TIDMENT
RNS Number : 6346V
Entain PLC
11 August 2022
11 August 2022
Entain plc
("Entain" or the "Group")
Robust H1 performance with strategic focus on broader customer
appeal delivering record level of actives
Launch of Entain CEE and acquisition of SuperSport in
Croatia
Entain plc (LSE: ENT), the global sports-betting, gaming and
interactive entertainment group, today reports its Interim Results
for the six-month period ended 30 June 2022 ("H1").
Strategic progress
-- Group's strategic focus on a broader recreational customer
base delivering record level of actives, up 57% versus H1 2019, and
higher quality earnings
-- Greater customer engagement driven by innovative new products and enriched experiences
-- Further geographic expansion with five transactions this year
to date consistent with our strategy of expanding into regulated
markets
o Creation of Entain CEE and acquisition of SuperSport announced
separately today, provides a strategic springboard to unlock the
clear expansion opportunity in Central and Eastern Europe
("CEE")
o Acquisition in June of BetCity in the Netherlands to deliver
growth in the newly regulated Dutch market
o Completion of Avid Gaming (Canada), Klondaika (Latvia) and Totolotek (Poland) transactions
-- Ongoing ESG leadership and further progress made across our Sustainability Charter
o Expansion of Advanced Responsibility & Care ("ARC(TM) ")
player protection trials into international markets
o Founding partner of Global Gaming Alliance ("GGA"), awarded
GamCare's Advanced Safer Gambling Standard, and received numerous
awards for safer gambling, including from S&P, SBC &
EGR
o Pitching-In Volunteer Hub for the UK Trident Leagues launched
to connect volunteers and local clubs
o Appointment of Rahul Welde as an independent Non-Executive Director
Financial highlights
-- Robust Group performance during H1, reflecting the
diversified business model and underlying momentum of the online
business
-- Total Group net gaming revenue ("NGR") growth of 18% (+18%cc(2) )
o Online NGR down 7% (-7%cc(2) ) reflecting strong prior year
comparators driven by Covid lockdowns, temporary closure in the
Netherlands, affordability measures in the UK and customers
responding to the economic backdrop
-- Excluding the Netherlands, NGR was down -3%cc(2)
-- Strong underlying momentum with H1 Online NGR 3yr CAGR up
13%cc(2)
-- Retail perfomance ahead of expectations with a more
interactive digital experience across gaming machines and betting
terminals driving greater customer engagement
-- BetMGM continues to perform strongly and is on track to deliver FY22 NGR of over $1.3bn
o H1 NGR of $608m, 65% ahead of 2021
o Established number two operator with 23%(7) market share where
BetMGM operates (excluding New York)
o Consistent leading iGaming operator with 30%(7) market
share
o Reiterate expectation to reach positive EBITDA during
2023(,8)
-- Group EBITDA(4,5) up 17% at GBP471m
-- Group profit after tax from continuing operations GBP28m, down GBP63m
-- FY 2022 Group EBITDA(4,5,9) expected to be in the range of
GBP925m to GBP975m, in line with current consensus(10)
-- New progressive dividend policy announced:
o Full year payment of GBP100m split evenly between Interim and
Full Year
o Interim dividend of 8.5p per share
-- Net Debt of GBP2,210m at 30 June 2022, with net debt to
EBITDA ratio of 2.3x reflecting continued investment in growth
opportunities
Jette Nygaard-Andersen, CEO of Entain, commented :
"We continue to make excellent progress on our strategic
priorities, with momentum in our business remaining strong as a
result of putting the customer at the heart of everything we do. I
am delighted that more customers are choosing to play with us as we
focus on providing them with even better products, engaging content
and exciting experiences. This has resulted in our highest ever
level of actives in H1, up 57% versus the same period two years
ago. Not only is this approach great for our customers, but it also
provides us with a broader, more recreational customer base that
will support more sustainable long-term revenues.
Underpinned by the Entain platform, we continue to expand our
growth opportunities, and have already announced five transactions
so far this year. This includes today's announcement of an
innovative growth strategy for Central and Eastern Europe, starting
with the acquisition of SuperSport in Croatia. In the US, BetMGM
goes from strength to strength and continues to demonstrate its
market leadership with a 23%(7) market share.
We continue to lead our industry on responsibility and
sustainability as we deliver further progress on our Sustainability
Charter. ARC(TM) continues to be rolled out into international
markets and our efforts have been recognised in the UK and
internationally with awards from GamCare, S&P, SBC as well as
our inclusion in the Global Sustainability Yearbook 2022.
As ever, I would like to thank each and every one of our
talented colleagues around the world for their hard work and
dedication in helping deliver these results. We have established a
meaningful runway for sustainable and high-quality growth. While we
remain vigilant to the consumer backdrop, our geographic and
product diversity provides resilience which, together with our
proven ability to drive superior returns, gives us confidence that
we will continue to deliver benefits for our stakeholders."
Group 2022(1,) (3) 2021 (3) Change CC(2)
Six months to 30 June GBPm GBPm % %
------------- --------- ------- ------
Net gaming revenue (NGR) 2,117.6 1,792.6 18% 18%
Revenue 2,094.9 1,767.0 19% 19%
Gross profit 1,327.8 1,136.3 17%
Underlying EBITDAR (4,5) 480.1 410.5 17%
Underlying EBITDA (4,5) 471.0 401.1 17%
Underlying operating profit(5) 246.5 205.6 20%
Underlying profit before tax(5) 152.4 246.7
Profit after tax 28.1 90 .9
Basic EPS (p) 5.1 13.8
Adjusted diluted EPS(6) (p) 29.3 18.5
Adjusted diluted EPS excl US(6) (p) 47.6 31.7
Dividend per share (p) 8.5 -
------------------------------------- ------------- --------- ------- ------
Dividend
Recognising the importance of dividends to shareholders, the
strength of the operational performance of the business and our
future prospects, the Group is implementing a new dividend
policy.
The Board is proposing a progressive dividend, starting with a
total dividend of GBP100m for the Financial Year to 31 December
2022, to be paid to shareholders in equal instalments in respect of
the H1 and FY results.
The interim dividend of GBP50m (8.5p per share) in respect of
the H1 2022 results announced today is expected to be paid in
September 2022 to shareholders on register on 19 August 2022.
Outlook
Entain's first half performance reflects the underlying strength
of our business model underpinned by our growth and sustainability
strategy. The Group's momentum remains strong and our outlook for
the balance of the year is unchanged with FY 2022 Group
EBITDA(4,5,9) expected to be in the range of GBP925m to GBP975m, in
line with current consensus(10) . The economic environment remains
uncertain in many of our markets, however we remain confident that
our customer focus, increasing diversification and proven ability
to deliver growth will see us deliver further progress for all
stakeholders.
Notes
(1) 2022 reported numbers are unaudited
(2) Growth on a constant currency basis calculated by
translating 2022 and 2021 performances at 2022 exchange rates
(3) Reflecting the results of continuing operations
(4) EBITDAR is defined as earnings before interest, tax,
depreciation and amortisation, rent and associated costs, share
based payments and share of JV income. EBITDA is defined as EBITDAR
after charging rent and associated costs.
(5) Stated pre separately disclosed items
(6) Adjusted for the impact of separately disclosed items,
foreign exchange movements on financial indebtedness and
losses/gains on derivative financial instruments (see note 8 in the
interim financial statements)
(7) BetMGM market shares for the three month period to May 2022,
in markets in which BetMGM operates, excluding New York
(8) Based on current assumption of future live markets
(9) References to profit expectations are made on a reported basis post IFRS 16 implementation
(10) Current consensus as compiled by Entain, incorporating
published analysts forecasts updated after 7 July 2022
Enquiries:
Investor Relations - Entain plc investors@entaingroup.com
David Lloyd-Seed, Chief IR & Communications Officer david.lloyd-seed@entaingroup.com
Davina Hobbs, Head of Investor Relations davina.hobbs@entaingroup.com
Callum Sims, IR Manager callum.sims@entaingroup.com
Media - Entain plc media@entaingroup.com
Lisa Attenborough, Head of Corporate Communications lisa.attenborough@entaingroup.com
Jay Dossetter, Head of ESG and Press Office jay.dossetter@entaingroup.com
Jodie Hitch, PR Manager Jodie.hitch@entaingroup.com
Powerscourt Tel: +44 (0) 20 7250 1446
Rob Greening/Nick Hayns/Sam Austrums entain@powersco urt-group.com
H1 Conference Call & Webcast
The H1 2022 results presentation for analysts and investors will
be held today, Thursday 11(th) August at 9:00am GMT. Participants
may join via webcast or conference call dial in, approximately 15
minutes ahead of the event.
Live webcast link: https://brrmedia.news/ENTH12022
To participate in the Q&A, please also connect via the
conference call dial in details.
