TIDMGVC
RNS Number : 6927Q
GVC Holdings PLC
14 September 2017
14 September 2017
GVC Holdings PLC
("GVC" or the "Group")
Interim Results
GVC Holdings PLC (LSE:GVC), the multinational sports betting and
gaming group, is pleased to announce its Interim Results for the
six months ended 30 June 2017.
Actual Pro forma(1)
Six months to 30 Constant
June 2017 2016 Change 2016 Change Currency
EURm EURm % EURm % %
------------------------ ------ ------- ------- ------ ------- ----------
Net Gaming Revenue 486.2 390.6 25 441.8 10 12
Revenue 472.8 382.1 24 432.0 9 11
Clean EBITDA(2) 133.9 91.2 47 104.4 28
Adjusted profit
before tax(3) 101.9 51.3 99
Adjusted fully diluted
EPS(4) (EURc) 31 20 55
Dividend per share 16.5 - -
(EURc) (5)
------------------------ ------ ------- ------- ------ ------- ----------
Financial highlights
-- NGR up 10% (+12% in constant currency) vs pro forma(1) H1 2016
-- Clean EBITDA(2) of EUR133.9m up 28% vs pro forma(1) H1 2016 (EUR104.4m)
-- Adjusted PBT(3) of EUR101.9m up 99% vs H1 2016 (EUR51.3m)
-- Statutory loss before tax EUR6.6m (H1 2016 loss EUR86.1m)
-- Adjusted fully diluted EPS(4) of 31c up 55% vs H1 2016 (20EURc)
-- Interim dividend 16.5EURc per share
-- Long-term refinancing secured
-- Net debt as at 30 June 2017 EUR150.7m (0.6 x LTM Clean EBITDA)
Operational highlights
-- Sports Brands gross win margin 9.8% (9.1% pro forma(1) H1 2016)
-- Sports Brands NGR up 11% (+13% constant currency) vs pro forma(1) H1 2016
-- Games Brands NGR up 8% (+10% constant currency) vs pro forma(1) H1 2016
-- On target to achieve EUR125m(6) synergy run rate by end of 2017
-- Disposal of Kalixa Group for EUR29m completed May 2017 and up
to EUR2.6m in deferred consideration
Current Trading (Q3 for period up to 10 September)
-- Daily Group NGR up 12% (+15% constant currency)
-- Underlying(7) daily NGR up 20% (+23% constant currency)
-- Board now expects Clean EBITDA for the current year to be
comfortably ahead of analysts consensus(8)
Kenneth Alexander (CEO) said:
"I am delighted with the strong progress across the Group, which
has continued to exceed our expectations since last year's
acquisition of bwin.party. A combination of high quality talent,
proprietary technology and proven brands are key components driving
the business forward. Scale and geographic diversification are
increasingly important as the regulatory environment evolves and
competition increases. The strong performance of the business
together with the smooth integration of bwin.party continues to
present exciting organic growth opportunities. In addition, given
its proven track record of creating shareholder value, GVC remains
well positioned to continue to play a pivotal role in the
industry's consolidation, should the right opportunities
arise."
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
(1) Assumes bwin.party acquired 1 January 2016
(2) EBITDA before exceptional items and share based payments
(3) Profits before exceptional items, amortisation associated
with acquisition, dividends from previously sold businesses,
impairments, changes in fair value of derivative financial
instruments and amortisation of early repayment of option on
loan
(4) Adjusted profit before tax(3) less tax associated with
adjusted profit(3)
(5) For the 2016 financial year 30EURc of dividends were paid
out in 2017
(6) Synergy target as disclosed in offer document dated 13
November 2015
(7) Underlying includes stripping out Euro 2016 and Kalixa
(8) 2017 Clean EBITDA forecast consensus EUR255.9m (range
EUR243.8m-EUR262.2m; source: Factset 08/09/17)
Presentation and live webcast
A presentation for analysts and investors will be held today at
9:30am BST in the offices of Nomura, 1 Angel Lane, London, EC4R
3AB.
The presentation will be webcast live and available at:
http://www.investis-live.com/gvc-holdings/59a6a1485c0472100016b2ca/jrsj
The presentation will also be accessible via a live conference
call.
Dial In Number: +44 (0)20 3059 8125
Conference password: GVC
There will also be a replay available for one week.
Dial in no: +44 (0)121 260 4861
Conference reference
number: 7016009#
An on demand replay will also be available on the GVC website
following the presentation.
- ends -
For further information:
GVC Holdings PLC
Kenneth Alexander, Chief Executive Tel: +44 (0) 1624
652 559
Paul Miles, Chief Financial Officer Tel: +44 (0) 20 3938
0079
Nick Batram, Head of Investor Relations Tel: +44 (0) 20 3938
& Corporate Strategy 0066
Media enquiries:
David Rydell, Jamie Ricketts, Laura Jaques Tel: +44 (0) 7798
646021
About GVC Holdings PLC
GVC Holdings PLC is a leading e-gaming operator in both B2C and
B2B markets. GVC has four business segments with a number of
brands; Sports Brands (bwin, Sportingbet, Gamebookers), Games
Brands (partypoker, partycasino, Foxy Bingo, Gioco Digitale,
CasinoClub), B2B and non-core assets. GVC acquired bwin.party
digital entertainment plc on 1 February 2016. The Group is
headquartered in the Isle of Man, is a constituent of the FTSE 250
index and has licences in more than 18 countries.
For more information see the Group's website:
www.gvc-plc.com
Chief Executive's review
The Group has continued to make strong progress, with the
integration of bwin.party substantially completed, in a little over
18 months since its acquisition in February 2016. As a consequence
we are on track to secure the targeted EUR125m of synergies
announced at the time of the bwin.party transaction, by the end of
the current year. The migration of the remaining territories onto
the bwin.party technology platform is expected to be completed by
the end of 2017.
Group NGR for the first six months rose 10% (+12% constant
currency) to EUR486.2m compared to pro forma EUR441.8m for the same
period in 2016 (actual NGR EUR390.6m). This was particularly
pleasing as the corresponding period last year was boosted by the
UEFA Euro 2016 tournament. Excluding these revenues, underlying NGR
growth for the period was 14%. A combination of top line growth and
synergy benefits meant Clean EBITDA of EUR133.9m represented a 28%
improvement on the pro forma EUR104.4m (EUR91.2m actual) reported
in H1 2016. As a result, the Clean EBITDA margin increased to 28%
(24% pro forma H1 2016).
The refinancing that replaced the Cerberus Loan with a six year
EUR250m Term Loan and EUR70m RCF, led to a significant reduction in
interest payable (pre exceptional costs) to EUR7.5m from EUR21.1m
in H1 2016. After share based payment costs of EUR10.5m (H1 2016
EUR6.5m), adjusted profit before tax was EUR101.9m, an increase of
99% on H1 2016 (EUR51.3m). Meanwhile, adjusted fully diluted EPS
rose 55% to 31EURc per share from 20EURc the previous year. An
interim dividend of 16.5EURc per share was also declared. In total,
this interim dividend together with the special and final dividends
declared in relation to the prior year, means that the Group will
have returned over EUR138m (46.5 EURc) to shareholders via dividend
payments in 2017.
Also in H1 we completed the disposal of our non-core payments
business, Kalixa Group, for a cash consideration of EUR29.0m and up
to EUR2.6m of deferred consideration.
Strategically, the organic growth potential remains exciting and
through further product development and increased marketing
investment we are well placed to pursue these opportunities.
However, we operate in an industry where regulation and increased
taxation present headwinds and these are best addressed through
scale and diversification. The combination of our people,
proprietary technology and proven M & A track record, means GVC
is well positioned to play a significant role in the industry's
ongoing consolidation. Our focus is to build further scale in
markets where we have identified an opportunity for expansion and
explore new fast growing markets, both in terms of products and
geography.
Operational overview
GVC operates through four divisions; Sports Brands, Games
Brands, B2B and Non-core.
Sports Brands
GVC operates a number of market leading sports brands including
bwin and Sportingbet. As well as sports betting, these brands also
offer an extensive range of gaming products in most markets in
which they operate.
The first half of 2017 saw a continuation of the positive
momentum reported in 2016 across all segments of Sports Brands,
despite the absence of a major football tournament during the
summer months. Amounts wagered were flat in constant currency ((1%)
reported), however, adjusting for the UEFA Euro 2016 tournament,
underlying wager growth was +4%. The sports gross win margin
improved to 9.8% (9.1%), broadly in line with our expectation of a
long-term average of 10%. Sports NGR rose 6% to EUR172.7m (+7% in
constant currency) compared to pro forma H1 2016 - adjusting for
UEFA Euro 2016, underlying NGR growth was +15%. Gaming NGR from
Sports Brands continues to grow strongly, driven by improved
product and more effective CRM. During the period, gaming NGR rose
16% to EUR182.4m against pro forma 2016.
Pro forma Actual
Six months to 30 Constant
June (EURm) 2017 2016 Change currency 2016
--------------------- -------- ---------- ------- ---------- --------
Sports wagers 2,265.2 2,298.6 (1%) 0% 2,082.6
Sports margin % 9.8% 9.1% 9.2
Sports NGR 172.7 163.4 6% 7% 146.2
Gaming / other 182.4 157.2 16% 18% 141.3
--------------------- -------- ---------- ------- ---------- --------
NGR 355.1 320.6 11% 13% 287.5
EU VAT (9.8) (8.2) (20%) (7.1)
--------------------- -------- ---------- ------- ---------- --------
Revenue 345.3 312.4 11% 13% 280.4
Contribution 194.2 177.7 9% 157.6
Contribution margin
% 55% 55% 55%
Contribution from Sports Brands increased 9% to EUR194.2m
(EUR177.7m pro forma H1 2016), with the margin 55% (55% pro forma
H1 2016). Marketing spend as a percentage of NGR was 19% (18% pro
forma H1 2016) and, as previously guided, we expect this to rise in
H2 as we return to more normalised levels of investment.
Looking ahead, we have continued to add new games content and
believe we have one of the strongest offerings in the industry.
