will have a material impact
in the coming year.
Other legal
Other legal provisions generally consist of payments for various
future legal settlements where, based on all available information,
management believes it is probable that there will be a future
outflow.
These provisions comprise a number of different legal cases, the
majority of which are immaterial. The most significant relates to
the foreign payments contingent liabilities outlined in more detail
in Note 18. Further disclosure in respect of these provisions has
not been provided as such information would be expected to be
prejudicial to the Group's position in such matters.
Whilst the maximum potential obligation for all ongoing cases
could be greater than the recognised provision, and the outcomes
may not be known for some time, a liability has been recorded for
the Directors' best estimate of the cash outflows that will
ultimately be required in respect of each claim. Management has not
provided a sensitivity for this provision as the range is not
considered to be material. Management notes this is a key estimate;
however, it is not a key judgement that will have a material impact
in the coming year.
Other
Other provisions primarily comprise a number of different
regulatory provisions.
14. Borrowings
The following is a summary of borrowings, including accrued
interest, outstanding as at 30 June 2022 and 31 December 2021:
30 June 2022 31 December 2021
Principal Principal
outstanding Carrying outstanding
Contractual balance amount (including balance Carrying
interest in currency accrued in currency amount (including
rate of borrowing interest)(1) of borrowing accrued interest)
Local currency Local currency
% (m) GBPm (m) GBPm
GBP First
Lien Term
Loan A 2.80 GBP1,017.9 1,010.7 GBP1,017.9 1,009.6
USD First
Lien Term
Loan B 3.30 $2,916.3 2,375.1 $2,931.0 2,142.6
EUR First
Lien Term
Loan B 2.50 EUR507.2 430.3 EUR507.2 419.6
GBP
Revolving
Credit
Facility 2.80 GBP190.0 190.0 GBP- -
Total
borrowings 4,006.1 3,571.8
Presented
in:
Current
portion 24.2 22.1
Non-current
portion 3,981.9 3,549.7
Total
borrowings 4,006.1 3,571.8
1 The carrying amounts at 30 June 2022 includes accrued interest
of nil (31 December 2021: GBP0.4m) presented within the current
portion of borrowings above.
14. Borrowings (continued)
During the six months ended 30 June 2022, the Group incurred the
following interest on its then outstanding borrowings:
Effective
interest Interest
rate(1) Interest(2) accretion Total interest
% GBPm GBPm GBPm
GBP First Lien
Term Loan
A 3.10 11.9 1.5 13.4
USD First Lien
Term Loan
B 3.60 32.7 2.7 35.4
EUR First Lien
Term Loan
B 2.90 5.4 0.7 6.1
GBP Revolving
Credit
Facility 3.10 0.2 - 0.2
Total 50.2 4.9 55.1
1 The effective interest rate calculation excludes the impact of
the Swap Agreements (as defined below).
2 In addition to the amount included above, the Group incurred
GBP1.5m of interest expense relating to commitment, utilisation,
and fronting fees associated with its Revolving Credit
Facility.
The Group's change in borrowings during the six months ended 30
June 2022 was as follows:
Balance Balance
at 1 Jan Principal Interest at 30 Jun
2022 New debt payments accretion(2) FX translation 2022
GBPm GBPm GBPm GBPm GBPm GBPm
GBP First
Lien
Term Loan
A 1,009.2 - - 1.5 - 1,010.7
USD First
Lien
Term Loan
B 2,142.6 - (11.6) 2.7 241.4 2,375.1
EUR First
Lien
Term Loan
B 419.6 - - 0.7 10.0 430.3
GBP
Revolving
Credit
Facility - 275.0 (85.0) - - 190.0
Total 3,571.4 275.0 (96.6) 4.9 251.4 4,006.1
Accrued
interest 0.4 -
Total
borrowings 3,571.8 4,006.1
(1) Adjustments to amortised costs include transaction costs and
fees incurred in respect of the refinancing and additional debt
drawdown noted below.
(2) Interest accretion represents interest expense calculated at
the effective interest rate less interest expense calculated at the
contractual interest rate and is recorded in financial expenses in
the consolidated income statement.
Revolving Credit Facility and First Lien Term Loans
Each of the Group's facilities are discussed below.