UK +44 (0) 33 0551 0202
US +1 646 843 4609
Access Code: 4493388
The presentation slides will be accessible on our website
shortly before the event. A replay and transcript will be available
afterwards;
https://entaingroup.com/investor-relations/results-centre/
Upcoming dates:
Q3 Trading update: 11 October 2022
Entain Sustain: 19 October 2022
Dividend Timetable
Announcement date: 11 August 2022
Ex-Dividend date 18 August 2022
Record date: 19 August 2022
Payment date: 22 September 2022
Forward-looking statements
This document contains certain statements that are
forward-looking statements. They appear in a number of places
throughout this document and include statements regarding our
intentions, beliefs or current expectations and those of our
officers, directors and employees concerning, amongst other things,
results of our operations, financial condition, liquidity,
prospects, growth, strategies and the business we operate. These
forward-looking statements include all matters that are not
historical facts. By their nature, these statements involve risks
and uncertainties since future events and circumstances can cause
results and developments to differ materially from those
anticipated. Any such forward-looking statements reflect knowledge
and information available at the date of preparation of this
document . Other than in accordance with its legal or regulatory
obligations (including under the Market Abuse Regulation
(596/2014), the Listing Rules, the Disclosure Guidance and
Transparency Rules and the Prospectus Rules), the Company
undertakes no obligation to update or revise any such
forward-looking statements. Nothing in this document should be
construed as a profit forecast. The Company and its directors
accept no liability to third parties in respect of this document
save as would arise under English law.
About Entain plc
Entain plc (LSE: ENT) is a FTSE100 company and a leading global
sports-betting, gaming and interactive entertainment group ,
operating both online and in the retail sector. The Group owns a
comprehensive portfolio of established brands; Sports Brands
include bwin, Coral, Crystalbet, Eurobet, Ladbrokes, Neds,
Sportingbet and Sports Interaction; Gaming Brands include
CasinoClub, Foxy Bingo, Gala, GiocoDigitale, Ninja Casino, Optibet,
Partypoker and PartyCasino. The Group operates a proprietary
platform across core product verticals and in addition to its B2C
operations provides services to a number of third-party customers
on a B2B basis.
The Group has a 50/50 joint venture, BetMGM, a leader in sports
betting and iGaming in the US. Entain provides the technology and
capabilities which power BetMGM as well as exclusive games and
products, specially developed at its in-house gaming studios. The
Group is tax resident in the UK with operations in over 30
regulated or regulating territories. Entain is a leader in ESG, a
member of FTSE4Good, the DJSI and is AA rated by MSCI. The Group
has set a science-based target, committing to be carbon net zero by
2035 and through the Entain Foundation supports a variety of
initiatives, focusing on safer gambling, grassroots sport,
diversity in technology and community projects.
For more information see the Group's website :
www.entaingroup.com
LEI: 213800GNI3K45LQR8L28
CHIEF EXECUTIVE'S REVIEW
Entain is a customer-focused growth business delivering
profitable and sustainable returns for our stakeholders. Our core
strategic pillars of growth and sustainability will enable us to
deliver our ambition of being the world leader in betting, gaming
and interactive entertainment.
Our purpose 'to bring moments of excitement into people's lives'
is underpinned by our unwavering focus on putting customers at the
heart of everything we do. It is this driving force that has
enabled us to continue to deliver a richer, more engaging
experience for customers as demonstrated by the record level of
actives we now have.
Our ongoing leadership of the industry in player protection,
responsibility and sustainability, ensures that together with our
powerful Entain platform we can continue to drive sustainable
growth in our core markets across the world.
Customer centricity powered by Entain's platform
Our Entain platform is at the heart of our business and provides
unique competitive advantages. It powers and enables our growth,
provides us with customer insight and analysis and drives value
creation for our stakeholders . Understanding our customers better
through insight, analysis and research empowers us to act and think
differently, be flexible, be agile, be bold. It underpins our
customer centric approach in delivering responsible and engaging
entertainment.
Our platform enables us to execute and deliver against our two
strategic pillars of growth and sustainability.
Growth
Entain is a growth business. Our strategic growth pillar
provides us with an exciting opportunity for many years to come as
dynamics within our markets support continued growth, we expand
into new regulated markets and across new audiences.
The four pillars of our growth strategy that continue to deliver
value to our stakeholders are; grow presence in our core markets;
leadership in the US; expand into new regulated markets - both
organically and via M&A; and extend into new interactive
entertainment experiences. We aim to lead in our markets by
providing customers with great experiences and engaging products
and services.
We believe these opportunities will treble the size of our
addressable markets over the long-term to almost $170bn.
Growth from our core markets
Our operations span over 30 regulated or regulating territories
and we have established leading positions in each of our key
markets. With growth dynamics built into these markets, Entain has
a long runway for growth driven by our Entain platform. Our
diversified business model, encompassing both digital and retail
operations, as well as geographic breadth and product range,
provides relative resilience, enabling Entain to adapt and evolve
with changing customer behaviours to deliver earnings with greater
stability and of a higher quality.
The markets in which we operate today are expected to grow by
mid to high single digit compound over the medium term.
Our Retail operations performed strongly during the first half
of 2022. Post Covid and its associated lockdowns, customers are
re-engaging with the more interactive experience our shops provide
with volumes ahead of pre-Covid levels. Total Retail NGR in H1 was
up +244%cc(1) on a like for like ("LFL") (4) basis versus the same
period in 2021.
In the UK, the strong results are driven by the continued
digitalisation of our shop offering as we provide customers with an
even better in-store experience, with both gaming machines and
self-service betting terminals ("SSBT's") both seeing very strong
performance. Our gaming machines have secured the widest range of
exclusive content which, alongside our own in-house games, provides
customers with an unrivalled in-store experience. Our proprietary
Group BetStation solution, enables us to provide customers with a
more interactive in-store experience on betting terminals, similar
to that online. This is resulting in a broader customer audience as
well as unlocking markets and interests not typically seen in-store
before.
In some regions of Europe, due to the various lingering Covid
restrictions, our shops have been slower to recover, but in Italy
volumes are now back to pre-pandemic levels. The value of our
omnichannel approach continues to be evident as we outperformed
online-only competitors in Online in Italy.
In Online, NGR in the first half was down -7% (-7%cc(1) )
reflecting very strong prior year comparatives driven by Covid
lockdowns, the delayed Euro 2020 tournament and trading in the
Netherlands ahead of the temporary closure due to the licensing
process. Excluding the Netherlands Online NGR was -3%cc(1) in
H1.
During the first half, our Online operations faced several
headwinds, with lower than expected growth in Brazil due to
increased competition ahead of regulation and the impact of tighter
affordability measures in the UK. In Q2, we also saw our
increasingly recreational customer base responding to the changing
macro environment and inflationary fears by moderating spend per
head across the UK and parts of Europe.
In spite of these, our strategic approach and varied initiatives
to drive customer engagement resulted in our highest ever level of
actives, up +57% versus H1 2019. These initiatives included new
advertising campaigns in the UK and Australia, new live gaming
products, social gaming experiences and increased media content
further enabled us to engage with a broader recreational customer
base.
In the UK, NGR in H1 was -15% behind the prior year. 2021
comparators were particularly strong for UK sports brands due to a
fuller sports calendar, including the delayed Euro 2020 football
tournament. Similarly, our UK Gaming brands NGR eased from a Covid
boosted 2021. We do however continue to expand our recreational
audience, attracting and retaining record customer levels. This
engagement has been driven by innovative marketing campaigns and
fresh product releases, enhancing our offering and customer
experience. Our brand revitalisation and repositioning continued
with Coral launching the UK's first 3D betting and gaming
advertisement as part of our 'Your Horse' campaign on the
Piccadilly Square screens ahead of the Cheltenham Festival.
Customers have responded well to new product releases including
Ladbrokes live game show 'Well Well Well' and Coral's first free to
play roulette tournament. Throughout H1, m onthly average actives
were 7% ahead of 2021 with UK NGR has grown at 10% on a 3 year CAGR
basis, a clear demonstration of our ongoing and increasingly
recreational customer base.
Our Australian business continues to go from strength to
strength with excellent performances from both the Ladbrokes and
Neds brands throughout the first half. Despite lapping strong 2021
comparators, NGR grew +19% (+20%cc (1) ) year on year, with actives
up +8%. The team continues to deliver a fresh and differentiated
customer experience through our unique content, innovative social
player products and a leading player sustainability offering. In
addition to new campaigns across both brands, Ladbrokes launched
the Mates Mode product during the first half which enables
customers to chat, share and bet together, all within the Ladbrokes
app. This has driven tremendous engagement so far and is seeing a
strong uptake in multi products. Our recently announced partnership
with Racing.com, the leading free to air broadcaster in Australia,
further embeds us as the first choice for racing enthusiasts with
an expanded content and media offering driving brand awareness and
engagement. This partnership launched in July coincided with the
release of our innovative live racing vision product available
across both Ladbrokes and Neds.
Online NGR for H1 in Italy was -12%cc (1) versus 2021,
reflecting the strong prior year comparators, but up 26%cc (1) on a
3 year CAGR basis. The value of the omni-channel approach continues
to be evidenced by the relative outperformance versus pure online
operators and through the strength of our Italian Retail estate
performance. During the first half bwin and GiocoDigitale delivered
a number of new products and experiences which further drove
customer engagement, increasing actives.
Enlabs in the Baltics continues to perform well, despite the
significant inflationary pressures being experienced in the region.
Actives were up +24% on a proforma basis for H1 whilst NGR was up
+18%cc (1) on a proforma basis. Enlabs continues to benefit from
Entain's content, product and marketing expertise. Having
redesigned the Optibet brand user experience customers also now
benefit from a broader offering, such as the inclusion of
partypoker product driving increased poker NGR.