Sports product development will be a particular focus going
forward, with a significant pipeline of enhancements. Our new
tennis product was launched during the summer and this was well
received by customers. We are now less than 12 months from the FIFA
World Cup in Russia and our marketing and product development
roadmaps are very much focused around the run up to the industry's
most popular betting event.
August saw the launch of a new ambitious marketing campaign for
the bwin brand. Early results are very encouraging with new sign
ups and first time deposit ("FTDs") values up 113% and 98%
respectively in the DACH region. Equally pleasing has been the
performance of the campaign in the regulated markets of Belgium,
Italy and Spain, where FTDs year on year in August have risen by
between 50%-200%. The combination of an increasing number of new
customers together with continuous product enhancement, should
deliver material long-term benefits to the Group.
Games Brands
The Group owns a portfolio of well-established stand-alone
gaming brands including partypoker, partycasino, CasinoClub, Gioco
Digitale and Foxy Bingo.
Pro forma Actual
Six months to 30 Constant
June (EURm) 2017 2016 Change currency 2016
--------------------- ------ ---------- ------- ---------- -------
Sports wagers 34.8 31.1 12% 11% 24.8
Sports margin % 13.9% 8.4% 8.4%
Sports NGR 1.9 2.3 (19%) (20%) 1.9
Gaming / other 110.5 101.3 9% 11% 86.5
--------------------- ------ ---------- ------- ---------- -------
NGR 112.4 103.6 8% 10% 88.4
EU VAT (3.6) (1.6) (112%) (1.4)
--------------------- ------ ---------- ------- ---------- -------
Revenue 108.8 102.0 7% 9% 87.0
Contribution 39.2 44.4 (12%) 38.2
Contribution margin
% 35% 43% 43%
Prior to its acquisition, Games Brands were the most challenged
segment within bwin.party. It is therefore pleasing to report that
after returning the division to growth during H2 2016, after many
years of decline, the performance of Games Brands accelerated
markedly through the first six months of 2017. Divisional NGR
increased 8% (+10% constant currency) to EUR112.4m (EUR103.6m pro
forma H1 2016), whilst the contribution decreased to EUR39.2m
(EUR44.4m pro forma H1 2016) - due to timing of investment,
particularly in partypoker.
The strongest performance came from partypoker, where NGR rose
32%, whilst the value of deposits increased 48%. A combination of
factors are behind the impressive growth including product
development, increased marketing, localised market focus and
improved player experience. From a contribution perspective, we
expect to see the benefits of the increased investment in
partypoker to come through in the second half of the current year
and beyond. Indeed, Q3 has seen a further acceleration in deposit
value and NGR growth.
Casino brands also achieved positive growth with CasinoClub,
Gioco Digitale and partycasino all delivering improved top line
performances in H1 2017. CasinoClub continues to benefit from one
of the most loyal customer bases in the industry, with more than
two thirds of revenues coming from those that have been with the
brand for five years or more. Gioco Digitale's performance is
equally as pleasing with deposits growing strongly in H1.
Bingo is the smallest product vertical for the Group and a
deliberate decision was made to significantly reduce marketing
spend in the first six months. Accordingly whilst revenue declined
in H1 2017, contribution was significantly higher. During the first
half Foxy was relaunched with Hollywood actress, Heather Graham,
being the new face of the brand. The second half has started well
with Cashcade returning to top line growth in Q3.
Although there has been a significant improvement within Games
Brands, there is much more yet to come in terms of product and the
overall customer experience. All the acquired bwin.party brands
have been reinvigorated and we expect further progress in the
second half of the year and beyond.
B2B
Pro forma Actual
Six months to 30
June (EURm) 2017 2016 Change 2016
--------------------- ----- ---------- ------- -------
Revenue 7.6 6.5 17% 5.6
Contribution 7.7 6.4 20% 5.5
Contribution margin
% 101% 98% 98%
The Group provides B2B services for a number of well-known
gaming companies including MGM, Danske Spil and PMU. B2B offers the
potential for the Group to gain access to markets where stand-alone
or acquisition opportunities are more limited.
At the end of 2016 we expanded our relationship with MGM to
launch new brands into the New Jersey online market, beyond the
existing Borgata offering. A new MGM branded casino and poker offer
was subsequently launched in August 2017. We continue to evaluate
further B2B opportunities in the US as further states, such as
Pennsylvania, look to regulate online gaming. In June we announced
a partnership with one of Russia's leading media groups, Rambler
Media, to launch a licenced online sports betting proposition. GVC
will provide technology and associated services, along with
licencing the bwin brand to the venture. The new site, bwin.ru, is
expected to go live before the end of the year.
We continue to have an active pipeline of B2B opportunities.
Non-core
Pro forma Actual
Six months to 30
June (EURm) 2017 2016 Change 2016
--------------------- ------ ---------- ------- -------
Revenue 11.1 11.1 0% 9.1
Contribution (0.3) (0.4) 25% (0.4)
Contribution margin
% (3%) (4%) (4%)
Following the disposal of Kalixa in May, the division solely
consists of InterTrader, our financial spread betting and CFD
business. Prior to its disposal at the end of May, Kalixa
contributed revenues of EUR6.1m in the period (EUR7.6m pro forma H1
2016). InterTrader revenues in constant currency grew 62% against
pro forma H1 2016, with the previous year being impacted by the
migration to a new platform provider.
Regulatory update
The regulatory landscape continues to evolve across the globe,
particularly Continental Europe. Whilst we welcome sustainable and
fair legislation, the national regulatory regimes across EU Member
States differ significantly due to the lack of harmonised gaming
rules at EU level.
In H1 2017, approximately 68% of Group NGR was derived from
territories where we are licensed or currently pay gaming taxes/VAT
or where a licensing structure is in the process of being
implemented.
During the period under review, we withdrew our licence
application in the Czech Republic. We believe the opaque licensing
process falls someway short of being compliant with the principals
of EU law. Poland also introduced new legislation in 2017, which
creates an online casino monopoly, which in our opinion is clearly
contrary to EU law. We continue to support industry attempts to
improve legislation through the EU legal process.
In Germany, following elections, the state of Schleswig-Holstein
has said it will not ratify proposed amendments to the State Gaming
Treaty that were proposed in November 2016. The key amendment was a
removal of the ceiling of the number of sports licences but with no
change to the inability to gain licences for poker and casino.
Schleswig-Holstein is currently the only state in Germany that
licences all gaming verticals and is calling for other states to
adopt its regulatory structure.
Current trading and outlook
The strong trading reported for the first two quarters has
continued into Q3. Daily Group NGR is up 12% (for the period up to
10 September) against the corresponding period last year. In
constant currency, daily NGR is up 15%. Underlying daily NGR which
includes stripping out Euro 2016 and Kalixa is up 20% (23% constant
currency). As a consequence of this together with the performance
achieved during the first half, the Board now expects Group Clean
EBITDA for the current year to be comfortably ahead of the current
analysts' consensus forecast of EUR255.9m.
Chief Financial Officer's review
The purchase of bwin.party was completed on 1 February 2016 and
in order to compare results on a like for like basis, pro forma H1
2016 assumes the acquisition took place on 1 January 2016. A
summary of revenue, contribution and expenditure by reporting
segment is shown below.
Pro forma Actual
Six months to 30 June 2017 2016 2016
EURm EURm EURm
----------------------- -------- ---------- --------
Sports brands 2,265.2 2,298.6 2,082.6
Games brands 34.8 31.1 24.8
----------------------- -------- ---------- --------
Sports wagers 2,300.0 2,329.7 2,107.4
----------------------- -------- ---------- --------
Sports margin % 9.8 9.1 9.2
Sports brands 355.1 320.6 287.5
Games brands 112.4 103.6 88.4
B2B 7.6 6.5 5.6
----------------------- -------- ---------- --------
Core 475.1 430.7 381.5
Non-core 11.1 11.1 9.1
----------------------- -------- ---------- --------
NGR 486.2 441.8 390.6
EU VAT (13.4) (9.8) (8.5)
----------------------- -------- ---------- --------
Revenue 472.8 432.0 382.1
----------------------- -------- ---------- --------
Sports brands 194.2 177.7 157.6
Games brands 39.2 44.4 38.2
B2B 7.7 6.4 5.5
----------------------- -------- ---------- --------
Core 241.1 228.5 201.3
Non-core (0.3) (0.4) (0.4)
----------------------- -------- ---------- --------
Contribution 240.8 228.1 200.9
----------------------- -------- ---------- --------
Sports brands 55% 55% 55%
Games brands 35% 43% 43%
B2B 101% 99% 98%
----------------------- -------- ---------- --------
Core 51% 53% 53%
Non-core (3%) (4%) (4%)
----------------------- -------- ---------- --------
Contribution margin 50% 52% 51%
----------------------- -------- ---------- --------
Core (80.5) (94.6) (84.2)
Non-core (6.3) (8.5) (7.1)
Corporate (20.1) (20.6) (18.4)
----------------------- -------- ---------- --------
Expenditure (106.9) (123.7) (109.7)
----------------------- -------- ---------- --------
Core 160.6 133.9 117.1
Non-core (6.6) (8.9) (7.5)
Corporate (20.1) (20.6) (18.4)
----------------------- -------- ---------- --------
Clean EBITDA 133.9 104.4 91.2
----------------------- -------- ---------- --------
NGR and Revenue
NGR increased 25% to EUR486.2m for the six months to 30 June
2017 (+10% pro forma H1 2016), whilst on a constant currency basis
growth on pro forma H1 2016 was +12%. GVC is an internationally
diverse business, with Euro denominated business accounting for
c55% of NGR. Key non Euro currencies include Pound Sterling (c10%
of NGR) and Turkish Lira (c10%).
The Group pays VAT on gaming revenues in a number of European
countries, the most significant being Germany. After VAT of
EUR13.4m, (EUR8.5m H1 2016) revenues during the period were
EUR472.8m vs EUR382.1m for the same period in 2016 (EUR432.0m pro
forma H1 2016).
Variable costs and contribution
The key component parts of variable costs continue to include
betting taxes and duties, payment processing costs, software
royalties, affiliate commissions, partner shares and marketing
costs.