TLA Agreement - GBP First Lien Term Loan A
In May 2020, the Group, Flutter Entertainment Plc, PPB Financing
Unlimited Company and PPB Treasury Unlimited Company as borrowers,
entered into a Term Loan A and Revolving Credit Facility Agreement
(the "TLA Agreement") comprising a term loan and revolving credit
facility totalling GBP1.4bn. In December 2021, an additional lender
was added to the facility increasing the overall TLA Agreement by
GBP100m bringing the total to GBP1.5bn. Subsequently in December
2021, the Group completed an additional drawdown of GBP68m under
the TLA agreement and its existing terms. The TLA Agreement
described above provides a term loan facility in an aggregate
amount of GBP1,017.9m (2021: GBP1,017.9m) priced at SONIA plus CSA
plus a margin of 1.75% (the "GBP First Lien Term Loan A"), with a
maturity date of 5 May 2025 and a SONIA floor of 0%. On 5 March
2021, the UK's Financial Conduct Authority ("FCA") formally
announced the cessation of all GBP London Interbank Offered Rate
("LIBOR") benchmark settings currently published by ICE Benchmark
Administration ("IBA") immediately after 31 December 2021. In
response, the Company entered into agreements with its lenders that
amended the benchmark rate referenced in the Term Loan A agreement
from GBP LIBOR to SONIA for interest periods commencing on or after
January 2022. There is no amortisation on the GBP First Lien Term
Loan A and the principal is due at maturity. The Group incurred
GBP11.9m of initial transaction costs and fees on drawdown which
have been capitalised against the principal of the debt and are
recorded as financial expense over the term of the debt using the
effective
interest rate method.
14. Borrowings (continued)
TLA Agreement - Revolving Credit Facility
The TLA Agreement described above provides a multi-currency
revolving credit facility in an aggregate amount of GBP482.0m
(2021: GBP482.0m) (the "Revolving Credit Facility"). Maturing on 5
May 2025, the Revolving Credit Facility includes a margin of 1.75%
over SONIA for borrowings with a 0% interest rate floor as well as
a utilisation fee ranging from 0.1% to 0.4% based on the proportion
of drawings to the total commitment. The commitment fee on the
Revolving Credit Facility is 35% of the margin and is payable in
respect of available but undrawn borrowings. The Revolving Credit
Facility is available for general corporate purposes including the
refinancing of existing borrowings. The Group incurred GBP5.3m of
transaction costs and fees in 2020 which have been capitalised and
are recorded as financial expense over the life of the facility
using the straight-line method. These capitalised costs have been
included within non-current receivables on the consolidated
statement of financial position. During the six month period ending
30 June 2022 the Group has drawn down GBP275.0m of its facility and
repaid GBP85.0m leaving an outstanding principal of GBP190.0m
(2021:nil). The Group has an undrawn capacity of GBP277m (2021:
GBP467m) on the Revolving Credit Facility with GBP15m (2021:
GBP15m) of capacity reserved for the issuance of Group guarantees
as of 30 June 2022.
The terms of the TLA Agreement limit the Group's ability to,
among other things: (i) incur additional debt (ii) grant additional
liens on their assets and equity (iii) distribute equity interests
and/or distribute any assets to third parties (iv) make certain
loans or investments (including acquisitions) (v) consolidate,
merge, sell or otherwise dispose of all or substantially all assets
(vi) pay dividends on or make distributions in respect of capital
stock or make restricted payments, and (vii) modify the terms of
certain debt or organisational documents, in each case subject to
certain permitted exceptions. During the six months ended 30 June
2022, the Group is in compliance with all covenants related to its
First Lien Term Loan A.
First Lien Term Loan B's
The Group holds USD term loans with an outstanding principal
balance of $2,916.3m (2021: $2,931.0m) priced at USD-LIBOR plus
2.25% (2021: 2.25%) (the "USD First Lien Term Loan B") and an EUR
first lien term loan with an outstanding principal balance of
EUR507.2m (2021: EUR507.2m) priced at EURIBOR plus 2.5% (2021:
2.5%) (the "EUR First Lien Term Loan B" and, together with the USD
First Lien Term Loan, the "First Lien Term Loan B"), each with a
maturity date of 21 July 2026 and a LIBOR and EURIBOR floor, as
applicable, of 0%. The USD First Lien Term Loan B requires
scheduled quarterly principal payments in amounts equal to 0.25% of
the initial aggregate principal amount of the USD First Lien Term
Loan B of $2,938m (2021: $2,938m), with the balance due at
maturity. There is no amortisation on the EUR First Lien Term Loan
B and the principal is due at maturity.