Crystalbet continues to deliver strong performance and again
held its position as the leading operator in the Georgian market.
With new regulation impacting the business in 2022, revenues were
down by -9%cc (1) in the first half, however the strength of our
operations and brand see the business well positioned to outperform
the market.
In Germany, the market continues to settle into the new
regulatory regime. Challenges of an uneven operating landscape
remain with the lack of regulatory enforcement continuing to weigh.
However, we are encouraged that the new regulator has signalled
that it will take action against unregulated operations and some
operators have already withdrawn from the market. S ports licences
have also seen the impending deposit limits now enforced from 1(st)
July. We remain positive on the long-term prospects for the German
market and expect it to settle down as regulatory oversight is
enforced. We have continued to differentiate bwin's offer with a
number of products and enhancements, and the brand through our
long-term partnership with UEFA, the German Football Association,
the German women's football team and multiple Bundesliga clubs.
In Brazil, we continue to perform strongly with our Sportingbet
brand. Whilst the business continues to deliver impressive growth,
greater than expected competition across H1 saw lower growth than
anticipated, albeit with NGR +38%cc (1) and actives growth +44%
year on year. The strength of our Sportingbet brand, product
quality and operational expertise enables us to perform ahead of
the market, putting our operations in Brazil in a very strong
position ahead of regulation of sports betting expected later this
year, with gaming potentially following thereafter. Our brands
elsewhere across the Latin American region continue to perform
in-line with expectations and we see the region as an exciting
market for further growth opportunities.
The consolidation of our Party brands onto our One Party enables
the business continues to differentiate its offering with live
tournaments as well as promoting our brand strength with
initiatives like our McLaren partnership, driving greater
recreational player activity and broader audience engagement.
Leadership in the US
Following a strong performance in the first half of 2022,
delivering NGR of $608m, BetMGM remains on track to deliver over
$1.3bn of NGR in 2022.
BetMGM is firmly established as a leading operator in the US
market and continues to go from strength to strength. BetMGM's
success is built on the industry leading technology and
capabilities of the Entain platform, coupled with MGM Resorts'
iconic brand, resorts and experiences. This winning formula
provides customers with a unique range of exclusive products and
experiences, differentiating BetMGM's offer as well as creating
significant long term financial and competitive advantages.
BetMGM hosted its second business update in May 2022, with CEO
Adam Greenblatt and his team providing a review of operational
progress, detail and colour on the market, customer behaviours and
the regulatory outlook. Additionally, they further outlined those
competitive advantages that BetMGM enjoys and how this underpins
its success now and for the long term. A replay of that
presentation can be found on our website at
www.entaingroup.com/investor-relations/results-centre .
The online sports betting and iGaming market in North America
continues to be extremely healthy, and BetMGM upgraded their
estimate for total addressable market size to around $37bn over the
long-term, reflecting positive changes in the legislative outlook
for sports betting across North America, including the most
populous state in the US, California. Performance of key metrics to
date reinforces our long-term expectations of player values for
both sports betting and iGaming, and while growth in player
participation has been impressive, penetration has a long way to
go, providing a tremendous runway for future growth.
BetMGM is now live in 23 markets, having delivered four new
launches (New York, Louisiana, Puerto Rico and Illinois) since the
start of the year, as well as going live on day one in Ontario,
Canada for both online sports betting and iGaming. BetMGM retains
its lead in iGaming and continues to build its sports betting
position across its markets, with a 23% (2) share in the markets
where it operates for the three months to May 2022. This excludes
New York, where due to the unfavourable tax environment BetMGM have
taken a strategic decision to focus attention on other markets
where there are significantly greater economic returns.
Our flexible, innovative and unique engagement strategy provides
BetMGM with one of the widest customer access models coupled with
best in class channel optimisation, lower costs and greater
returns. For example, in addition to MGM Resorts' retail presence
and footprint, which sees thousands of customer and brand
interactions each day. In financial terms, the benefits of
omnichannel are clear - CPAs are over 70% lower than our average
and predicted player value is 1.9x higher. The ROI is therefore
6.5x better than our other marketing channels alone. BetMGM
recently signed exclusive partnerships with Carnival Corporation to
offer BetMGM on board cruise ships, as well as with Sony Pictures
and IGT for a Wheel of Fortune branded gaming experience
Maintaining financial discipline despite such rapid growth is
facilitated by BetMGM's commercial components: brand, omnichannel,
CRM and personalisation. There has been some rationalisation of
behaviours and unsustainable competitive intensity, operators are
increasingly focused on the path to profitability and delivering
returns for their stakeholders. However, we expect key sporting
events such as the NFL season launch, Super Bowl and March Madness
to continue to attract elevated promotional activity. BetMGM are
already achieving positive contribution in several markets, some
within 12 months of opening and feel confident to reiterate
expectations of reaching positive EBITDA during 2023(3) .
The significant momentum and differentiated approach that
leverages the Entain platform, sees BetMGM firmly on track to
realising its ambition of being a leader in the US sports-betting
and iGaming market with a 20-25% share and long-term EBITDA margin
of over 30%.
Expand into new markets
There are significant growth opportunities across the globe with
over 50 regulated markets representing around $40 billion in long
term gross gaming revenues where we are not currently present. We
have a strong track record of successful acquisition, integration
and value creation through M&A and so far in 2022 have
announced five transactions: Avid Gaming in Canada; Klondaika in
Latvia; Totolotek in Poland; BetCity in the Netherlands; and,
today, the creation of Entain CEE and acquisition of SuperSport in
Croatia.
We have today made a separate announcement regarding the
establishment of Entain CEE. This is owned 75% by Entain, and 25%
by EMMA Capital. In addition, Entain CEE is acquiring SuperSport,
the leader in the Croatian betting and gaming market.
Entain CEE is acquiring 100% of SuperSport for an initial
consideration of EUR800m, of which EUR600m is payable in cash by
Entain on completion, which is expected to take place in Q4. There
are further potential payments to Emma Capital based on the
performance of the business through to 2024.
SuperSport has 54% market share in the regulated Croatian
market, with 85% of revenue coming from online. It has delivered
consistently strong financial performance, with compound annual
growth from 2016 to 2021, of 16.6% for revenue and 20.8% for
EBITDA, underpinned by healthy EBITDA margins. The transaction is
expected to be mid-to-single digit earnings accretive in the first
full year.
Entain CEE provides a springboard to expand across the CEE
region, combining Entain's global expertise, industry leading
industry capabilities and capital together with the regional
knowledge and connectivity of EMMA Capital, overlaid the expert
regional operational knowledge of local acquisitions and their
management teams starting with SuperSport. Entain CEE will be led
by Radim Haluza, the CEO of Supersport and a highly experienced and
capable individual within the industry
These acquisitions deliver quality brands and leading market
positions in highly attractive, growing and regulated markets.
We continue to explore both organic and M&A prospects across
growing regulated markets including Latin and Central America and
Central and Eastern Europe, that will drive further value for
shareholders.
Engaging new audiences and entertainment experiences
Technology is changing consumer behaviour giving users more
choice, enabling new social and community experiences and opening
up to new growth opportunities. At Entain, we've always embraced
the opportunity to innovate, listening to customers and
interpreting deep data insights to meet their changing needs in
rapidly evolving markets. We know that customers not only want more
content and more engagement but also seek differentiated, fresh and
exciting experiences. We continue to see increasing convergence of
interactive entertainment and media towards traditional betting and
gaming experiences and are excited to be building that future for
our customers.
In addition to broadening the engagement within our existing
offering, Entain continues to enhance the customer experience and
appeal that enables us to benefit from powerful flywheel effects
that not only grow our customer base but reduce acquisition cost,
lower churn and improve returns. Across markets like the UK,
Australia and Germany our customers have enjoyed richer content as
well as engaging media around our sports offering with our F1
collaboration with McLaren, Coral's latest episodes of Against the
Odds with ITV as well as Neds and Ladbrokes Australia's live racing
channels. These new initiatives have driven improved engagement,
retention and brand association and we aim to continue to invest in
these areas for our customers.
Our acquisition of UNIKRN provides access to the nascent esports
wagering market. We remain extremely excited by the opportunity.
Ahead of the launch expected later this year, we have been working
to evolve the product portfolio, whilst liaising with partners and
regulators to develop an appropriate framework fulfilling both
customer experience and player enjoyment alongside protection
structures required for a sustainable long-term market.
Through our Ennovate hub, we are investing in research and
development and exploring new technologies, both internally and
through external partnerships in order to meet the evolving needs
of current and future customers.
Sustainability
Sustainability is the second of our twin strategic pillars and
is at the heart of everything we do. We firmly believe that the
most sustainable business will be the most successful business in
our industry. Paired with our strategic growth priorities, our
strategic sustainability pillar is underpinned by our
Sustainability Charter with its four core principles clearly
defined: an exclusive focus on regulated markets; continuing to
take the lead on responsible betting and gaming; best in class
corporate governance; and investing in our people and local
communities.
We continue to strive to meet, and exceed the highest standards
in everything we do, from the way we run our business to the way we
support our colleagues, our customers and our communities.
Focus on regulated markets
Entain is currently licensed in over 30 countries, and that
number will continue to rise through a combination of positive
regulatory developments as well as our expansion into new already
regulated countries. Operating in a well-structured regulatory
regime enables us to deliver higher quality earnings with greater
certainty and sustainability of earnings as we continue to grow and
expand the footprint of our future opportunities.