Contribution after variable costs in the period was EUR240.8m,
up from EUR200.9m in H1 2016 (EUR228.1m pro forma H1 2016). The
contribution margin decreased to 50% from pro forma 52%. Marketing
costs increased as a proportion of NGR to 24% in H1 2017 vs 21% for
pro forma H1 2016. As guided, in 2016 marketing cost was lower than
normal due to the restructuring of bwin.party post the acquisition
and in 2017 we expect to return to a more normalised level of
23-25% of NGR. There was some non-material, incremental cost in
gaming taxes. Software royalties also increased as a proportion
reflecting the strong cross sell performance from Sports Brands.
However, underlying royalty costs have reduced as part of the
targeted synergy benefits.
Expenditure
The principle expenditure items are personnel and technology
costs, which combined account for 84% of the fixed cost base. Other
significant costs include real estate, travel and professional
fees.
Pro forma Actual
Six months to 30 June 2017 2016 2016
EURm EURm EURm
------------------------------ ------- ---------- -------
Personnel expenditure 65.0 70.3 61.7
Professional fees 8.8 9.7 8.3
Technology costs 24.9 35.9 32.5
Office, travel and other
costs 9.8 12.6 10.7
Foreign exchange differences (1.6) (4.8) (3.5)
------------------------------ ------- ---------- -------
106.9 123.7 109.7
------------------------------ ------- ---------- -------
Against pro forma H1 2016, costs decreased by 14% to EUR106.9m.
Personnel costs reflect a change in the bonus structure reflecting
a greater provision than in the corresponding period last year.
Clean EBITDA
While Clean EBITDA is a non GAAP measure, it is used by the
Group's management to assess the underlying performance of the
business. Clean EBITDA for the period under review was EUR133.9m,
compared to EUR91.2m reported for H1 2016 (EUR104.4m pro forma H1
2016). As a result the Clean EBITDA margin improved to 28% vs 24%
for pro forma H1 2016.
Depreciation and amortisation
Depreciation for the period was EUR8.7m, while total
amortisation was EUR65.4m. Amortisation consists of EUR5.9m
associated with internally generated assets and EUR59.5m relating
to assets recognised on acquisition.
Six months to 30 June 2017 2016
EURm EURm
------------------------------------ ----- -----
Depreciation 8.7 10.4
Amortisation
- intangible assets recognised
on acquisition 59.5 52.2
- internally generated intangibles 5.9 2.9
------------------------------------ ----- -----
74.1 65.5
------------------------------------ ----- -----
Exceptional items
Total exceptional costs incurred during the period amounted to
EUR15.7m, of which EUR11.1m were associated with the restructuring
post the bwin.party acquisition.
Six months to 30 June 2017 2016
EURm EURm
M & A costs 2.3 46.1
Premium listing application
costs - 4.4
Reorganisation costs 11.1 5.1
Accelerated depreciation - 12.5
Progressive jackpots - 7.6
Foreign exchange on deposit 0.3 13.6
Legal settlements 0.8 -
Other 1.2 -
----------------------------- ----- -----
Total 15.7 89.3
----------------------------- ----- -----
Operating profit
The Group reported an operating profit of EUR9.5m for the period
compared to a loss of EUR60.8m for the same period in 2016.
Excluding exceptional items, amortisation associated with the
acquisition of bwin.party, impairments of assets held for sale and
available for sale assets and changes in the fair value of
derivative financial instruments, adjusted operating profit was
EUR108.8m vs EUR71.4m for H1 2016.
Financing charges
During the first half of 2017, the Cerberus Loan was repaid in
full by a bridging facility provided by Nomura International plc.
The Nomura facility was subsequently replaced by a EUR250m six year
Term Loan and EUR70m revolving credit facility.
Six months to 30 June 2017 2016
EURm EURm
----------------------------- ----- -----
Loan interest 7.3 21.1
Amortisation of loan fees
and early repayment option 9.2 8.3
Other interest 0.2 -
16.7 29.4
----------------------------- ----- -----
Interest payments in the period were EUR7.3m, whilst
amortisation and other charges associated with the refinancing
deals amounted to EUR9.2m. In aggregate net finance charges
totalled EUR16.5m in H1 2017.
(Loss)/profit after tax
The Group reported a pre-tax loss of EUR6.6m for the period
compared to a loss of EUR86.1m for H1 2016. Excluding exceptional
items, amortisation of acquired intangibles, impairments, changes
in the value of derivative instruments and loan amortisation fees,
adjusted pre-tax profit for the first six months was EUR101.9m
(EUR51.3m).
Six months to 30 June 2017 2016
EURm EURm
-------------------------------------- ------ --------
Loss before tax (6.6) (86.1)
Exceptional items 15.7 89.3
Impairment of available for
sale asset - 4.8
Impairment of assets held 1.6 -
for sale
Changes in the fair value
of derivative instruments 22.5 (14.1)
Amortisation of acquired intangibles 59.5 52.2
Dividend income - (3.1)
Amortisation of loan fees
and early repayment options 9.2 8.3
-------------------------------------- ------ --------
Adjusted profit before tax 101.9 51.3
Taxation (7.8) (1.2)
-------------------------------------- ------ ----------
Adjusted profit 94.1 50.1
-------------------------------------- ------ --------
Adjusted fully diluted earnings
per share (EURc) 31 20
Taxation
The total tax charge for the period amounted to EUR0.9m, the
corporation tax charge was EUR8.2m and there was a deferred tax
credit of EUR7.3m.
Earnings per share
Reported EPS for the period was a loss of 2EURc compared to a
loss of 33EURc for the corresponding period in 2016. Adjusted fully
diluted EPS (based on adjusted profit) was 3EURc vs 20EURc in H1
2016.
Dividends
A special dividend of 14.9EURc per share was declared in
December 2016 and subsequently paid in February 2017. A final
dividend of 15.1EURc per share in relation to the 2016 financial
year was declared in March 2017 and paid to shareholders in May
2017.
An interim dividend of 16.5EURc per share has been declared and
will be paid on 19 October 2017. The interim dividend declared is
expected to represent 50% of the aggregate full year payout. As
previously announced, we will pursue a progressive dividend policy,
reflecting the growth in business and aiming to return no less than
50% of free cash flow.
Dividend timetable
14 September 2017 Dividend declared
21 September 2017 Ex-dividend date
22 September 2017 Record date
19 October 2017 Payment
Cash flow
Six months to 30 June 2017 2016
EURm EURm
----------------------------------------- --------- --------
Clean EBITDA 133.9 91.2
Capitalised software development (11.5) (8.2)
Other intangible asset purchases (2.7) (4.4)
Property, plant and equipment purchases (7.1) (4.4)
Interest paid including loan costs (32.2) (20.9)
Corporate taxes (12.4) (5.2)
Other working capital movements (38.1) (40.7)
----------------------------------------- --------- --------
Free cash flow before exceptional
costs 29.9 7.4
Exceptional items (cash) (15.7) (59.7)
Acquisitions (net of cash acquired) - (186.9)
Proceeds from issued share capital
net of costs 25.6 192.0
Proceeds from disposals 29.0 6.6
Interest bearing loan drawdown 500.0 380.0
Loan repayments (636.5) (42.0)
Dividends paid (88.8) -
Other cash movements 1.1 10.9
----------------------------------------- --------- --------
Net cash generated (155.4) 308.3
Foreign exchange - 1.0
Cash and cash equivalents at beginning
of period 367.0 28.2
----------------------------------------- --------- --------
Cash and cash equivalents at the
end of period 211.6 337.5
----------------------------------------- --------- --------
Free cash flow in the period was EUR29.9m. There was a net
working capital outflow of EUR38.1m, which was principally due to
the settlement of staff bonuses and trade payables. Capital
expenditure during the first half was EUR21.3m, of which EUR11.5m
represented investment in internally generated assets. We expect
capital expenditure for the full year to be around EUR35-40m.
Exceptional cash costs predominantly associated with the
restructuring of the business post the acquisition of bwin.party
amounted to EUR15.7m. For the year as a whole we anticipate the
exceptional cash cost being in the range of EUR25-35m.
The Group incurred interest and financing fees of EUR32.2m in
the first half, the majority of which related to the redemption of
the Cerberus Loan. Other notable cash movements included dividends
(EUR88.8m) and EUR25.6m received from the exercise of share
options. During the period there was a net cash outflow of
EUR155.4m predominantly as a result of reducing the Group's
borrowings from EUR386.5m to EUR250m.
Net debt and liquidity
During the first half the Group successfully refinanced its debt
facilities, extending the term and significantly reducing the cost.
The Group's debt facilities consist of a Euribor +3.25% EUR250m six
year term loan and a EUR70m revolving credit facility. Net debt as
at 30 June 2017 was EUR150.7m, representing leverage of 0.6x (last
twelve months Clean EBITDA).
Six months to 30 June 2017 2016
EURm EURm
------------------------------- --------- ---------
Loans due <1 year - (400.0)
Loans due >1 year (250.0) -
------------------------------- --------- ---------
Gross debt (250.0) (400.0)
Cash and cash equivalents 211.6 337.5
Less client liabilities (112.3) (107.8)
------------------------------- --------- ---------
Net debt (150.7) (170.3)
Cash in transit with payment
processors 46.2 57.6
------------------------------- --------- ---------
Net debt adjusted for payment
processors (104.5) (112.7)
------------------------------- --------- ---------
Review of balance sheet
A summarised balance sheet is shown below.
As at As at 31
30 June December
(EURm) 2017 2016
Goodwill 1,090.3 1,090.3
Other intangible assets 467.1 519.1
Other non-current assets 27.2 28.3
Total non-current assets 1,584.6 1,637.7
Cash & cash equivalents 211.6 354.8
Trade receivables 109.7 105.2
Other current assets 19.1 98.0
Total current assets 340.4 558.0
Total assets 1,925.0 2,195.7
Trade and other payables (73.3) (93.9)
Balances with customers (112.3) (112.0)
Progressive prize pools (15.3) (22.8)
Loans and borrowings (1.8) (403.5)
Other current liabilities (70.6) (89.3)
Total current liabilities (273.3) (721.5)
Loans and borrowings (246.6) -
Deferred tax (59.2) (65.6)
Other non-current liabilities (10.8) (11.3)
Total non-current liabilities (316.6) (76.9)
Total net assets 1,335.1 1,397.3
The most significant movement in the balance sheet is the
decrease in current liabilities and the increase in non-current
liabilities. This reflects the debt refinancing undertaken in the
first half, with the full repayment of the outstanding Cerberus
loan and associated liabilities (EUR403.5m as at 31 December 2016)
and replacement by the EUR250m 6 year term loan detailed above.