The First Lien Term Loan B's are governed by the "Syndicated
Facility Agreement". The Syndicated Facility Agreement limits Stars
Group Holdings B.V. and Flutter Financing B.V, as borrowers, and
its subsidiaries' ability to, among other things, (i) incur
additional debt (ii) grant additional liens on their assets and
equity (iii) distribute equity interests and/or distribute any
assets to third parties (iv) make certain loans or investments
(including acquisitions), (v) consolidate, merge, sell or otherwise
dispose of all or substantially all assets (vi) pay dividends on or
make distributions in respect of capital stock or make restricted
payments (vii) enter into certain transactions with affiliates
(viii) change lines of business and (ix) modify the terms of
certain debt or organisational documents, in each case subject to
certain permitted exceptions. The agreement also provides for
customary mandatory prepayments, including a customary excess cash
flow sweep if certain conditions are met. During the six months
ended 30 June 2022, the Group is in compliance with all covenants
related to its First Lien Term Loan B's.
Reconciliation to Statement of Cash Flows:
Reconciliation of movements in borrowings to the Statement of
Cash Flows:
2022 2021
GBPm GBPm
------------------------- --------------------------------- ---------------------------------
Financing activities:
Proceeds from borrowings 275.0 -
Repayment of borrowings (96.6) (12.9)
Interest paid (46.8) (70.0)
15. Derivatives
Derivatives and hedge accounting
The Group uses derivative financial instruments for risk
management and risk mitigation purposes. As such, any change in
cash flows associated with derivative instruments are expected to
be offset by changes in cash flows related to the hedged item. The
Group's derivatives are discussed below.
Swap agreements
The Group has executed cross-currency interest rate swaps which
swap the profile of the USD First Lien Term Loan B in its entirety
into EUR and GBP. In 2021 as part of the refinance, the Group
amended the terms of the existing trades to reflect the repriced
TLB USD and executed new cross-currency interest rate swaps on the
additional drawn-down debt in line with the hedging policy to cover
exposure to foreign currencies. From an accounting and risk
management perspective, these hedging instruments consist of: (i)
USD-EUR amortising cross-currency interest rate swap agreements
(the "EUR Cross-Currency Interest Rate Swaps") with a remaining
notional amount of EUR1,481m (31 December 2021: EUR1,488m), which
fix the USD to EUR exchange rate at 1.173 and fix the euro interest
payments at an average interest rate of 1.7% (31 December 2021:
1.7%) and (ii) USD-GBP amortising cross-currency interest rate swap
agreements (the "GBP Cross-Currency Interest Rate Swaps") with a
remaining notional amount of GBP890m (31 December 2021: GBP895m),
which fix the EUR to GBP exchange rate at 0.889 and fix the GBP
interest payments at an average interest rate of 2.5% (31 December
2021: 2.5%). The EUR Cross-Currency Interest Rate Swaps and GBP
Cross-Currency Interest Rate Swaps are in hedging relationships
with and have a profile that amortises in line with the USD First
Lien Term Loan B. The EUR Cross-Currency Interest Rate Swaps and
GBP Cross-Currency Interest Rate Swaps have a maturity date of July
2023.
Sports betting open positions
Amounts received from customers on sportsbook events that have
not occurred by the balance sheet date are derivative financial
instruments and have been designated by the Group on initial
recognition as financial liabilities at fair value through profit
or loss.
The fair value of open sports bets at 30 June 2022 and 31
December 2021 has been calculated using the latest available prices
on relevant sporting events. The carrying amount of the liabilities
is not significantly different from the amount that the Group is
expected to pay out at maturity of the financial instruments.
Sports bets are non-interest bearing. There is no interest rate or
credit risk associated with open sports bets.