Entain has already made significant progress towards our
commitment to only operate in regulated markets by the end of 2023.
At the end of 2021, the percentage of NGR from regulated or
regulating markets was almost 100% with Brazil, Canada and the
Netherlands being the most significant in the process of
regulating.
Entain ceased trading in the Netherlands from 1 October 2021
whilst awaiting confirmation of the licensing approval for bwin and
Party brands, which is now expected during the second half of the
year. The acquisition of BetCity, expected to complete in Q4 2022,
secures immediate access with a leading position in the newly
regulated Dutch market.
In April 2022, licenses for online sport betting and gaming were
awarded in Ontario, Canada with bwin and party brands both being
licensed.
We engage openly and proactively with regulators to support a
well-structured and robust regulatory environment that balances the
highest regulatory standards, the responsibility of appropriate
player protections whilst upholding customer freedoms and right of
choice. At Entain we offer first class player protection through
our industry leading technology platform, while upholding all
licensing objectives, across multiple jurisdictions.
In the UK, we continue to wait for the publication of the White
Paper outlining the review of the regulatory framework in the 2005
Gambling Act. The current disruption to Government and ongoing
leadership contest, has seen the postponement of any publication to
the Autumn. The newly appointed Prime Minister will take office on
5(th) September and will then appoint the Cabinet, after which
policy work will continue. Along with other industry operators we
continue to actively engage with appropriate parties in order to
help find a balance between protecting a minority who are at risk
while supporting a healthy entertainment experience as well as an
environment that is commercially viable for operators and
surrounding reliant industries.
Lead on responsibility
Responsibility continues to be a significant part of our
sustainability approach. We continue with the development and
implementation of our industry leading Advanced Responsibility and
Care (ARC(TM) ) programme. ARC(TM) has now been implemented in our
UK brands and operations, with the platform's international
roll-out already underway.
We continue to see an accuracy rating of over 90% across our
algorithms, and our combination of automated systems and real time
interceptors are achieving real traction, with 91% of those
customers with the highest risk, setting a limit within seven days
of interaction with ARC(TM) .
To reflect its importance to the business, we have now included
the effectiveness of ARC(TM) in our Group wide remuneration policy,
specifically targeting a safer customer experience through wider
use of player protection tools.
Our Gamble Responsibly America app is the first of its kind in
the US; being free, unbranded and with no commercial benefit to
Entain or BetMGM. Produced alongside EPIC Risk Management and
RG24/7, both partners with the Entain Foundation US, collaborate on
educational projects hosted by experts in the field. The app
features a series of educational resources and tools to support
those at risk of, or facing, gambling related harm. It also offers
assets and information to help people game responsibly and provides
guidance for those individuals potentially struggling with problem
gambling.
Best in class corporate governance
As an industry leader, we are committed to the highest standards
of governance in all areas of our operations. This commitment to
best practice is delivered through a robust framework of oversight
and control.
Rahul Welde was appointed as independent Non-Executive Director,
effective from 1st July 2022. Rahul brings a wealth of digital
consumer and ecommerce experience from over 30 years working in the
global FCMG sector. Peter Isola stepped down as Non-Executive
Director on 21st March 2022.
The Board now consists of the Chairman, three Executive
Directors and seven independent Non-Executive Directors, with
female Directors making up 36% of the Board's membership. The Board
remains committed to the view that an inclusive and diverse
membership results in optimal decision-making. To support this, we
have developed a Board Diversity Policy , which is available on our
website.
In line with our objective to operate best-in-class corporate
governance, we commissioned Alvarez & Marsal to conduct an
independent comprehensive review of the Group's governance and
compliance practises. A summary of the results of the review are
included in our Annual Report and ESG Report for 2021-22, published
on 8th June 2022
www.entaingroup.com/sustainability/esg-policy-statements .
Best place to work and investing in our people and
communities
Our vision is to create the best place to work where our
colleagues feel valued, respected, and engaged. We are on a journey
to revolutionise the betting and gaming industry and be the
employer of choice for all talented people. We launched an
Inclusion Ambassadors programme with 30 representatives across our
global footprint. We have invested in educating Entain's senior
leaders on the importance of diversity and inclusion and in the
process of reaching our wider colleague-base with Global Inclusion
Learning, a new interactive and immersive training programme
delivered by 50 facilitators across the business.
Reducing our impact on the environment is a core tenet of our
commitment to sustainability and we have successfully reduced our
carbon emissions by 15% between 2018 to 2021. Last year we
committed to becoming Net Zero for carbon emissions by 2035 - 15
years ahead of the target set by the Paris Agreement on climate
change. Having joined the Science Based Target initiative we are in
the process of formally agreeing our Net Zero targeting path.
Our two Foundations - the Entain Foundation and the Entain
Foundation US, continue to support research into problem gambling
and education initiatives that align with our sustainability
ambitions as well as investing into local communities and grass
roots sports across our key markets. In November 2021, we launched
EnTrain, an initiative to positively impact one million people
through education in technology by the end of the decade. This
builds on our partnerships with organisations such as Girls Who
Code, the international non-profit body working to close the gender
gap in technology and redefine the image of what a programmer does.
The Entain Foundation is looking to build on these partnerships
throughout 2022.
The Entain Foundation continues to invest in grassroots sports
through its Pitching In programme. In July, the Group extended its
partnership with the Pitching In Trident Leagues comprising 248
clubs and over 15,000 community based non-league football players.
In addition to funding the operation of the leagues, the core
objective of the partnership is to promote community engagement
between the clubs and their local areas. As such, the Foundation is
the Founding partner in the Trident Community Fund, which enables
clubs to run community engagement projects. In May 2022, we
launched the Pitching In Volunteer Hub, a unique online platform
that enables every Trident League Club to easily connect with
potential volunteers. In addition, we continue our long
term-collaboration with SportsAid, the UK based sports charity,
through which we sponsor and provide personal development coaching
to 50 young athletes each year. We have also internationalised our
investment in grassroots sport with new projects funded in Austria,
Italy, Greece and Colombia.
In Canada, having acquired Avid Gaming and its Sports
Interaction brand, we are building on their unique relationship to
support the socioeconomic efforts of the Mohawks of Kahnawà :ke
through our Mohawk Online agreement.
Notes
(1) Growth on a constant currency basis calculated by
translating 2022 and 2021 performances at 2022 exchange rates
(2) BetMGM market shares for the three month period to May 2022,
in markets in which BetMGM operates, excluding New York
(3) Based on current assumption of future live markets
(4) Retail operates in UK, Italy, Belgium and Republic of
Ireland. Retail numbers are quoted on a LFL basis. During H1 2022,
there were an average of 4,317 shops/outlets in the estate,
compared to an average of 4,612 during H1 2021
Financial Results and the use of non-GAAP measures
The Group's statutory financial information is prepared in
accordance with International Financial Reporting Standards
("IFRS") and IFRS Interpretations Committee (IFRS IC)
pronouncements as adopted for use in the European Union. In
addition to the statutory information provided, management have
also provided additional information in the form of Contribution,
EBITDAR and EBITDA as these metrics are industry standard KPIs
which help facilitate the understanding of the Group's performance
in comparison to its peers. A full reconciliation of these non-GAAP
measures is provided within the Income Statement and supporting
memo.
BUSINESS REVIEW
Group
Six months to 30 June 2022(1) 2021 Change CC (2)
GBPm GBPm % %
---------- -------- -------- -------
NGR 2,117.6 1,792.6 18% 18%
VAT/GST (22.7) (25.6) 11% 10%
---------- -------- -------- -------
Revenue 2,094.9 1,767.0 19% 19%
Gross profit 1,327.8 1,136.3 17%
Contribution 1,025.5 827.8 24%
Operating costs (545.4) (417.3) (31%)
Underlying EBITDAR(3) 480.1 410.5 17%
Rent and associated costs (9.1) (9.4) 3%
Underlying EBITDA(3) 471.0 401.1 17%
Share based payments (5 .2 ) (6.6) 2 1 %
Underlying depreciation and amortisation (113 .2 ) (109.9) (3%)
Share of JV/Associate (l oss) (10 6.1 ) (79.0) (3 4 %)
Underlying operating profit(4) 2 46.5 205.6 20%
------------------------------------------ ---------- -------- --------
Revenue increased by 19% (19%cc (2) ) to GBP2,094.9m in H1
driven by a strong performance in Retail following prior year
lockdowns partially offset by a -7%cc (2) decline in Online NGR as
we lap strong prior year comparators due to Covid lockdowns, Euro
2020 and prior year trading in the Netherlands. Whilst Online NGR
was down on the prior year, the underlying health of the business
remains particularly strong with active customer numbers in H1
higher than they have ever been.
Contribution of GBP1,025.5m was 24% higher than last year, with
a contribution margin of 48.4%, 2.2pp higher than 2021 due to a
higher Retail segmental mix. Operating costs (before rent) were 31%
higher leaving underlying EBITDA (3) of GBP471.0m, 17% higher than
the prior year.