Paul Miles
Chief Financial Officer
Principal risks
The principal risks which could impact the Group for the
remainder of the year are set out below. Further information on
these risks and actions taken by the Group to mitigate them are
disclosed on pages 32 to 33 of the Group's 2016 Annual Report.
Technology
-- Denial of Service attacks or similar
-- Natural or man-made disasters may affect continuity of operations
-- Migration of brands to the acquired bwin.party technology platform
Regulatory
-- Ensuring compliance in regulated markets
-- Additional regulation and enforcement
Taxation
-- Imposition of additional gaming or other indirect taxes
-- Changes in VAT rules within the EU impacting the digital economy
Country and currency risk
-- Macro-economic decline in core European markets
-- Devaluation of the Group's operating currency
Impact of Brexit
-- Potential reduction of the Group's ability to challenge protectionist measures at EU level
Statement of Directors' Responsibilities
The Directors confirm that to the best of their knowledge:
-- The unaudited condensed consolidated set of financial
information has been prepared in accordance with IAS 34 'Interim
Financial Reporting'; and
-- The interim management report includes a fair review of the
information required by: (a) DTR 4.2.7R, being an indication of
important events that have occurred during the first six months of
the financial year and their impact on the condensed consolidated
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; (b) DTR 4.2.8R, being material related party
transactions that have taken place in the first six months of the
current financial year and any material changes in the related
party transactions described in the Annual Report for the year
ended 31 December 2016.
The Directors of GVC Holdings PLC are listed on the GVC website:
www.gvc-plc.com.
By order of the Board
Robert Hoskin
Company Secretary
13 September 2017
Independent review report to GVC Holdings PLC
Introduction
We have reviewed the condensed set of financial statements in
the half-yearly financial report of GVC Holdings PLC (the company)
for the six months ended 30 June 2017, which comprises the
Condensed Consolidated Income Statement, the Condensed Consolidated
Statement of Comprehensive Income, the Condensed Consolidated
Statement of Financial Position, the Condensed Consolidated
Statement of Changes in Equity, the Condensed Consolidated
Statement of Cash Flows and the related notes. We have read the
other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company, as a body, in
accordance with International Standard on Review Engagements (UK
and Ireland) 2410, 'Review of Interim Financial Information
performed by the Independent Auditor of the Entity'. Our review
work has been undertaken so that we might state to the company
those matters we are required to state to it in an independent
review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company as a body, for our review work, for
this report, or for the conclusion we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity'. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2017 is not prepared, in all material respects, in accordance
with International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
13 September 2017
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 30 June 2017
Period Ended Period Ended
30 June 30 June
2017 2016
(Unaudited) (Unaudited)
Notes EURm EURm
------------------------------------------- --- ----- ------------ ------------
NGR 486.2 390.6
EU VAT (13.4) (8.5)
------------------------------------------------ ----- ------------ ------------
Revenue 2 472.8 382.1
Cost of sales (232.0) (181.2)
------------------------------------------------ ----- ------------ ------------
Contribution 2 240.8 200.9
Administrative costs 3 (106.9) (109.7)
------------------------------------------------ ----- ------------ ------------
Clean EBITDA 133.9 91.2
Share based payments 11 (10.5) (6.5)
Exceptional items 3 (15.7) (89.3)
Depreciation and amortisation 3 (74.1) (65.5)
Impairment of assets held for sale 8 (1.6) -
Impairment of available for sale asset - (4.8)
Changes in the fair value of derivative
financial instruments 9 (22.5) 14.1
Operating profit (loss) 9.5 (60.8)
Financial income 0.6 0.9
Financial expense 4 (16.7) (29.4)
Dividend income - 3.1
Share of profit of associate - 0.1
------------------------------------------------ ----- ------------ ------------
Loss before tax (6.6) (86.1)
Taxation (expense) credit 5 (0.9) 1.9
------------------------------------------------ ----- ------------ ------------
Loss after tax (7.5) (84.2)
------------------------------------------------ ----- ------------ ------------
Loss after tax for the period attributable
to:
------------------------------------------- --- ----- ------------ ------------
Owners of the parent (7.3) (84.0)
Non-controlling interests (0.2) (0.2)
Loss per share EUR EUR
------------------------------------------- --- ----- ------------ ------------
Basic 6 (0.02) (0.33)
------------------------------------------------ ----- ------------ ------------
Diluted 6 (0.02) (0.33)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2017
Period Ended Period Ended
30 June 2017
(Unaudited) 30 June
2016
(Unaudited)
Notes EURm EURm
--------------------------------------------- ---- ------- ---- ------------- --------------
Loss for the period (7.5) (84.2)
Other comprehensive expense
Items that will be reclassified subsequently
to profit or loss:
Exchange differences on translation
of foreign operations (2.5) (3.1)
------------------------------------------------------------------ ------------- --------------
Total comprehensive expense for the
period (10.0) (87.3)
------------------------------------------------------------------ ------------- --------------
Loss after tax for the period attributable
to:
---------------------------------------------- ---- ------- --- ------------- ------------
Owners of the parent (9.8) (87.1)
Non-controlling interests (0.2) (0.2)
---------------------------------------------- ---- ------- --- ------------- ------------
The notes on pages 19 to 30 form part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 June 2017
30 June 2017 31 December 30 June 2016
2016 (Audited)
(Unaudited) (Unaudited)
Notes EURm EURm EURm
---------------------------------------- --- ----- ------------ --------------- ------------
Non-current assets
Intangible assets 7 1,557.4 1,609.4 1,660.8
Property, plant and equipment 18.1 19.7 20.0
Trade and other receivables 3.9 4.9 -
Investments and available for
sale financial assets 4.0 3.7 1.4
Deferred tax 5 1.2 - 0.8
Total non-current assets 1,584.6 1,637.7 1,683.0
--------------------------------------------- ----- ------------ --------------- ------------
Current assets
Trade and other receivables 109.7 105.2 116.3
Derivative financial assets 3.7 26.2 25.3
Income and other taxes reclaimable 8.5 6.7 8.6
Short term investments 4.9 5.4 5.3
Cash and cash equivalents 211.6 354.8 302.9
Assets in disposal groups classified
as held for sale 8 2.0 59.7 75.3
--------------------------------------------- ----- ------------ --------------- ------------
Total current assets 340.4 558.0 533.7
--------------------------------------------- ----- ------------ --------------- ------------
Total assets 1,925.0 2,195.7 2,216.7
Current liabilities
Trade and other payables (73.3) (93.9) (75.9)
Balances with customers (112.3) (112.0) (107.8)
Progressive prize pools (15.3) (22.8) (18.4)
Amounts due under finance leases - - (0.2)
Loans and borrowings 9 (1.8) (403.5) -
Provisions (1.1) (1.2) (8.9)
Income taxes payable (14.9) (18.2) (15.5)
Other taxation payable (53.5) (47.2) (40.2)
Liabilities in disposal groups
classified as held for sale 8 (1.1) (22.7) (29.8)
--------------------------------------------- ----- ------------ --------------- ------------
Total current liabilities (273.3) (721.5) (296.7)
--------------------------------------------- ----- ------------ --------------- ------------
Current assets less current liabilities 67.1 (163.5) 237.0
Non-current liabilities
Trade and other payables (4.3) (4.4) (1.8)
Loans and borrowings 9 (246.6) - (408.1)
Provisions (6.5) (6.9) -
Deferred tax 5 (59.2) (65.6) (70.9)
--------------------------------------------- ----- ------------ --------------- ------------
Total non-current liabilities (316.6) (76.9) (480.8)
--------------------------------------------- ----- ------------ --------------- ------------
Total net assets 1,335.1 1,397.3 1,439.2
--------------------------------------------- ----- ------------ --------------- ------------
Capital and reserves
Issued share capital 3.0 2.9 2.9
Merger reserve 40.4 40.4 40.4
Share premium 1,503.9 1,478.4 1,477.6
Translation reserve (4.5) (2.0) (2.8)
Retained earnings (206.0) (120.9) (77.5)
--------------------------------------------- ----- ------------ --------------- ------------
Total equity attributable to equity
holders of the parent 1,336.8 1,398.8 1,440.6
Non-controlling interests (1.7) (1.5) (1.4)
--------------------------------------------- ----- ------------ --------------- ------------
Total equity 1,335.1 1,397.3 1,439.2
--------------------------------------------- ----- ------------ --------------- ------------
The notes on 19 to 30 form part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2017
Non-
Share Merger Share Translation Retained Controlling Total
Capital Reserve Premium Reserve Earnings Total interest equity
EURm EURm EURm EURm EURm EURm EURm EURm
----------------------- -------- -------- -------- ----------- --------- ------- ------------ --------
Balance at 1 January
2016 (audited) 0.6 40.4 85.4 0.3 1.4 128.1 - 128.1
Share based payments - - - - 5.9 5.9 - 5.9
Share options
surrendered - - - - (0.8) (0.8) - (0.8)
Share options exercised - - 0.3 - - 0.3 - 0.3
Issue of share capital
for the acquisition
of bwin.party 2.3 - 1,391.9 - - 1,394.2 - 1,394.2
Resulting from the
acquisition of
bwin.party - - - - - - (1.2) (1.2)
----------------------- -------- -------- -------- ----------- --------- ------- ------------ --------
Transactions with
owners 2.3 - 1,392.2 - 5.1 1,399.6 (1.2) 1,398.4
----------------------- -------- -------- -------- ----------- --------- ------- ------------ --------
Loss for the period
attributable to the
parent - - - - (84.0) (84.0) - (84.0)
Loss for the period
attributable to the
non-controlling
interest - - - - - - (0.2) (0.2)
Other comprehensive
expense attributable
to the parent - - - (3.1) - (3.1) - (3.1)
Other comprehensive - - - - - - - -
income attributable
to the non-controlling
interest
----------------------- -------- -------- -------- ----------- --------- ------- ------------ --------
Total comprehensive
income for the period - - - (3.1) (84.0) (87.1) (0.2) (87.3)
----------------------- -------- -------- -------- ----------- --------- ------- ------------ --------
Balance as at 30 June
2016 (unaudited) 2.9 40.4 1,477.6 (2.8) (77.5) 1,440.6 (1.4) 1,439.2
----------------------- -------- -------- -------- ----------- --------- ------- ------------ --------
Balance at 1 January
2017 (audited) 2.9 40.4 1,478.4 (2.0) (120.9) 1,398.8 (1.5) 1,397.3
Share based payments - - - - 11.0 11.0 - 11.0
Share options - - - - - - - -
surrendered
Share options exercised 0.1 - 25.5 - - 25.6 - 25.6
Dividends paid - - - - (88.8) (88.8) - (88.8)
Transactions with
owners 0.1 - 25.5 - (77.8) (52.2) - (52.2)
Loss for the period
attributable to the
parent - - - - (7.3) (7.3) - (7.3)
Loss for the period
attributable to the
non-controlling
interest - - - - - - (0.2) (0.2)
Other comprehensive
expense attributable
to the parent - - - (2.5) - (2.5) - (2.5)
Other comprehensive - - - - - - - -
income attributable
to the non-controlling
interest
Total comprehensive
income for the period - - - (2.5) (7.3) (9.8) (0.2) (10.0)
----------------------- -------- -------- -------- ----------- --------- ------- ------------ --------
Balance as at 30 June
2017 (unaudited) 3.0 40.4 1,503.9 (4.5) (206.0) 1,336.8 (1.7) 1,335.1
----------------------- -------- -------- -------- ----------- --------- ------- ------------ --------
All reserves of the Company are distributable, as under the Isle
of Man Companies Act 2006 distributions are not governed by
reserves but by the Directors undertaking an assessment of the
Company's solvency at the time of distribution (section 49, 2006
Companies Act Isle of Man).