It is primarily based on expectations as to the results of
sporting and other events on which bets are placed. Changes in
those expectations and ultimately the actual results when the
events occur will result in changes in fair value.
There are no reasonably probable changes to assumptions and
inputs that would lead to material changes in the fair value
methodology, although final value will be determined by future
sporting results.
The following table summarises the fair value of derivatives as
at 30 June 2022 and 31 December 2021:
30 June 2022 31 December 2021
Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm
Derivatives held for
hedging
Derivatives designated as
cash
flow hedges:
Cross-currency interest
rate
swaps - non-current 260.0 - 31.7 (54.6)
Total derivatives
designated
as cash flow hedges 260.0 - 31.7 (54.6)
Derivatives designated as
net
investment hedges:
Cross-currency interest
rate
swaps - non-current 15.5 (16.0) 36.3 -
Total derivatives
designated
as net investment hedges 15.5 (16.0) 36.3 -
Total derivatives held for
hedging 275.5 (16.0) 68.0 (54.6)
Derivatives held for risk
management
and other purposes not
designated
as hedges
Sports betting open
positions
- current - (50.1) - (74.0)
Sports betting open
positions
- non-current - (0.5) - (0.5)
Total derivatives held for
risk
management and other
purposes
not designated as hedges - (50.6) - (74.5)
16. Share capital and reserves
Share capital
Transactions during the six months ended 30 June 2022:
-- A total of 192,342 ordinary shares were issued as a result of
the exercise of employee share options, giving rise to share
capital and share premium of GBP3.1m;
Transactions during the six months ended 30 June 2021:
-- A total of 262,910 ordinary shares were issued as a result of
the exercise of employee share options, giving rise to share
capital and share premium of GBP8.0m;
Equity reserves
Equity reserves at 30 June 2022 include the following classes of
reserves:
Shares held by Employee Benefit Trust
At 30 June 2022, the Paddy Power Betfair plc Employee Benefit
Trust ("EBT") held 33,158 (31 December 2021: 33,158) of the
Company's own shares, which were acquired at a total cumulative
cost of GBP4.0m (31 December 2021: GBP4.0m) in respect of potential
future awards relating to the Group's employee share plans.
Cash flow hedge reserve
The cash flow hedge reserve represents the effective portion of
the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that had not yet
occurred at that date.
Foreign exchange translation reserve
The foreign exchange translation reserve at 30 June 2022
amounted to a debit balance of GBP16.9m (31 December 2021: debit
balance of GBP194.2m) and arose from the retranslation of the
Group's net investment in primarily EUR, AUD and USD functional
currency companies. The movement in the foreign exchange
translation reserve for the six month period ended 30 June 2022,
reflects mainly the strengthening of EUR and USD against GBP in the
period.
Other reserves
Other reserves comprise undenominated capital. Undenominated
capital at 30 June 2022 of GBP2.5m (31 December 2021 of GBP2.5m)
relates to the nominal value of shares in the Company acquired by
the Company of GBP2.3m (31 December 2021: GBP2.3m) and subsequently
cancelled, and an amount of GBP0.2m (31 December 2021: GBP0.2m)
which arose on the redenomination of the ordinary share capital of
the Company at the time of conversion from Irish pounds to
Euro.
Share-based payment reserve
During the six months ended 30 June 2022, an amount of GBP50.1m
was expensed in the Consolidated Income Statement with respect to
share based payments (six month period ended 30 June 2021:
GBP36.6m) and an amount of GBP11.7m (six month period ended 30 June
2021: GBP16.4m) in respect of share options exercised during the
period was transferred from the share-based payment reserve to
retained earnings.
An amount of GBP0.8m of deferred tax relating primarily to the
Group's share-based payments was credited to retained earnings in
the six months ended 30 June 2022 (six month period ended 30 June
2021: credit of GBP0.5m). An amount of GBP0.2m of current tax
relating to the Group's share-based payments was credited to
retained earnings in six months ended 30 June 2022 (six month
period ended 30 June 2021: credit of GBP0.6m).
Non-controlling interest
During the six month period ended 30 June 2022 the Group paid
dividends totalling GBP5.4m to the non-controlling interest in
Adjarabet (six months ended 30 June 2021: GBP5.1m).