Share based payment charges were GBP1.4m lower than last year,
while underlying depreciation and amortisation was 3% higher as a
result of current year and the annualisation of prior year
acquisitions. Share of JV losses includes a loss of GBP108.6m
(2021: GBP78.2m) relating to BetMGM, which is in line with our
expectations. Group underlying operating profit (4) of GBP246.5m
was 20% ahead of 2021. After charging separately disclosed items of
GBP112.9m (2021: GBP116.1m), operating profit of GBP133.6m was
GBP44.1m higher than in 2021.
Online
Six months to 30 June 2022(1) 2021 Change CC (2)
GBPm GBPm % %
-------- -------- -------- --------
Sports wagers 6,881.8 7,077.3 (3%) (3%)
Sports margin 12.8% 13.1% (0.3pp) (0.3pp)
Sports NGR 702.9 751.1 (6%) (6%)
Gaming NGR 752.7 825.9 (9%) (9%)
B2B NGR 15.1 10.6 42% 54%
-------- -------- -------- --------
Total NGR 1,470.7 1,587.6 (7%) (7%)
VAT/GST (22.7) (25.6) 11% 10%
-------- -------- -------- --------
Revenue 1,448.0 1,562.0 (7%) (7%)
Gross profit 886.1 989.1 (10%)
Contribution 587.3 683.8 (14%)
Contribution margin 39.9% 43.1% (3.2pp)
Operating costs (201.9) (187.1) (8%)
Underlying EBITDAR(3) 385.4 496.7 (22%)
Rent and associated costs (0.7) (0.8) 13%
Underlying EBITDA(3) 384.7 495.9 (22%)
Share based payments (1 .3 ) (3.5) 6 3 %
Underlying depreciation and amortisation (57.2) (56.9) (1%)
Share of JV/Associate income 1.8 - -
Underlying operating profit(4) 328 . 0 435.5 (25%)
------------------------------------------ -------- -------- --------
Online NGR of GBP1,470.7m was -7% (-7%cc (2) ) behind last year
as a result of the very strong comparatives in 2021 when much of
Europe remained in Covid related lockdowns, the delayed Euro 2020
took place and our Netherlands operation continued to trade before
its temporary closure on 1 October 2021 whilst we await licenses
being granted. Excluding the Netherlands, NGR was -3% behind year
on year.
Underlying performance remains strong, and the first half
represents a 3 year CAGR of 13%cc (2) (+14%cc (2) in Q1 and +11%cc
(2) in Q2), demonstrating our ability to deliver long-term
sustainable growth. We are also delighted that our Q2 performance
is underpinned by the highest levels of active players ever
recorded, the result of our continued focus on recreational players
and putting the customer at the heart of everything we do.
Underlying EBITDAR (3) for the half of GBP385.4m and underlying
EBITDA (3) of GBP384.7m were -22% behind 2021. U nderlying
operating profit (4) of GBP328.0m was -25% behind and, after
charging separately disclosed items of GBP50.5m (2021: GBP92.6m),
operating profit was GBP277.5m, GBP65.4m lower than 2021.
In the UK, NGR was -15%cc (2) behind 2021 as prior year
lockdowns, tighter affordability measures and customers responding
to economic pressures impacted year on year comparisons. Despite
the reduction in NGR, we continue to attract and retain record
numbers of customers through our innovative marketing campaigns and
exciting product releases. Examples during the half include Coral's
3D advert in Piccadilly Square, our new Gala Bingo brand campaign,
as well as successful product releases like Ladbrokes live 'Well
Well Well' game and Coral's first free to play roulette tournament.
Monthly average actives throughout H1 were 7% ahead of 2021, whilst
UK Online NGR grew at 10% on a 3year CAGR basis. We are pleased to
see our UK NGR, across both online and retail, up +33% versus 2021,
illustrating the strength of our brands and the benefits of the
Group's multi-channel approach.
In Australia, we expect to have once again gained market share
in the first half with NGR +20%cc (2) ahead of the prior year. Our
local team deliver this strong performance through differentiating
our brands and expanding the customer experience. Recently
announced changes to the tax regimes in New South Wales and
Queensland will impact our business from H2 and 2023 respectively.
Given the scale and strength of our business in Australia, we are
confident in our ability to mitigate a proportion of the
incremental tax impact.
In Italy, 2022 H1 NGR across the three major brands was -12%cc
(2) behind 2021 given the tough prior year comparators but +26%cc
(2) ahead on a 3 year CAGR basis. The omnichannel appeal of Eurobet
continues to benefit the business, with year on year growth across
Italy online and retail at +31%cc (2) .
In Germany, NGR was -19%cc (2) behind 2021 reflecting the lack
of regulatory oversight creating an unlevel playing field post
implementation of the tolerance regime. However, we remain
confident in the prospects for the market in Germany. We expect
that gaming licences will be issued shortly, bringing greater
enforcement and allowing the Group to reposition itself as a
leading operator in a fully regulated environment.
NGR in Brazil, was +38%cc (2) ahead of 2021 in the first half,
maintaining Sportingbet's position of strength in the market.
Gaming performed particularly strongly, with NGR +70%cc (2) ahead
of 2021. Sports betting, a significant proportion of NGR in Brazil
was +31%cc (2) year on year reflecting the prior year benefit from
Euro 2020 and the Copa America. During the first half, we have seen
a significant increase in competition ahead of the anticipated
regulation which lowered NGR growth versus our original
expectations. However, underlying customer metrics remain very
strong with the number of active customers +44% ahead year on
year.
In Georgia, NGR was -9%cc (2) behind last year with the new
regulation regime taking effect from Q1.
Enlabs, which we acquired in the first quarter of last year,
continues to perform strongly, despite economic challenges of the
region, with year on year growth of +18%cc (2) on a proforma basis.
The Enlabs business and Baltics region continues to present a
number of exciting opportunities for the Group.
During Q1 we completed the acquisition of Avid Gaming and its
Sports Interaction brand, which sees the Group expand its presence
in the Canadian market. During the first half the business
contributed 1% to Online NGR with momentum building in both sports
and gaming volumes.
Online contribution margin of 39.9% was -3.2pp lower than last
year as a result of the Covid unwind impact on NGR and costs
associated with regulation in Germany and Georgia.
Operating costs (before rent) were 8% higher than last year as a
result of inflation and the impact of acquisitions, with the
year-on-year increase in line with previous mid to high
single-digit guidance.
Rent and associated costs were GBP0.7m in the first half,
compared with GBP0.8m in the prior year, leaving underlying EBITDA
(3) of GBP384.7m, -22% behind 2021.
Share based payments were GBP2.2m lower than last year,
underlying depreciation and amortisation of GBP57.2m was -1% higher
and share of associate's income was GBP1.8m following an investment
in 2021, leaving underlying operating profit (4) -25% lower at
GBP328.0m.
Retail
The Retail business is made up of our Retail estates in the UK,
Italy, Belgium and Republic of Ireland.
Six months to 30 June 2022(1) 2021 Change CC(2)
GBPm GBPm % %
--------- -------- -------- --------
S ports wagers(5) 1,913 .7 5 09.9 2 75 % 2 76 %
S ports margin(5) 18.7% 1 9.0 % (0.3pp) (0.3pp)
Sports NGR/Revenue 354.7 99. 5 256% 258%
Machines NGR/Revenue 281.3 91.8 206% 206%
NGR/Revenue 636.0 191.3 232% 233%
Gross profit 428.6 134.2 219%
Contribution 425.1 131.3 224%
Contribution margin 66.8% 6 8.6% (1.8pp)
Operating costs (275.8) (185.7) (49%)
Underlying EBITDAR(3) 149.3 (54.4) 374%
Rent and associated costs (8.2) (8.3) 1%
Underlying EBITDA(3) 141.1 (62.7) 325%
Share based payments (0.5) (1.3) 6 2 %
Underlying depreciation and amortisation (53.0) (51.1) (4%)
Share of JV/Associate income - - -
Underlying operating profit/(loss)(4) 87.6 (115.1) 176%
------------------------------------------ --------- -------- --------
Retail NGR of GBP636.0m was +232% (+244% LFL (5) ) ahead of a
lockdown impacted prior year with customers returning in strength
to our shops for the unique Retail betting and gaming experience.
In our two largest Retail estates, the UK and Italy, we are seeing
volumes ahead of pre-Covid levels and LFL (5) Retail NGR grew at
2%cc (2) in Q2 on a 3 year CAGR basis (post implementation of the
Triennial review in the UK on 1 April 2019).
With NGR significantly ahead year on year, Retail recorded an
underlying EBITDAR (3) of GBP149.3m which was GBP203.7m ahead of
2021, and underlying EBITDA (3) of GBP141.1m, GBP203.8m ahead.
Underlying operating profit(4) was GBP87.6m and, after separately
disclosed items of GBP50.1m (2021: GBP5.6m), operating profit was
GBP37.5m, an increase of GBP158.2m on 2021.
In the UK, NGR was +194% ahead of 2021 with the strong
performance driven by a continuation of our digitalisation strategy
and our ongoing focus on market leading content for our gaming
machines and self-service betting terminals. Strong sports volumes
are predominantly driven by our SSBT's, which provide an experience
akin to the digital offering and now represent approximately one
third of our total sports NGR in UK Retail. Gaming NGR was up +7%
on a LFL (5) basis vs 2019, supported by best in class machines and
the most differentiated content on the high street.