The notes on pages 19 to 30 form part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2017
Period Period
Ended Ended
30 June 30 June
2017 2016
(Unaudited) (Unaudited)
Notes EURm EURm
---------------------------------------------------- ----- ------------ ------------
Cash flows from operating activities
Cash receipts from customers 499.5 398.1
Cash paid to suppliers and employees (419.4) (407.3)
Interest paid including initial costs and
loan servicing 9 (32.2) (20.9)
Corporate taxes paid (12.4) (5.2)
Net cash generated (used) in operating activities 35.5 (35.3)
---------------------------------------------------- ----- ------------ ------------
Cash flows from investing activities
Interest received 0.6 0.9
Dividends received - 3.1
Acquisition earn-out payments (Betboo) - (1.2)
Acquisition of bwin.party (net of cash acquired) - (186.9)
Acquisition of property, plant and equipment (7.1) (4.4)
Proceeds from disposal of assets held for
sale 8 29.0 6.6
Capitalised development costs and other intangibles 7 (14.2) (12.6)
Decrease in short term investments 0.5 8.1
---------------------------------------------------- ----- ------------ ------------
Net cash generated (used) in investing activities 8.8 (186.4)
---------------------------------------------------- ----- ------------ ------------
Cash flows from financing activities
Proceeds from interest bearing loans 9 500.0 380.0
Repayment of non-interest bearing loan (from
William Hill) - (3.0)
Proceeds from issue of share capital, net
of costs 25.6 192.0
Repayment of borrowings 9 (636.5) (39.0)
Dividends paid 10 (88.8) -
---------------------------------------------------- ----- ------------ ------------
Net cash (used) generated from financing
activities (199.7) 530.0
---------------------------------------------------- ----- ------------ ------------
Net (decrease) increase in cash and cash
equivalents (155.4) 308.3
Exchange differences - 1.0
Cash and cash equivalents at beginning of
the period 367.0 28.2
Cash and cash equivalents at end of the period 211.6 337.5
---------------------------------------------------- ----- ------------ ------------
Cash and cash equivalents
The balance at 30 June 2016 of EUR337.5 million consists of
EUR302.9 million cash and cash equivalents as shown on the face of
the condensed consolidated statement of financial position and
EUR34.6 million of cash and cash equivalents recognised within
assets held for sale.
The notes on pages 19 to 30 form part of these financial
statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 30 June 2017
1. Basis of preparation
2. Segmental reporting
3. Operating costs
4. Financial expense
5. Taxation
6. Earnings per share
7. Intangibles
8. Assets and liabilities classified as held for sale
9. Loans and borrowings
10. Dividends
11. Share option schemes
12. Related parties
13. Contingent liabilities and capital commitments
1. BASIS OF PREPARATION
1.1 General information and accounting policies
GVC Holdings PLC is a company registered in the Isle of Man and
was incorporated on 5 January 2010. It is the successor company of
Gaming VC Holdings S.A., a company which had been incorporated in
Luxembourg, and took the assets of Gaming VC Holdings S.A. on 21
May 2010 after formal approval by shareholders. The condensed
consolidated financial statements of the Group for the six months
ended 30 June 2017 comprise the Company and its subsidiaries
(together referred to as the 'Group'). The condensed consolidated
financial statements are unaudited but have been reviewed by the
auditor, whose report is set out in this document.
The condensed consolidated financial statements have been
prepared under IAS 34 'Interim Financial Reporting' and those parts
of the Isle of Man Companies Act 2006 applicable to companies
reporting under International Financial Reporting Standards (IFRS).
They do not constitute full accounts within the meaning of the Isle
of Man Companies Act 2006, and should be read in conjunction with
the financial statements for the year ended 31 December 2016, which
have been prepared in accordance with IFRS as adopted by the EU.
Those financial statements have been reported on by the Group's
auditor and are included in the Group's Annual Report 2016,
available in the Investor Relations section of the Group website at
www.gvc-plc.com. The auditor's report on those financial statements
was unqualified.
The condensed consolidated financial statements are prepared on
the basis of the accounting policies stated in the Group's Annual
Report 2016 and were approved by the Board of Directors on 13
September 2017. The condensed consolidated financial statements are
presented in the Euro, rounded to the nearest EUR0.1 million, and
are prepared on the historical cost basis with the exception of
those assets and liabilities carried at fair value.
1.2 Going Concern
After making enquiries and after consideration of the Group's
existing operations, financing arrangements, cash flow forecasts
and assessment of business and regulatory risks, the Directors have
a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed consolidated financial statements.
1.3 Seasonality
The Group's overall profitability is sensitive to sporting
events and results. In addition, there is underlying seasonality
for online activity which also depends on geographical location of
players.
1.4 Standards in issue, not yet effective
At the date of authorisation of these financial statements,
certain new standards, and amendments to existing standards have
been published by the IASB that are not yet effective, and have not
been adopted early by the Group. Information on those expected to
be relevant to the Group's financial statements is provided
below.
1.4.1 IFRS 9 'Financial Instruments' (2014)
The International Accounting Standards Board (IASB) has released
IFRS 9 'Financial Instruments' (2014), representing the completion
of its project to replace IAS 39 'Financial Instruments:
Recognition and Measurement'. The new standard introduces extensive
changes to IAS 39's guidance on the classification and measurement
of financial assets and introduces a new 'expected credit loss'
model for the impairment of financial assets together with new
guidance on the application of hedge accounting. The new standard
is required to be applied for annual reporting periods beginning on
or after 1 January 2018. The Group's management are currently
reviewing the various classifications of financial instruments used
by the Group but do not believe that any material changes to the
Group's results in future periods will arise as a result of any
changes of classification. The Group's treasury officials will
consider the implications of this new standard when reviewing the
hedging instruments it will utilise going forward.
1.4.2 IFRS 15 'Revenue from Contracts with Customers'
IFRS 15 presents new requirements for the recognition of
revenue, replacing IAS 18 'Revenue', IAS 11 'Construction
Contracts', and several revenue-related Interpretations. The new
standard establishes a control-based revenue recognition model and
provides additional guidance in many areas not covered in detail
under existing IFRSs, including how to account for arrangements
with multiple performance obligations, variable pricing, customer
refund rights, supplier repurchase options, and other common
complexities. IFRS 15 is effective for reporting periods beginning
on or after 1 January 2018. The Group's management do not consider
that there will be any material impact on the Group's policy of
recognising revenue but will review the impact of the standard on
the Group's 2017 results during this financial year.
1.4.3 IFRS 16 'Leases'
IFRS 16 presents new requirements for the recognition,
measurement, presentation and disclosure of leases, replacing IAS
17 'Leases'. The standard provides a single lessee accounting
model, requiring lessees to recognise assets and liabilities for
all leases of over 12 months unless the underlying asset has a low
value. Lessors continue to classify leases as operating or finance
leases, with minimal changes from IAS 17. The new standard applies
to annual reporting periods beginning on or after 1 January 2019.
The Group's management consider that the adoption of this standard
will likely result in an increase in the non-current assets
(representing 'right-of-use' assets) and a corresponding increase
in liabilities, both current and non-current on the Statement of
Financial Position of the Group and will fully review the impact in
the 2018 financial year.
2. SEGMENTAL REPORTING
Management review the business across five operating segments,
being Sports brands, Games brands, B2B, Non-core and Corporate.
These operating segments are monitored and strategic decisions are
made on the basis of overall operating results. Management also
monitors revenue by geographic location of its customers.
2.1 Geographical Analysis
The Group's revenues and other income from external customers
are divided into the following geographic areas:
Period Period ended
ended 30 30 June
June 2017 2016
EURm EURm
-------- ---------- ------------
Germany 110.9 87.9
Turkey 47.6 50.0
UK 48.9 32.0
Other 265.4 212.2
---------- ---------- ------------
Total 472.8 382.1
---------- ---------- ------------
Revenues from external customers have been identified on the
basis of the customer's geographical location.