As outlined in more detail in Note 12, as a result of the
exercise of the put option held by the Adjarabet non-controlling
interest and the agreement to settle in cash for EUR238.0m
(GBP204m), an amount of GBP34.2m was recorded in non-controlling
interest with the remaining amount of GBP169.8m booked to retained
earnings.
17. Fair values
Financial instruments carried at fair value
Fair value hierarchy
The table below analyses recurring fair value measurements for
financial assets and financial liabilities. These fair value
measurements are categorised into different levels in the fair
value hierarchy based on the inputs to the valuation method used.
The different levels are defined as follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Group can access at the
measurement date;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly; and
-- Level 3: unobservable inputs for the asset or liability.
17. Fair values (continued)
30 June 2022
Level 1 Level 2 Level 3 Total
------------------------
GBPm GBPm GBPm GBPm
------------------------ ------------------------ ------------------------ ------------------------
Bonds - FVOCI 60.6 28.4 - 89.0
Investments -
FVTPL - - 6.0 6.0
Derivatives - 275.5 - 275.5
Total financial
assets 60.6 303.9 6.0 370.5
Derivative
financial
liabilities - (16.0) (50.6) (66.6)
Non-derivative
financial
liabilities (204.1) - (23.2) (227.3)
Total financial
liabilities (204.1) (16.0) (73.8) (293.9)
31 December 2021
Level 1 Level 2 Level 3 Total
------------------------
GBPm GBPm GBPm GBPm
------------------------ ------------------------ ------------------------ ------------------------
Bonds - FVOCI 58.2 24.8 - 83.0
Investments -
FVTPL - - 5.5 5.5
Derivatives - 68.0 - 68.0
Total financial
assets 58.2 92.8 5.5 156.5
Derivative
financial
liabilities - (54.6) (74.5) (129.1)
Non-derivative
financial
liabilities - - (37.9) (37.9)
Total financial
liabilities - (54.6) (112.4) (167.0)
As part of its periodic review of fair values, the Group
recognises transfers, if any, between levels of the fair value
hierarchy at the end of the reporting period during which the
transfer occurred. There were no transfers between levels of the
fair value hierarchy during the periods ended 30 June 2022 or 31
December 2021.
Valuation of Level 2 financial instruments
Bonds - FVOCI
The Group has determined that the carrying value of the bonds
approximates their fair value which is determined by using
observable quoted prices or observable input parameters derived
from comparable bonds/markets. Although the Group has determined
that a number of the bonds fall within Level 1 of the fair value
hierarchy, there are a class of bonds which have been classified as
Level 2 due to the existence of relatively inactive trading markets
for those bonds.
Derivative financial instruments
Swap agreements
The Group uses derivative financial instruments to manage its
interest rate and foreign currency risk. The valuation of these
instruments is determined using widely accepted valuation
techniques including discounted cash flow analysis of the expected
cash flows of each derivative. This analysis reflects the
contractual terms of the derivatives, including the period to
maturity, and uses observable market-based inputs, such as yield
curves, spot and forward FX rates.
To comply with the provisions of IFRS 13, Fair Value
Measurement, the Group incorporates credit valuation adjustments to
appropriately reflect both its own non-performance risk and the
applicable counterparty's non-performance risk in the fair value
measurements. In adjusting the fair value of its derivative
contracts for the effect of non-performance risk, the Group has
considered the impact of netting and any applicable credit
enhancements, such as collateral postings, thresholds, mutual puts
and guarantees.
Although the Group has determined that the majority of the
inputs used to value its derivatives fall within Level 2 of the
fair value hierarchy, the credit valuation adjustments associated
with its derivatives utilise Level 3 inputs, such as estimates of
current credit spreads to evaluate the likelihood of default by
itself and its counterparties. At both 30 June 2022 and 31 December
2021, the Group assessed the significance of the impact of the
credit valuation adjustments on the overall valuation of its
derivative positions, determined that the credit valuation
adjustments are not significant to the overall valuation of its
derivatives. As a result, the Group determined that its valuations
of its derivatives in their entirety are classified in Level 2 of
the fair value hierarchy.