In Italy, the strength of our omni-channel offering and our
ability to maintain ongoing relationships with customers through
digital channels during lockdowns has continued to benefit the
businesses recovery post Covid, with NGR in H1 +5%cc (2) ahead of
2019. Shops in Italy were closed for much of the first half in
2021, with a phased reopening during June and July.
Our Retail estate in Belgium continues to recover more slowly
than our other estates post Covid with a further lockdown in
January of this year disrupting momentum. With Belgium in lockdown
for much of H1 2021, year on year NGR was +207%cc (2) ahead in H1
2022. Similarly impacted by significant lockdown closures in 2021,
Republic of Ireland NGR was +468%cc (2) ahead.
Operating costs (before rent) were 49% higher than 2021, largely
due to prior year comparators benefiting from cost mitigation in
response to lockdowns and the receipt of furlough. Whilst the
business continues to combat inflationary pressures through strict
cost control, the current level of inflation and rising energy
prices in H2 is expected to be offset by continued strong NGR
performance driven by our industry leading content on gaming
machines and SSBTs.
Rent and associated costs of GBP8.2m in the first half were 1%
lower than the prior year, leaving underlying EBITDA(3) of
GBP141.1m, GBP203.8m higher than 2021.
Charges for share based payments were GBP0.8m lower than last
year and underlying depreciation and amortisation of GBP53.0m was
-4% higher leaving an underlying operating profit(4) of GBP87.6m,
GBP202.7m ahead of 2021.
As of 30 June 2022, there were a total of 4,287 shops/outlets
(2021: 4,524): UK 2,568 (2021: 2,754), Italy 940 (2021: 942),
Belgium shops 287, outlets 359 (2021: shops 289, outlets 398) and
Ireland 133 (2021: 132).
During the first half, the Group made the decision to repay
GBP45.5m received under the Coronavirus Job Retention Scheme
("furlough scheme") , a charge which has been recognised in
separately disclosed items .
New Opportunities
Six months to 30 June 2022(1) 2021 Change CC(2)
GBPm GBPm % %
--------- ----- ------- ------
Underlying EBITDAR(3) (14.6) - -
Rent and associated costs - - -
Underlying EBITDA(3) (14.6) - -
Share based payments ( 0.1) - -
Underlying depreciation and amortisation (1 .6 ) - -
Share of JV/Associate income - - -
Underlying operating loss(4) (1 6.3 ) - -
----------------------------------------- --------- ----- -------
New Opportunities costs (3) of GBP14.6m primarily reflect
GBP11.0m of costs associated with our innovation program, and
GBP3.6m of losses in our Unikrn business as we prepare the business
for launch in H2.
After depreciation and amortisation and share based payments,
New Opportunities underlying operating loss (4) was GBP16.3m.
Other
Six months to 30 June 2022(1) 2021 Change CC(2)
GBPm GBPm % %
-------- ------- ------- ------
NGR/Revenue 13.1 15.5 (15%) (16%)
Gross profit 13.1 13.0 1%
Contribution 13.1 12.7 3%
Operating costs (10.1) (10.3) 2%
Underlying EBITDAR(3) 3.0 2.4 25%
Rent and associated costs - (0.1) 100%
Underlying EBITDA(3) 3.0 2.3 30%
Share based payments - -
Underlying depreciation and amortisation (1.3) (1.7) 24%
Share of JV/Associate income/(loss) 0.7 (0.8) 188%
Underlying operating profit/(loss)(4) 2.4 (0.2) n/m
------------------------------------------ -------- ------- -------
NGR of GBP13.1m was 15% lower than 2021 with the continued
recovery in NGR in our 4 dog tracks post Covid lockdowns more than
offset by lost revenues from our break even Betdaq business which
was sold in H2 2021. Resulting underlying EBITDAR(3) and EBITDA(3)
of GBP3.0m were GBP0.6m and GBP0.7m ahead of 2021 respectively.
Underlying operating profit(4) was GBP2.4m (2021: GBP0.2m loss) and
operating profit after charging separately disclosed items was also
GBP2.4m, GBP4.3m ahead of last year.
Corporate
Six months to 30 June 2022(1) 2021 Change CC(2)
GBPm GBPm % %
---------- -------- -------- ------
Underlying EBITDAR(3) (43.0) (34.2) (26%)
Rent and associated costs (0.2) (0.2) -
Underlying EBITDA(3) (43.2) (34.4) (26%)
Share based payments (3.3) (1.8) (8 3 %)
Underlying depreciation and amortisation (0.1) (0.2) 50%
Share of JV/Associate (l oss) (1 08.6 ) (78.2) (39%)
Underlying operating loss (155.2) (114.6) (35%)
------------------------------------------ ---------- -------- --------
Corporate costs(3) of GBP43.2m were GBP8.8m higher than last
year driven by additional investment in our Responsible Gambling
activities, as we move towards our 1% of UK GGR target, and the
annualisation of investment in 2021 (H2 2021 cost was GBP46.6m).
After share based payments, depreciation and amortisation and share
of JV losses, Corporate underlying operating loss(4) was GBP155.2m,
an increase of GBP40.6m, largely as a result of the expected
GBP30.4m incremental loss in the US JV, BetMGM. After charging
separately disclosed items of GBP12.3m, the operating loss of
GBP167.5m was GBP36.7m higher than 2021.
Notes
(1) 2022 results are unaudited
(2) Growth on a constant currency basis is calculated by
translating both current and prior year performance at the 2022
exchange rates
(3) EBITDAR is defined as earnings before interest, tax,
depreciation and amortisation, rent and associated costs, share
based payments and share of JV/associate income. EBITDA is defined
as EBITDAR after charging rent and associated costs. Both EBITDAR
and EBITDA are stated pre separately disclosed items
(4) Stated pre separately disclosed items
(5) Retail numbers are quoted on a LFL basis. During H1 there
was an average of 4,317 shops in the estate, compared to an average
of 4,612 in the same period last year
CHIEF FINANCIAL OFFICER'S REVIEW
Six months to 30 June 2022(1) 2021 Change CC(2)
GBPm GBPm % %
-------- -------- ------- ------
NGR 2,117.6 1,792.6 18% 18%
Revenue 2,094.9 1,767.0 19% 19%
Gross profit 1,327.8 1,136.3 17%
Contribution 1,025.5 827.8 24%
Underlying EBITDAR(3) 480.1 410.5 17%
Underlying EBITDA(3) 471.0 401.1 17%
Share based payments (5.2) (6.6) 21%
Underlying depreciation and amortisation (113.2) (109.9) (3%)
Share of JV/Associate l oss (106.1) (79.0) (34%)
Underlying operating profit(4) 246.5 205.6 20%
Net finance costs (39.1) (36.0)
Net foreign exchange/movement
on derivatives (55.0) 77.1
Profit before tax pre separately
disclosed items 152.4 246.7
Separately disclosed items:
Amortisation of acquired intangibles (51.5) (94.7)
Other (61.4) (21.4)
Profit before tax 39.5 130.6
Tax (11.4) (39.7)
Profit after tax from continuing
activities 28.1 90.9
Discontinued operations (3.1) (6.2)
Profit after tax 25.0 84.7
------------------------------------------ -------- -------- ------- ------
NGR and Revenue
Group reported NGR was 18% ahead and revenue was 19% ahead of
last year, with prior year lockdowns causing strong growth in
Retail partially offset by a decline in Online. Further details are
provided in the Business Review section.
Underlying operating profit (4)
Group reported underlying operating profit(4) of GBP246.5m was
20% ahead of 2021 (2021: GBP205.6m), with underlying EBITDA(4)
ahead by 17%. The Group's share of JV and Associate losses of
GBP106.1m (2021: GBP79.0m) includes BetMGM losses of GBP108.6m,
which were GBP30.4m higher year on year as the business invests in
growth. Analysis of the Group's performance for the first half is
detailed in the Business Review section.
Financing costs
Finance costs of GBP39.1m (2021: GBP36.0m) were GBP3.1m higher
than 2021 as a result of annualisation of interest on the
additional $351m (cGBP250m) in term loans raised In July 2021.
Net foreign exchange losses in H1 of GBP55.0m (2021: GBP77.1m
gain) resulted from the retranslation of non-sterling denominated
debt. These losses are offset by gains in reserves on the
retranslation of assets in our overseas businesses.
Separately disclosed items
Items separately disclosed before tax for the period amount to a
GBP112.9m charge (2021: GBP116.1m) and relate primarily to GBP51.5m
of amortisation on acquired intangibles (2021: GBP94.7m), a
GBP45.5m charge for the repayment of monies received under the
Coronavirus Job Retention Scheme ("furlough scheme")(2021: GBPnil),
a GBP3.5m (2021: GBP3.3m) impairment/loss on disposal of certain
Retail assets and in the prior year a write off of assets on the
disposed exchange business Betdaq, Project Evolve costs of GBP4.5m
(2021: GBPnil), corporate transaction costs of GBP12.5m (2021:
GBP3.4m) and GBP4.7m of legal and onerous costs (2021: GBP6.2m),
offset by a GBP9.3m release of contingent consideration liabilities
following a reassessment of the likely cost (2021: GBP0.2m charge).
During the prior year the Group also incurred GBP10.1m of
Integration costs and GBP0.7m on other exceptional items as well as
recording a GBP2.5m income predominantly on the Ladbrokes VAT
claim.