2.2 Reporting by Segment
Period ended 30 June 2017:
Sports Total
brands Games brands B2B core Non-core Corporate Total
EURm EURm EURm EURm EURm EURm EURm
NGR 355.1 112.4 7.6 475.1 11.1 - 486.2
EU VAT (9.8) (3.6) - (13.4) - - (13.4)
---------------------- ------- ------------ ---- ------- -------- --------- -------
Revenue 345.3 108.8 7.6 461.7 11.1 - 472.8
Variable costs (151.1) (69.6) 0.1 (220.6) (11.4) - (232.0)
---------------------- ------- ------------ ---- ------- -------- --------- -------
Contribution 194.2 39.2 7.7 241.1 (0.3) - 240.8
Contribution margin 55% 35% 101% 51% (3%) - 50%
Other operating
costs:
Personnel expenditure (51.4) (4.3) (9.3) (65.0)
Professional fees (1.7) (0.5) (6.6) (8.8)
Technology costs (23.8) (0.8) (0.3) (24.9)
Office, travel
and other costs (2.6) (0.4) (6.8) (9.8)
Foreign exchange
differences (1.0) (0.3) 2.9 1.6
---------------------- ------- ------------ ---- ------- -------- --------- -------
Clean EBITDA 160.6 (6.6) (20.1) 133.9
---------------------- ------- ------------ ---- ------- -------- --------- -------
Period ended 30 June 2016:
Sports Total
brands Games brands B2B core Non-core Corporate Total
EURm EURm EURm EURm EURm EURm EURm
NGR 287.5 88.4 5.6 381.5 9.1 - 390.6
EU VAT (7.1) (1.4) - (8.5) - - (8.5)
---------------------- ------- ------------ ----- ------- -------- --------- -------
Revenue 280.4 87.0 5.6 373.0 9.1 - 382.1
Variable costs (122.8) (48.8) (0.1) (171.7) (9.5) - (181.2)
---------------------- ------- ------------ ----- ------- -------- --------- -------
Contribution 157.6 38.2 5.5 201.3 (0.4) - 200.9
Contribution margin 55% 43% 98% 53% (4%) - 51%
Other operating
costs:
Personnel expenditure (47.7) (5.0) (9.0) (61.7)
Professional fees (2.4) (0.4) (5.5) (8.3)
Technology costs (31.6) (0.8) (0.1) (32.5)
Office, travel
and other costs (3.1) (0.9) (6.7) (10.7)
Foreign exchange
differences 0.6 - 2.9 3.5
---------------------- ------- ------------ ----- ------- -------- --------- -------
Clean EBITDA 117.1 (7.5) (18.4) 91.2
---------------------- ------- ------------ ----- ------- -------- --------- -------
Management do not review the performance of each segment below
the level of Clean EBITDA.
3. OPERATING COSTS
Period ended Period
30 June ended 30
2017 June 2016
Notes EURm EURm
-------------------------------------------- ----- ------------ ----------
Wages and salaries, including Directors 54.8 48.8
Staff costs capitalised in respect of
intangible asset additions (9.8) (6.7)
Outsourced consultants 10.8 10.5
Compulsory social security contributions 5.2 6.1
Pension contributions 0.5 0.4
Health and other benefits 2.5 1.9
Recruitment and training 1.0 0.7
---------------------------------------------- ----- ------------ ----------
Personnel expenditure (excluding share
based payment charges) 65.0 61.7
Professional fees 8.8 8.3
Technology costs 24.9 32.5
Office, travel and other costs 9.8 10.7
Foreign exchange differences on operating
activity (1.6) (3.5)
Administrative costs 106.9 109.7
Equity settled share based payments charges 11 10.0 5.9
Cash settled share based payments charges 11 0.5 0.6
Exceptional items 3.1 15.7 89.3
Impairment of available for sale asset - 4.8
Impairment of assets held for sale 1.6 -
Movement in the fair value of derivative
financial instruments 9 22.5 (14.1)
Depreciation 8.7 10.4
Amortisation 7 65.4 55.1
---------------------------------------------- ----- ------------ ----------
Total operating costs 231.3 261.7
---------------------------------------------- ----- ------------ ----------
3.1 Exceptional Items
The Group incurred expenditure on exceptional items of EUR15.7
million (period ended 30 June 2016: EUR89.3million). These are
items which are exceptional in size or nature.
Period ended Period
30 June ended 30
2017 June 2016
EURm EURm
------------------------------------------------- ------------ ----------
Professional fees 2.3 13.4
Currency option, including fair value adjustment - 10.8
Bonuses and share options - 21.9
M&A costs 2.3 46.1
Premium listing application costs - 4.4
Reorganisation costs 11.1 5.1
Accelerated depreciation - 12.5
Progressive jackpots - 7.6
Foreign exchange on deposit 0.3 13.6
Legal settlements 0.8 -
Other 1.2 -
Total exceptional items 15.7 89.3
--------------------------------------------------- ------------ ----------
Reorganisation costs reflect costs following the acquisition of
bwin.party as Management restructures the combined business.
4. FINANCIAL EXPENSE
Period Period
ended 30 ended 30
June 2017 June 2016
EURm EURm
------------------------------------------- ---------- ----------
Interest on Cerberus loan* 4.2 21.1
Interest on Nomura bridging loan* 0.4 -
Interest on Term Loan* 2.7 -
Amortisation of loan fees 9.2 10.2
Amortisation of the early repayment option - (1.9)
Other interest 0.2 -
16.7 29.4
------------------------------------------- ---------- ----------
*Interest on the various financing loans represents the
effective interest on the loan which includes interest at the
contracted rates and charges for exit and similar fees obliged to
be accounted for.
5. TAXATION
GVC Holdings PLC is an international business incorporated in
the Isle of Man and the Group's two largest trading entities are in
Gibraltar and Malta. As a result, there are significant differences
between the Group's effective rate of tax and the UK Corporation
tax rate.
The effective rate in respect of ordinary activities after
exceptional items is 13.6% (six months ended 30 June 2016: 2.2%).
The effective tax rate for the period is different from that which
would result from applying the standard rate of UK Corporation Tax
of 19.0% (2016: 20.0%) due to the geographic spread of the income
earned by the Group and other tax adjustments.
5.1 Deferred Taxation Amounts Recognised in the Statement of Financial Position
Total
EURm
-------------------------------------- -------------- ------
Balance at 1 January 2016 -
Acquired in business combination (79.6)
Deferred tax credit 11.8
Transfer to liabilities held for sale 3.8
Foreign exchange and other movements (1.6)
------------------------------------------------------- ------
Balance at 31 December 2016 (65.6)
------------------------------------------------------- ------
Deferred tax credit 7.3
Foreign exchange and other movements 0.3
Balance at 30 June 2017 (58.0)
------------------------------------------------------- ------
The deferred tax balance of EUR58.0m includes deferred taxation
liabilities of EUR59.2m and deferred taxation assets of
EUR1.2m.
6. EARNINGS PER SHARE
6.1 Basic Earnings Per Share and Adjusted Earnings Per Share
Basic earnings per share has been calculated by taking the
profit attributable to ordinary shareholders and dividing by the
weighted average number of shares in issue. Adjusted earnings per
share has been calculated by taking the profit before tax, adding
back certain costs that are not directly related to trading
activities in the period and dividing by the weighted average
number of shares in issue.
Period ended Period
30 June ended 30
2017 June 2016
Loss for the period attributable to ordinary
shareholders (EURm) (7.3) (84.0)
---------------------------------------------- ------------ ----------
Weighted average number of shares (m) 296.1 251.3
---------------------------------------------- ------------ ----------
Basic loss per share (EUR) (0.02) (0.33)
---------------------------------------------- ------------ ----------
Loss before tax (6.6) (86.1)
Exceptional items 15.7 89.3
Change in value of available for sale asset - 4.8
Change in fair value of derivative financial
instruments 22.5 (14.1)
Impairment of assets held for sale 1.6 -
Dividend income - (3.1)
Acquired intangible amortisation 59.5 52.2
- Effect of tax thereon - -
Debt fee amortisation 9.2 10.2
Early repayment amortisation - (1.9)
Corporation and similar taxation (7.8) (1.2)
---------------------------------------------- ------------ ----------
Adjusted profit for the period (EURm) 94.1 50.1
Adjusted earnings per share (EUR) 0.32 0.20
---------------------------------------------- ------------ ----------
6.2 Diluted Earnings Per Share and Adjusted Diluted Earnings Per Share
Diluted earnings per share has been calculated by taking the
profit attributable to ordinary shareholders and dividing by the
weighted average number of shares in issue as diluted by share
options. Adjusted diluted earnings per share has been calculated by
taking the profit before tax, adding back certain costs that are
not directly related to trading activities in the period and
dividing by the weighted average number of shares in issue, as
diluted by share options.
Period Period ended
ended 30 30 June
June 2017 2016
Loss for the period attributable to ordinary shareholders
(EURm) (7.3) (84.0)
----------------------------------------------------------- ---------- ------------
Weighted average number of shares (m) 296.1 251.3
Effect of dilutive share options (m) 6.2 -
----------------------------------------------------------- ---------- ------------
Weighted average number of dilutive shares (m) 302.3 251.3
----------------------------------------------------------- ---------- ------------
Diluted loss per share (EUR) (0.02) (0.33)
----------------------------------------------------------- ---------- ------------
Adjusted profit for the period (see note 6.1) (EURm) 94.1 50.1
Adjusted diluted earnings per share (EUR) 0.31 0.20
----------------------------------------------------------- ---------- ------------
Share options that could potentially dilute basic earnings per
share but were not included in diluted earnings per share because
they are antidilutive for the period ended 30 June 2017 amounted to
nil effective shares (2016: 1.3 million effective shares).