Level 3 fair values
Derivatives (Level 3)
Some of the Group's financial assets and liabilities are
classified as Level 3 of the fair value hierarchy because the
respective fair value determinations use inputs that are not based
on observable market data. As at 30 June 2022, the valuation
techniques and key inputs used by the Group for each Level 3 asset
or liability were as follows:
17. Fair values (continued)
Sports betting open positions (Level 3)
Derivative financial liabilities comprise sports betting open
positions. The fair value of open sports bets at the period end has
been calculated using the latest available prices on relevant
sporting events. Changes in the fair value of the unsettled bets
are recorded in revenue in the consolidated income statement.
It is primarily based on expectations as to the results of
sporting and other events on which bets are placed. Changes in
those expectations and ultimately the actual results when the
events occur will result in changes in fair value.
There are no reasonably probable changes to assumptions and
inputs that would lead to material changes in the fair value
methodology although final value will be determined by future
sporting results.
Non-derivative financial instruments (Level 3)
Investments
The Group valued its equity investments in private companies
with reference to earnings measures from similar businesses in the
same or similar industry and adjusts for any significant changes in
the earnings multiple and the valuation. A reasonable change in
assumptions would not have a material impact on fair value. Changes
in the fair value of equity in private companies are recorded in
financial income or financial expense in the consolidated income
statement.
Contingent deferred consideration (Level 3)
Non-derivative financial liabilities include contingent
consideration. The contingent consideration payable is primarily
determined with reference to forecast performance for the acquired
businesses during the relevant time periods and the amounts to be
paid in such scenarios. The fair value was estimated by assigning
probabilities to the potential payout scenarios. The significant
unobservable inputs are forecast performance for the acquired
businesses.
The fair value of contingent consideration is primarily
dependent on forecast performance for the acquired businesses in
excess of a predetermined base target. An increase and decrease of
10% in the excess over the predetermined base target during the
relevant time periods would increase and decrease the value of
contingent consideration at 30 June 2022 by GBP1.1m and GBP1.9m
respectively (31 December 2021: GBP1.2m and GBP2.2m).
FOX Corporation
As announced on 2 October 2019, in order to achieve economic
alignment of Flutter's and TSG's strategic third party
relationships across their respective US businesses, the Group
entered into an arrangement with FOX, pursuant to which FSG
Services, a wholly-owned subsidiary of FOX, had an option to
acquire an 18.6% equity interest in FanDuel Group at its fair
market value in July 2021. As a consequence of there being no
increase in the market value of FanDuel since the valuation date of
the option, it is determined that the value of the option is not
material and has close to nominal value at 30 June 2022.
Non-controlling interest agreements
Adjarabet (Level 1)
As part of the acquisition of Adjarabet in 2019, a mechanism was
agreed, consisting of call and put options, which enables the Group
to acquire the remaining 49% after three years at a valuation
equivalent to seven times the 2021 EBITDA. The call/put option
consideration can be settled, at the Group's election, in cash or
shares. During the six months ended 30 June 2022, the
non-controlling interest elected to exercise the put option and the
Group entered into an arrangement with the seller to acquire the
remaining shares for a cash payment of EUR238.0m in line with the
terms of the original agreement. Upon the signing of this agreement
on 20 June 2022, the Group recognised a liability of EUR238.0m
(GBP204.1m). This liability has been recorded as a current
liability as at 30 June 2022.
Boyd
A mechanism has been agreed with Boyd who hold a non-controlling
interest in FanDuel Group, consisting of call and put options,
which enables the Group to acquire the remaining 5% at prevailing
market valuations in 2028. The call/put option consideration can be
settled, at the Group's election, in cash or shares. As a
consequence of both the put and call options being only exercisable
at fair value based on the market value of FanDuel at the date of
exercise of the options, it was determined that the fair value was
not material and was close to nominal value.
As announced on 2 October 2019, in order to achieve economic
alignment of Flutter's and TSG's strategic third-party
relationships across their respective US businesses, the Group
entered into arrangements conditional on completion of the
Combination with Boyd pursuant to which Boyd would receive a total
payment of the 1.5% of the increase in Fox Bet's market value
between completion of the Combination and July 2023 (subject to a
carrying value adjustment). Any payment due to Boyd in respect of
this is not expected to be significant.