Separately disclosed items
2022 2021
GBPm GBPm
-------------------------------------- -------- --------
Amortisation of acquired intangibles (51.5) (94.7)
Furlough repayments (45.5) -
Impairment/Loss on disposal (3.5) (3.3)
Project Evolve (4.5) -
Corporate transaction costs (12.5) (3.4)
Legal and onerous contract costs (4.7) (6.2)
Movement in fair value of contingent
consideration 9.3 (0.2)
Integration costs - (10.1)
Tax litigation/one-off legislative
impacts - 2.5
Other one-off items - (0.7)
Total (112.9) (116.1)
-------------------------------------- --------
Profit before tax
Profit before tax and separately disclosed items was GBP152.4m
(2021: GBP246.7m), a year-on-year reduction of GBP94.3m with the
outperformance in Group operating profit offset by the foreign
exchange losses on retranslation of debt.
Taxation
The tax charge for the period ended 30 June 2022 was GBP11.4m
(2021: charge of GBP39.7m), reflecting an underlying effective tax
rate pre-BetMGM losses and foreign exchange of 11.4% (2021: 20.2%)
and a tax income on separately disclosed items of GBP19.3m (2021:
GBP10.3m).
With changes anticipated in the taxation regime in Gibraltar, we
now expect the full year 2022 effective tax rate to be c18%
excluding the impact of foreign exchange and share of BetMGM
losses.
Cashflow
Six months to 30 June 2022 2021
GBPm GBPm
-------- --------
Underlying EBITDA (3) 471.0 401.1
Discontinued EBITDA - (2.5)
Underlying working capital (86.7) (43.9)
Capital expenditure (103.9) (71.6)
Finance lease (incl. IFRS 16 leases) (48.6) (44.0)
Corporate taxes (40.6) (41.4)
-------- --------
Underlying free cashflow 191.2 197.7
Investment in BetMGM (113.1) (72.6)
Acquisitions net of cash acquired (179.5) (380.7)
-------- --------
Free cashflow (101.4) (255.6)
Interest paid (incl. IFRS 16 leases) (32.5) (29.6)
Separately disclosed items 66.7 (18.4)
Net movement on debt and associated instruments 34.3 (21.9)
Equity issue - 0.6
Dividends paid - (14.8)
-------- --------
Net Cashflow (32.9) (339.7)
Foreign exchange 11.3 18.1
-------- --------
Net cash generated (21.6) (321.6)
------------------------------------------------- -------- --------
Note: Cashflows of GBP19.9m on contingent consideration
arrangements classified as separately disclosed items above have
been included within settlement of financial instruments and other
financial liabilities within the statutory cashflow (2021:
GBP1.6m)
During the first half, the Group had a net cash outflow of
GBP32.9m (2021: GBP339.7m), but an inflow of GBP259.7m before
acquisitions and investment in BetMGM (2021: GBP113.6m). Underlying
free cashflow for the period was GBP191.2m (2021: GBP197.7m) with
underlying EBITDA(3) of GBP471.0m (2021: GBP401.1m) offset by
investment in capital expenditure of GBP103.9m (2021: GBP71.6m),
lease payments of GBP48.6m, including those on non-operational
shops (2021: GBP44.0m) and a working capital outflow of GBP86.7m
(2021: GBP43.9m). The Group also paid GBP40.6m in corporate tax
(2021: GBP41.4m) with discontinued operations also incurring a loss
of GBP2.5m EBITDA(3) in the prior year. Including cash outflows for
acquisitions and additional investment in BetMGM, the Group had a
free cash outflow of GBP101.4m (2021: GBP255.6m).
The Group paid GBP32.5m of interest during the first half (2021:
GBP29.6m) and received GBP66.7m on separately disclosed items
(2021: GBP18.4m expense) including GBP161.9m on tax litigation
(2021: GBP3.1m), primarily monies received from the 2010/11 Greek
Tax Assessment following a ruling in the Group's favour, less
payments of GBP4.9m on Project Evolve (2021: GBPnil), GBP45.5m to
repay monies received under the furlough scheme (2021: GBPnil),
GBP6.0m on legal and onerous contract costs (2021: GBP8.7m),
GBP14.5m on acquisition and deal related costs (2021: GBP1.8m) and
GBP19.9m on deferred consideration arrangements on previous
acquisitions (2021: GBP1.6m). The Group also incurred GBP4.4m in
ongoing fees in relation to previous disposals (2021: GBPnil). In
the prior period, costs of GBP9.4m in relation to integration
activities were incurred.
During the half, GBP34.3m was received on debt related
instruments, primarily on the settlement of one of the Group's
external swap arrangements following its maturity (2021: GBP21.9m
repaid). In the prior period, GBP14.8m was paid in dividends to the
minority holding in Crystalbet. No equity dividends were paid
during either the current or prior year.
Net debt and liquidity
As at 30 June 2022, net debt was GBP2,209.6m and represented a
net debt to EBITDA ratio of 2.3x. There was no drawdown on the
Group's revolving credit facility.
Par value Issue costs/ Total
Premium
GBPm GBPm GBPm
----------- ------------- ----------
Bonds (500.0) (7.3) (507.3)
Term loans (1,887.0) 13.9 (1,873.1)
Interest accrual (22.4) - (22.4)
----------- ------------- ----------
(2,409.4) 6.6 (2,402.8)
Cash 465.5
----------
Accounting net debt (1,937.3)
Cash held on behalf of customers (194.9)
Fair value of swaps held against debt instruments 84.0
Short term investments/Deposits
held 20.7
Balances held with payment service
providers 94.2
Adjusted net debt pre IFRS 16 (1,933.3)
Lease liabilities recognised as a result
of IFRS 16 (276.3)
----------
Adjusted net debt post IFRS 16 (2,209.6)
---------------------------------------- ----------- ------------- ----------
Going Concern
In adopting the going concern basis of preparation in the
interim financial statements, the directors have considered the
current trading performance of the Group, the principal risks and
uncertainties as considered in the 2021 year end longer term
viability statement and the current macro-economic environment. The
assessment performed over going concern included assessing the
impact of the crystallisation of the Group's principal risks in
"severe but plausible" downside scenarios as well as downside
sensitivities for the broader macro-economic environment.
At 30 June 2022, the Group had accessible cash of cGBP0.4bn with
a further cGBP0.5bn available under the Group's RCF. Given the
level of the Group's current financing facilities, the first
material tranche of which does not mature until H2 2023, and the
forecast covenant headroom even under the sensitised downside
scenarios, the directors believe that the Group is well placed to
manage the risks and uncertainties it faces. As such, the directors
have a reasonable expectation that the Group will have adequate
financial resources to continue in operational existence and have,
therefore, considered it appropriate to adopt the going concern
basis of preparation in the interim financial statements.
Notes
(1) 2022 results are unaudited
(2) Growth on a constant currency basis is calculated by
translating both current and prior year performance at the 2022
exchange rates
(3) EBITDAR is defined as earnings before interest, tax,
depreciation and amortisation, rent and associated costs, share
based payments and share of JV income. EBITDA is defined as EBITDAR
after charging rent and associated costs. Both EBITDAR and EBITDA
are stated pre separately disclosed items
(4) Stated pre separately disclosed items
Principal risks
Key risks are reviewed by the executive directors, other senior
executives and the Board of Entain plc on a regular basis and,
where appropriate, actions are taken to mitigate the key risks that
are identified. The Board has overall responsibility for risk
management as an integral part of strategic planning.
The principal risks and uncertainties which could impact the
Group are detailed in the Group's Annual Report and Accounts 2021
and are as follows:
Data breach and cyber security
The Group operations depend on the fairness of its gaming
engines, the processing of customer data (protected by strict data
protection and privacy laws in all jurisdictions in which the Group
operates) and the ability of customers to access its services on a
24/7 basis. The Group is exposed to the risk that the integrity of
gaming, confidentiality of data or availability of its services
would be compromised through a cyberattack or a breach in data
security, which would impact the trust of its customers and
resulting NGR growth and could ultimately result in prosecutions
including financial penalties.
Laws, regulations, licensing and regulatory compliance
Regulatory, legislative and fiscal regimes for betting and
gaming in key markets around the world can change, sometimes at
short notice. Such changes could benefit or have an adverse effect
on the Group's profitability or the markets in which it can
operate.
Technology failure
The Group's operations are highly dependent on technology and
advanced information systems and there is a risk that such
technology or systems could fail. In particular, any damage to, or
failure of online systems and servers, electronic point of sale
systems and electronic display systems could result in
interruptions to trading and customer service systems.
Taxes
The Group is subject to a range of taxes, duties and levies in
many of the countries where we have operations or in which our
customers are located. The taxes imposed upon betting and gaming
companies have changed over time and continue to change. In
addition to changing taxes, given the Group's geographical
diversity, the nature of tax affairs can be complicated with
differing legal interpretation regarding the scope and scale of
taxation. Both of these factors mean the levels of taxation to
which the Group is exposed to may change in the future.
BetMGM and US strategy
Effective execution of BetMGM's strategy in the US is key to the
Group's growth forecasts. Ineffective execution of the strategy may
impact the Group's ambition of leadership in the US and
opportunities for NGR growth in already regulated states and new
states as they regulate.