7. INTANGIBLES
Trade-marks Non-contractual
Software & Trade Consulting Customer
Licences Goodwill Name & Magazine Relationships Total
EURm EURm EURm EURm EURm EURm
---------------------------- --------- -------- ----------- ----------- --------------- -------
Cost
At 1 January 2016 32.5 166.2 17.0 4.9 2.4 223.0
Additions 19.0 - - - - 19.0
Acquisition of subsidiaries 224.0 963.9 176.0 - 208.0 1,571.9
Reclassified as held
for sale (2.0) (6.5) - - (12.0) (20.5)
Foreign exchange (0.2) - - - - (0.2)
At 31 December 2016 273.3 1,123.6 193.0 4.9 198.4 1,793.2
Additions 13.8 - - - - 13.8
Foreign exchange (0.1) - - - (0.3) (0.4)
---------------------------- --------- -------- ----------- ----------- --------------- -------
At 30 June 2017 287.0 1,123.6 193.0 4.9 198.1 1,806.6
---------------------------- --------- -------- ----------- ----------- --------------- -------
Amortisation and
Impairment
At 1 January 2016 25.8 33.3 1.5 4.9 2.4 67.9
Amortisation 62.1 - 13.6 - 40.8 116.5
Reclassified as held
for sale (0.1) - - - (0.5) (0.6)
---------------------------- --------- -------- ----------- ----------- --------------- -------
At 31 December 2016 87.8 33.3 15.1 4.9 42.7 183.8
Amortisation 35.9 - 7.4 - 22.1 65.4
At 30 June 2017 123.7 33.3 22.5 4.9 64.8 249.2
---------------------------- --------- -------- ----------- ----------- --------------- -------
Net Book Value
At 31 December 2016 185.5 1,090.3 177.9 - 155.7 1,609.4
---------------------------- --------- -------- ----------- ----------- --------------- -------
At 30 June 2017 163.3 1,090.3 170.5 - 133.3 1,557.4
---------------------------- --------- -------- ----------- ----------- --------------- -------
Certain intangible assets are deemed to have an indefinite
useful life as there is no foreseeable limit to the period over
which the asset is expected to generate net cash inflows for the
entity. The carrying amounts of such assets at 30 June 2017 were as
follows:
30 June 31 December
2017 2016
EURm EURm
------------------------- ------- -----------
Trademarks & Trade Names 15.1 15.1
---------------------------- ------- -----------
Impairment Tests for Cash-Generating Units Containing Goodwill
and Trademarks
An assessment of the Group's goodwill was carried out for the
period ended 30 June 2017 to identify whether there were any
indicators of impairment. The goodwill relates to Betboo,
CasinoClub, Sportingbet, bwin.party Sports brands and bwin.party
Games brands which had all been assessed for impairment at 31
December 2016. No indicators of impairment were found.
The following units have significant carrying amounts of
goodwill:
30 June 31 December
2017 2016
EURm EURm
------------------------- ------- -----------
Betboo 8.3 8.3
CasinoClub 40.4 40.4
Sportingbet 84.2 84.2
bwin.party Sports brands 849.1 849.1
bwin.party Games brands 108.3 108.3
Total Goodwill 1,090.3 1,090.3
--------------------------- ------- -----------
8. ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
The Group had classified and transferred its Kalixa business, a
fully integrated digital payments company, as held for sale as at
31 March 2016 after its acquisition as part of the bwin.party
group. The Group completed the sale of the majority of the Kalixa
business during the period, completing this disposal on 31 May
2017. It realised initial consideration of EUR29.0m in the period
together with deferred consideration of EUR2.6m which will be
receivable in the second half of the year after paying down certain
balances owing between the business groups. As a result of fees and
other trading movements, an impairment charge of EUR1.1m was
recorded prior to the disposal of the business.
The remaining Kalixa business was disposed of after the period
end on 1 August 2017, realising consideration of EUR0.9m. An
impairment charge of EUR0.5m was recorded during the period to
reflect the net realisable value.
During the prior year the Group disposed of its joint venture
investment in Conspo, a provider of sports content, which had also
previously been classified as held for sale.
No further assets are considered as held for sale.
The movements in assets and liabilities held for sale are shown
in the table below:
Assets Liabilities
held-for-sale held-for-sale Total
EURm EURm EURm
As at 31 December 2015 - - -
Acquired in business combination 12.3 - 12.3
Reclassified as held-for-sale 55.7 (22.9) 32.8
Trading, working capital and revaluation
movements 4.0 0.2 4.2
Disposal of Visa shares (8.4) - (8.4)
Disposal of Conspo (3.9) - (3.9)
-------------------------------------------- --------------- --------------- -------
As at 31 December 2016 59.7 (22.7) 37.0
Trading, working capital and revaluation
movements (3.3) (3.5) (6.8)
Disposal of Kalixa (52.8) 25.1 (27.7)
Impairment (1.6) - (1.6)
-------------------------------------------- --------------- --------------- -------
As at 30 June 2017 2.0 (1.1) 0.9
-------------------------------------------- --------------- --------------- -------
9. LOANS AND BORROWINGS
On 4 September 2015, the Group entered into an agreement with
Cerberus Business Finance LLC for a loan of up to EUR400m, in order
to part-fund the acquisition of bwin.party. The Cerberus loan was
repaid in January 2017 and an alternate bridge financing facility
of EUR250m provided by Nomura International plc was drawn down. All
associated fees were charged to the income statement at this time
including the remaining value of the early repayment option on the
Cerberus loan of EUR22.5m.
This bridging loan was then replaced with a long term
institutional loan in March 2017 comprising of a EUR320m Senior
Secured Term and Revolving Facility, composed of a EUR250m term
loan (maturity 6 years) and a EUR70m revolving credit facility
(maturity 5 years). The EUR70m credit facility was not drawn down
during the period.
IAS 39 Financial Instruments: Recognition and Measurement,
states that all financial liabilities should initially be measured
at their fair value and subsequently measured at amortised cost
using the effective interest rate method. The effective interest
has been calculated using the internal rate of return on the cash
outflows across the period of the loan.
Interest Early Total
Principal and fees Repayment
option
EURm EURm EURm EURm
Loan balance at 1 January 2016 20.0 (0.2) - 19.8
Loan drawdown 380.0 - - 380.0
Arising on business combinations 39.4 - - 39.4
Revaluation of loan balances (0.4) - - (0.4)
Loan repayment (52.5) - - (52.5)
Arrangement fees and loan services
fees paid in the prior year - (7.6) - (7.6)
Arrangement fees and loan services
fees paid in the current year - (7.9) - (7.9)
Fair value of embedded derivatives - - 7.4 7.4
Interest charged - 46.0 - 46.0
Interest instalments paid - (39.7) - (39.7)
Amortisation of loan fees - 23.3 - 23.3
Unwinding of early repayment option - - (4.3) (4.3)
Loan balance at 31 December 2016 386.5 13.9 3.1 403.5
Loan drawdown 500.0 - - 500.0
Arrangement fees and loan services
fees paid - (15.5) - (15.5)
Loan repayment (636.5) - - (636.5)
Interest charged - 7.3 - 7.3
Interest instalments paid - (16.5) - (16.5)
Amortisation of loan fees - 9.2 - 9.2
Unwinding of early repayment option - - (3.1) (3.1)
Loan balance at 30 June 2017 250.0 (1.6) - 248.4
Split between the following as at 31
December 2016:
Current liabilities 403.5
Non-current liabilities -
Split between the following as at 30
June 2017:
Current liabilities 1.8
Non-current liabilities 246.6
The interest and fees balance of EUR1.6m includes loan fees
outstanding of EUR4.7m netted against accrued loan interest of
EUR3.1m.
10. DIVIDS
Period ended Period ended
30 June 30 June
2017 2016
EURm EURm
----------------------------- ------------ ------------
First special dividend paid 42.8 -
Second special dividend paid 46.0 -
------------------------------- ------------ --------------
88.8 -
----------------------------- ------------ --------------
During the period, two special dividend payments were made.
These consisted of a first special dividend paid on 14 February
2017 of 14.9 EURc per share and a second special dividend paid on
12 May 2017 of 15.1 EURc per share equating to total dividends paid
in the period of EUR88.8m (2016: nil).
The Board of Directors has declared an interim dividend of 16.5
EURc per share, payable on 19 October 2017.
11. SHARE OPTION SCHEMES
At 30 June 2017, the Group had the following share options
schemes for which options remained outstanding:
i. Options were granted to Directors and employees under the
existing and already approved LTIP on 2 June 2014. Under this
scheme, 2,450,000 options held by Directors were cancelled under
the arrangements for the acquisition of bwin.party and as at 30
June 2017, 75,000 employee share options remained outstanding.
ii. Options were granted to Directors under the terms of the
2015 LTIP, as set out in the 13 November 2015 prospectus pages 325
to 329.
iii. Options were granted under a Management Incentive Plan
under the same terms of the 2015 LTIP.
Under the terms of the share option plan, the Group can allocate
up to 10% of the issued share capital, although it must take
allowance of the shares issued or issuable post the acquisition of
bwin.party, as a consequence of rights to subscribe for shares
under the 2015 LTIP or any other employees' share scheme. The
following options to purchase EUR0.01 ordinary shares in the
Company were granted, exercised, forfeited or existing at the
period end:
Existing
Existing Granted Forfeited Exercised at Exercisable
Exercise at 1 January in the in the in the 30 June at 30 June Vesting
Date of Grant Price 2017 period period period 2017 2017 criteria
-------------- -------- ------------- --------- ----------- ----------- ---------- ----------- ---------
Note
02 Jun 2014 1p 75,000 - - (75,000) - - a
Note
02 Feb 2016 422p 10,264,420 - (2,932,691) (2,443,909) 4,887,820 - b
Note
02 Feb 2016 467p 3,421,473 - - (977,564) 2,443,909 - c
Note
02 Feb 2016 422p 200,000 - - - 200,000 57,144 d
Note
16 Dec 2016 422p 8,658,334 - - (1,661,112) 6,997,222 299,999 e
Note
30 Mar 2017 422p - 750,000 - - 750,000 333,333 f
Note
30 Mar 2017 1p - 699,835 - (658,513) 41,322 41,322 g
Total all
schemes 22,619,227 1,449,835 (2,932,691) (5,816,098) 15,320,273 731,798
-------------- -------- ------------- --------- ----------- ----------- ---------- ----------- ---------
The existing share options at 30 June 2017 are held by the
following employees and consultants:
Option price 1p 422p 467p 422p 422p 1p
Grant date 02-Jun-14 02-Feb-16 02-Feb-16 19-Dec-16 30-Mar-17 30-Mar-17 Total
Kenneth Alexander - 4,887,820 - - - - 4,887,820
Lee Feldman (c) - - 2,443,909 - - - 2,443,909
Norbert Teufelberger
(d) - 200,000 - - - - 200,000
Paul Miles (f) - - - - 350,000 - 350,000
Employees - - - 5,624,446 400,000 41,322 6,065,768
Consultants - - - 1,372,776 - - 1,372,776
----------------------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
- 5,087,820 2,443,909 6,997,222 750,000 41,322 15,320,273
----------------------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
Note a: These equity-settled options were granted to certain
Directors and employees. The awards vested in full (and became
exercisable) on the share price being equal to or exceeding GBP6.00
per share for a continuous period of 90 calendar days at any time
from the date of grant.