On 22 October 2021, FanDuel Group Parent LLC ("FanDuel") and
Boyd Interactive Holdings LLC ("Boyd") entered into an arrangement
where Boyd contributed 91,828 Investor Units equivalent to 0.5% of
FanDuel's total Investor Units in exchange for 91,828 warrants to
acquire Investor Units of FanDuel. The aggregate exercise price of
the warrants is $1.00 and are exercisable at any time within the
next 10 years. If the warrants remain outstanding after 10 years,
they will be automatically converted into the number of Investor
Units for which such warrants are exercisable. As this transaction
involves the exchange of one form of fixed equity instrument for
another fixed instrument with a non-controlling interest for no
additional consideration, no further accounting is required.
17. Fair values (continued)
Junglee
As part of the acquisition of Junglee, the Group has put in
place arrangements, consisting of call and put options, that could
see its ownership in the business increase to 100% in 2025. The
call/put option consideration can be settled, at the Group's
election, in cash or shares. As a consequence of both the put and
call options being only exercisable at fair value being the future
EBITDA and revenue multiple which are considered to be two key
inputs into valuing the option, it was determined that the fair
value was not material and was close to nominal value.
18. Commitments and contingencies
Guarantees
The Company enters into financial guarantee contracts to
guarantee the indebtedness of other companies within the Group. The
Company considers these to be insurance arrangements and accounts
for them as such. The Company treats the guarantee contract as a
contingent liability until such time as it becomes probable that
the Company will be required to make a payment under the
guarantee.
The Group has uncommitted working capital overdraft facilities
of GBP16.2m (31 December 2021: GBP16.2m) with Allied Irish Banks
p.l.c. These facilities are secured by a Letter of Guarantee from
Flutter Entertainment plc.
The Group has bank guarantees: (i) in favour of certain gaming
regulatory authorities to guarantee the payment of player funds,
player prizes, and certain taxes and fees due by a number of Group
companies; and (ii) in respect of certain third-party rental and
other property commitments, merchant facilities and third party
letter of credit facilities. The maximum amount of the guarantees
at 30 June 2022 was GBP32.8m (31 December 2021: GBP44.4m). No
claims had been made against the guarantees as of 30 June 2022 (31
December 2021: GBPNil). The guarantees are secured by counter
indemnities from Flutter Entertainment plc and certain of its
subsidiary companies. The value of cash deposits over which the
guaranteeing banks hold security was GBP11.3m at 30 June 2022 (31
December 2021: GBP17.5m).
As mentioned in Note 14, borrowings under the TLA Agreement and
Syndicated Facility Agreement are guaranteed by the Company and
certain of its operating subsidiaries.
Contingent liabilities
The Group operates in an uncertain marketplace where many
governments are either introducing or contemplating new regulatory
or fiscal arrangements.
The Board monitors legal and regulatory developments and their
potential impact on the business, however, given the lack of a
harmonised regulatory environment, the value and timing of any
obligations in this regard are subject to a high degree of
uncertainty and cannot always be reliably predicted.
Prior to the Combination, the Board of TSG became aware of the
possibility of improper foreign payments by TSG or its subsidiaries
in certain jurisdictions outside of Canada and the United States
relating to its historical B2B business (which was never profitable
and effectively ceased operations in 2014). When this matter arose,
TSG contacted the relevant authorities in the United States and
Canada with respect to these matters and, following the
Combination, the Group continues to co-operate with the United
States and Canada governmental authorities in respect of all
inquiries. Based on its review to date, the Board of Flutter has
not identified issues that it believes would have a significant
adverse effect on the Group's financial position or business
operations.
The Group has seen a number of player claims in Austria for
reimbursement of historic gaming losses. We have provided our
remote services in Austria on the basis of multi-jurisdictional
Maltese licences and EU law, however the Austrian Courts consider
that our services are contrary to local law.
Together with its legal advisers, the Group is currently
reviewing its position and strongly disputes the basis of these
judgements. It is not possible at this stage to provide a
reasonable estimate of the contingent liability as the matter is
still at an early stage and unlikely to be fully resolved in the
short term.
19. Related parties
There were no material transactions with related parties during
the six months ended 30 June 2022, the six months ended 30 June
2021 or the year ended 31 December 2021.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
20. Events after the reporting date
Acquisition of Sisal
On 23 December 2021, the Group announced the acquisition of
Sisal, Italy's leading retail and online gaming operator, from CVC
Capital Partners Fund VI for announced consideration of
EUR1.91bn/GBP1.62bn subject to merger control clearance and
customary gaming and foreign investment consents. This acquisition
fully aligns with the Group's strategy of investing to build
leadership positions in regulated markets globally.
The transaction completed on 4 August 2022. The acquisition date
fair value accounting had not been completed as at 11 August
2022.
Borrowings
On 2 August 2022, the Group entered into the Third Amendment of
the Syndicated Facility Agreement receiving a principal balance of
EUR2.0bn first lien term loan priced at EURIBOR plus 3%, with a
maturity date in 2028. The funds were used for the acquisition of
Sisal.
In July and August 2022, the Group drew down an additional
GBP151.0m under the GBP Revolving Credit Facility.
Acquisition of remaining 49% shares of Adjarabet
On 1 July 2022, as outlined in more detail in Note 12, the Group
made a cash payment of EUR238.0m (GBP204m) in respect of the
acquisition of the remaining 49% outstanding shares of Adjarabet.
This acquisition brings the Group's holding in Adjarabet to 100% up
from the previous controlling interest of 51%. This liability has
been recorded as a current liability as at 30 June 2022.
INDEPENDENT REVIEW REPORT TO FLUTTER ENTERTAINMENT PLC
Conclusion
We have been engaged by Flutter Entertainment plc ('the
Company') to review the condensed consolidated set of financial
statements in the half-yearly financial report for the six months
ended 30 June 2022 which comprises the Condensed Consolidated
Interim Income Statement, the Condensed Consolidated Interim
Statement of Other Comprehensive Income, the Condensed Consolidated
Interim Statement of Financial Position, the Condensed Consolidated
Interim Statement of Cash Flows, the Condensed Consolidated Interim
Statement of Changes in Equity, a summary of significant accounting
policies and other explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half-yearly financial report for the
six months ended 30 June 2022 is not prepared, in all material
respects in accordance with International Accounting Standard 34
Interim Financial Reporting ("IAS 34") as adopted by the EU and the
Transparency (Directive 2004/109/EC) Regulations 2007
("Transparency Directive"), and the Central Bank (Investment Market
Conduct) Rules 2019 ("Transparency Rules of the Central Bank of
Ireland).
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (Ireland) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (Ireland) 2410") issued for use in Ireland. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (Ireland)
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We read the other information contained in the half-yearly
financial report to identify material inconsistencies with the
information in the condensed set of consolidated financial
statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the review. If
we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention that causes us to believe that the Directors have
inappropriately adopted the going concern basis of accounting, or
that the Directors have identified material uncertainties relating
to going concern that have not been appropriately disclosed .
This conclusion is based on the review procedures performed in
accordance with ISRE (Ireland) 2410. However, future events or
conditions may cause the Company to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
Company will continue in operation .
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Transparency Directive and the Transparency Rules of the
Central Bank of Ireland.
The Directors are responsible for preparing the condensed set of
consolidated financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the
EU.
As disclosed in Note 1, the annual financial statements of the
Group for the year ended 31 December 2021 are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU.
In preparing the condensed set of consolidated financial
statements, the Directors are responsible for assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to
liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Our conclusion, including our conclusions relating to going
concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion section of
this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the Transparency Directive and the Transparency
Rules of the Central Bank of Ireland. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
11 August 2022
KPMG
Chartered Accountants
1 Stokes Place
St. Stephen's Green
Dublin 2
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR PBMRTMTABBRT
(END) Dow Jones Newswires
August 12, 2022 02:00 ET (06:00 GMT)
Flutter Entertainment (LSE:FLTR)
Graphique Historique de l'Action
De Mar 2024 à Avr 2024
Flutter Entertainment (LSE:FLTR)
Graphique Historique de l'Action
De Avr 2023 à Avr 2024