Note b: These equity-settled awards were issued on completion of
the acquisition of bwin.party. The options vest and became
exercisable, subject to the satisfaction of a performance
condition, over 30 months, with one-ninth vesting six months after
the date of grant and a further ninth vesting at each subsequent
quarter. The options lapse, if not exercised, on 2 February 2026.
The performance condition is the total shareholder return ("TSR")
of the Group against the FTSE 250. Each ninth of the shares will
have its TSR condition reviewed from the date of grant until the
relevant testing date. To the extent the TSR is not met at that
time, it is tested again the following quarter and, if necessary,
at the end of the 30-month vesting period. In order to vest, the
TSR of the Group must rank at median or above against the FTSE
250.
Note c: These equity-settled awards were issued on the same
basis as the awards in note b but at a higher exercise price which
represents the market value of the shares as at the date the scheme
became effective. In order to compensate Lee Feldman for the higher
exercise price, the Company has agreed to pay him a cash bonus of
GBP2.0m over the 30 month vesting period of the option, but only
upon option vesting and satisfaction of the performance condition
described above, and he has to reinvest 50% of this in GVC
shares.
Note d: These awards were issued on completion of the
acquisition of bwin.party. The equity-settled options, which are
not subject to a performance condition, vest and become exercisable
over 24 months, with one seventh vesting six months after the date
of grant and a further seventh vesting at each subsequent quarter.
The options lapse, if not exercised, on 2 February 2026
11. SHARE OPTION SCHEMES (continued)
Note e: These equity-settled awards were issued on the same
basis as the awards in Note b and granted on 16 December 2016.
Note f: These equity-settled awards were issued on the same
basis as the awards in Note b and granted on 30 March 2017.
Note g: These cash-settled awards were issued in accordance with
the Group's annual share bonus plan 2016 and granted on 30 March
2017.
The charge to share-based payments within the consolidated
income statement in respect of these options in 2017 was EUR10.5m
(2016: EUR6.5m plus a charge of EUR12.8m within exceptional items).
Of the share-based payment charge, EUR10.0m related to equity
settled options (2016: EUR5.9m) and EUR0.5m to cash settled options
(2016: EUR0.6m).
11.1 Weighted Average Exercise Price of Options
The number and weighted average exercise prices of share options
is as follows:
Weighted average Number of
Weighted average Number of exercise price options 31
exercise price options 30 31 December December
30 June 2017 June 2017 2016 2016
----------------------------- ---------------- ------------ ---------------- -----------
Outstanding at the beginning
of the period 416p 22,619,227 11p 3,481,946
Granted during the period 219p 1,449,835 422p 26,621,149
Exercised during the period 376p (5,816,098) 126p (6,360,255)
Forfeited in the period 422p (2,932,691) 422p (1,123,613)
Outstanding at the end of
the period 15,320,273 416p 22,619,227
----------------------------- ---------------- ------------ ---------------- -----------
Exercisable at the end of
the period 731,798 1,869,445
----------------------------- ---------------- ------------ ---------------- -----------
The options outstanding at 30 June 2017 have a weighted average
contractual life of 8.6 years (31 December 2016: 9.1 years).
11.2 Valuation of Options
The fair value of services received in return for share options
granted were measured by reference to the fair value of share
options granted. The Group engaged a third party valuation
specialist to provide a fair value for the options.
The 2014 options were valued using a Monte Carlo model due to
the performance conditions associated with the options. The 2014
cash-settled options were revalued using a Monte Carlo model at 31
December 2015.
The 2016 and 2017 schemes were valued using a correlated
simulation comparing the Group and the peer Group of the FTSE250 at
the grant date on a risk neutral basis. For simulations that meet
the vesting conditions the share price at the vesting date is
discounted back to the present.
In 2016 the Group operated an annual share bonus plan for
certain employees. On 30 March 2017 these awards were granted with
an exercise price of 1p. The number of options granted was
calculated by the annual share bonus amount over the share price at
grant date.
Fair value of share options and assumptions:
Share price Fair value
at date Exercise Expected Risk at measurement
of grant* price Expected Exercise dividend free date (in
Date of grant (in GBP) (in GBP) volatility multiple yield rate** GBP)
02 Feb 16 - equity settled
30 months 4.67 4.22 22%-30% n/a n/a n/a 0.32-0.47
02 Feb 16 - equity settled
30 months 4.67 4.67 22%-30% n/a n/a n/a 0.22-0.28
02 Feb 16 - equity settled
24 months 4.67 4.22 n/a n/a n/a n/a 0.32-0.47
16 Dec 16 - equity settled
30 months 6.48 4.22 30%-28% n/a n/a n/a 1.43-1.94
30 Mar 17 - equity settled
18 months 7.28 4.22 30%-28% n/a n/a n/a 1.88-2.39
* This is the bid price, not the mid-market price, at market
close, as sourced from Bloomberg.
** The measurement of the risk-free rate was based on rate of UK
sovereign debt prevalent at each grant date over the expected term
of the option.
For the 2016 LTIP and MIP schemes, the expected volatilities
have been calculated using historical prices for companies that
were constituents of the FTSE 250 at the grant date. The LTIP
scheme options accrue dividend credits and the yield is assumed to
be nil for 2016 and 10% thereafter. As the schemes vest on a
staggered basis over a period of up to 30 months, the volatilities
have been calculated over each relevant time period. The fair value
of each phase of the options has been calculated separately, shown
as a range in the table above, and the cost of each phase is
allocated across the vesting period for that phase.
12. RELATED PARTIES
12.1 Identity of Related Parties
The Group has related party relationships with its subsidiaries
and with its Directors and executive officers.
12.2 Transactions with Directors and Key Management Personnel
Kenneth Alexander received dividends during the period of
EUR0.5m (2016: EURnil). The wife of Kenneth Alexander received
dividends during the period of EUR0.1m (2016: EURnil) in respect of
her interest in the ordinary share capital of the Group.
Karl Diacono is the Chief Executive Officer of Fenlex Corporate
Services Limited, a corporate service provider incorporated in
Malta. During the period ended 30 June 2017 Fenlex received
EUR0.05m from the Group in relation to Company Secretarial and
other matters arising in Malta (2016: EUR0.07m).
Lee Feldman received dividends during the period of EUR0.2m
(2016: EURnil) in respect of his beneficial interest in the
ordinary share capital of the Group. Lee Feldman is the Managing
Partner of Twin Lakes Capital, a private equity firm based in New
York. During the period ended 30 June 2017, Twin Lakes Capital
received EUR0.03m (2016: EUR0.03m) in relation to office
services.
Norbert Teufelberger received dividends of EUR0.8m during the
period (2016: EURnil),
Peter Isola is a partner at Isolas, a law firm in Gibraltar,
which charged legal expenses of EUR0.04m in the period (2016:
EUR0.2m).
The Group purchased certain customer services of EUR1.0m (2016:
EUR1.1m) from an associate, with amounts owed at 30 June 2017 of
EUR0.2m (31 December 2016: EUR0.2m).
13. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
13.1 East Pioneer Corporation Guarantee
On 21 November 2011 the Group entered into a service agreement
and guarantee relating to the acquisition by East Pioneer
Corporation B.V. ('EPC') from Sportingbet PLC of Superbahis, a
Turkish language website. The maximum contingent liability under
this agreement at inception was EUR171 million. The Directors
consider this has a fair value of EURnil (31 December 2016:
EURnil).
The Group continues to provide back office and support services
to EPC. Following the acquisition of Sportingbet PLC on 19 March
2013 the Group now receives all payments of amounts from EPC under
the Business Purchase Agreement and other Transaction Documents and
does not now offer any guarantee of payments to legal entities
outside of the Group.
13.2 Indirect taxation
Group companies may be subject to VAT on transactions which have
been treated as exempt supplies of gambling, or on supplies which
have been exported outside the scope of VAT where legislation
provides that the services are received or used and enjoyed in the
country where the service provider is located. Where group
companies have treated supplies of gambling as exempt based on
exemptions available to comparable supplies in the place where the
customer is located, the right to exemption may be restricted if
the supplies do not have similar characteristics or meet the same
needs as other exempt gambling from the customer's point of view.
Where group companies have determined the taxable amount for
supplies of gambling to be the amount of stakes received less
amounts that have to be returned to players, the right to a
deduction for amounts returned to players may be restricted to the
extent that the obligation to make a payment is not enforceable in
the place where the customer is located.
Revenues earned from customers located in any particular
jurisdiction may give rise to further taxes in that jurisdiction.
If such taxes are levied, either on the basis of current law or the
current practice of any tax authority, or by reason of a change in
the law or practice, then this may have a material adverse effect
on the amount of tax payable by the Group or on its financial
position. Where it is considered probable that a previously
identified contingent liability will give rise to an actual outflow
of funds, then a provision is made in respect of the relevant
jurisdiction and period impacted. Where the likelihood of a
liability arising is considered remote, or the possible contingency
is not material to the financial position of the Group, the
contingency is not recognised as a liability at the balance sheet
date.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR OKNDPOBKDKCD
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