Safer betting and gaming
Safer betting and gaming is at the centre of everything that
Entain does. It is the cornerstone of our Sustainability Charter,
and our most material ESG issue is to ensure the highest possible
levels of player safety and protection. Failure to adequately
protect our customers could impact our ability to offer products
and build a sustainable business.
Increased cost of product
The Group is subject to certain arrangements intended to support
the customer offering. Examples are the horseracing and the
voluntary greyhound racing levies, data and content supply, and the
provision of marketing services. The combined cost of these
third-party services is material, and they collectively have a
significant impact on the profitability for the business globally.
A number of the contracts that underpin the provision of
third-party services are under negotiation at any one time. The
pricing of these services is also subject to inflationary cost
increases and can also be volatile based on the changeable business
environment that many of our suppliers operate.
Health, Safety & Wellbeing of Customers, Communities and
Employees
Failure to meet the requirements of the various domestic and
international rules and regulations relating to the health and
safety of our employees and our responsibilities and commitments
towards customers and communities could expose the Company to
material civil, criminal and/or regulatory action with the
associated financial and reputational consequences.
Trading, liability management and pricing
The Group may experience significant losses as a result of a
failure to determine accurately the odds in relation to any
particular event and/or any failure of its price risk management
processes.
Loss of key locations
Whilst the Group operates out of a number of geographical
locations, there are a number of key sites which are critical to
the day-to-day operations of the Group, including our offices in
Central London, Gibraltar, Vienna, Hyderabad, Australia, Italy,
Ireland and Manila. Disruption in any of these locations could have
an impact on operations.
Pandemic
Further waves of pandemic affecting individual countries or
continents resulting in the closure of all or part of our Retail
estate or the cancellation/postponement of major sporting events,
e.g., football, horse racing may result in financial losses,
service outage or an inability to protect our colleagues
wellbeing.
Recruitment and retention of key employees
The people who work within Entain are pivotal to the success of
the Company and our failure to attract or retain key individuals
may impact our ability to deliver on our strategic goals.
Emerging and Evolving Risks
The current economic pressures, increasing rates of inflation
and increasing energy costs are a cause for concern for many
consumers. Whilst the Group considers itself as relatively
resilient to the impacts of economic pressures, it is not immune.
The directors continue to be vigilant of the economic backdrop.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that, to the best of their knowledge the
condensed financial statements of the Company have been prepared in
accordance with IAS 34; and the interim management report of the
Company includes:
-- a fair review of the important events during the first six
months of the year and their impact on the condensed financial
statements and a description of the principal risks and
uncertainties for the remaining six months of the year, as required
by DTR 4.2.7R; and
-- a fair review of related party transactions and changes
therein, as required by DTR 4.2.8R.
A list of current directors is maintained on the Entain plc
website www.entaingroup.com.
On behalf of the Board
J Nygaard-Andersen R Wood
Chief Executive Officer Chief Financial Officer/Deputy Chief
Executive Officer
11 August 2022
UNAUDITED FINANCIAL STATEMENTS
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June
----- ---------- ---------- --------- ---------- ---------- -------
2022 2021
Separately Separately
disclosed disclosed
items items
Underlying (note Underlying (note
items 4) Total items 4) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
NGR 2,117.6 - 2,117.6 1,792.6 - 1,792.6
VAT/GST (22.7) - (22.7) (25.6) - (25.6)
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
Revenue 2,094.9 - 2,094.9 1,767.0 - 1,767.0
Cost of sales (767.1) - (767.1) (630.7) - (630.7)
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
Gross profit 1,327.8 - 1,327.8 1,136.3 - 1,136.3
Administrative costs (975.2) (112.9) (1,088.1) (851.7) (116.1) (967.8)
Contribution 1,025.5 - 1,025.5 827.8 - 827.8
Administrative costs excluding marketing (672.9) (112.9) (785.8) (543.2) (116.1) (659.3)
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
Group operating profit/(loss) before
share of results from joint ventures
and associates 352.6 (112.9) 239.7 284.6 (116.1) 168.5
Share of results from joint venture
and associates (106.1) - (106.1) (79.0) - (79.0)
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
Group operating profit/(loss) 246.5 (112.9) 133.6 205.6 (116.1) 89.5
(36.8
Finance expense 5 (40.2) - (40.2) ) - (36.8)
Finance income 5 1.1 - 1.1 0.8 - 0.8
Gains arising from financial derivatives 5 63.5 - 63.5 24.3 - 24.3
(Losses)/gains arising from foreign
exchange on debt instruments 5 (118.5) - (118.5) 52.8 - 52.8
Profit/(loss) before tax 152.4 (112.9) 39.5 246.7 (116.1) 130.6
Income tax (expense)/credit 6 (30.7) 19.3 (11.4) (50.0) 10.3 (39.7)
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
Profit/(loss) from continuing operations 121.7 (93.6) 28.1 196.7 (105.8) 90.9
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
Loss for the period from discontinued
operations after tax - (3.1) (3.1) (2.5) (3.7) (6.2)
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
Profit/(loss) for the period 121.7 (96.7) 25.0 194.2 (109.5) 84.7
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
Attributable to:
Equity holders of the parent 123.7 (96.7) 27.0 184.0 (109.5) 74.5
Non-controlling interests (2.0) - (2.0) 10.2 - 10.2
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
Earnings per share on profit for
the period from continuing operations(1) 8 29.5p 5.1p 18.7p 13.8p
From profit for the period(1) 29.5p 4.6p 18.3p 12.7p
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
Diluted earnings per share on profit
for the period from continuing
operations(1) 8 29.3p 5.1p 18.5p 13.7p
From profit for the period(1) 29.3p 4.6p 18.1p 12.6p
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
Proposed dividends 7 8.5p 8.5p - -
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
Memo: 2022 2021
Separately Separately
Underlying disclosed Underlying disclosed
items items Total items items Total
GBPm GBPm GBPm GBPm GBPm GBPm
EBITDAR(2) 480.1 (59.2) 420.9 410.5 (18.1) 392.4
Rent and associated costs(3) (9.1) - (9.1) (9.4) - (9.4)
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
EBITDA 471.0 (59.2) 411.8 401.1 (18.1) 383.0
Share based payments (5.2) - (5.2) (6.6) - (6.6)
Depreciation, amortisation and impairment (113.2) (53.7) (166.9) (109.9) (98.0) (207.9)
Share of results from joint ventures
and associates (106.1) - (106.1) (79.0) - (79.0)
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
Group operating profit/(loss) 246.5 (112.9) 133.6 205.6 (116.1) 89.5
------------------------------------------- ----- ---------- ---------- --------- ---------- ---------- -------
1. The calculation of underlying earnings per share has been
adjusted for separately disclosed items, and for the removal of
foreign exchange volatility arising on financial instruments as it
provides a better understanding of the underlying performance of
the Group. See note 8 for further details.
2. Included within the Income Statement and Memo above are
certain non-statutory measures. The use of these items and the
reconciliation to their statutory equivalents is provided
above.
3. Rent and associated costs include VAT and rent not captured
by IFRS 16. These are predominantly driven by held over leases and
irrecoverable VAT on rental charges.
The accompanying notes form part of these financial
statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
Six months Six months
ended ended
30 June 30 June
2022 2021
GBPm GBPm
Profit for the period 25.0 84.7
----------------------------------------------------- ----------- -----------
Other comprehensive income:
Items that may be reclassified to profit or loss:
Currency translation gains/(losses) 111.0 (88.7)
-----------------------------------------------------
Total items that will be reclassified to profit
or loss 111.0 (88.7)
----------------------------------------------------- ----------- -----------
Items that will not be re-classified to profit
or loss:
Changes in the fair value of equity instruments (2.7) -
at fair value through other comprehensive income
Re-measurement of defined benefit pension scheme (0.1) 17.1
Tax on re-measurement of defined benefit pension
scheme - (6.0)
Total items that will not be reclassified to
profit or loss (2.8) 11.1
----------------------------------------------------- ----------- -----------
Other comprehensive income/(expense) for the
period, net of tax 108.2 (77.6)
----------------------------------------------------- ----------- -----------
Total comprehensive income for the period 133.2 7.1
----------------------------------------------------- ----------- -----------
Attributable to:
- equity holders of the parent 135.2 (3.1)
- non-controlling interests (2.0) 10.2
----------------------------------------------------- ----------- -----------
The accompanying notes form part of these financial
statements.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
30 June 31 December 30 June
2022 2021 2021
Note GBPm GBPm GBPm
--------------------------------------- ----- ---------- ------------ ----------
ASSETS
Non-current assets
Goodwill 3,392.6 3,217.0 3,207.4
Intangible assets 2,231.6 2,152.5 2,176.9
Property, plant and equipment 486.4 467.2 458.6
Interest in joint venture 14.2 9.7 -
Interest in associates and other
investments 57.1 58.4 54.4
Trade and other receivables 4.2 3.0 4.1
Other financial assets 8.0 0.3 3.6
Deferred tax assets 161.6 141.4 146.7
Retirement benefit assets 88.2 95.1 81.0
--------------------------------------- ----- ---------- ------------ ----------
6,443.9 6,144.6 6,132.7
--------------------------------------- ----- ---------- ------------ ----------
Current assets
Trade and other receivables 429.6 539.8 472.7
Income and other taxes recoverable 34.1 23.1 15.3
Derivative financial instruments 14 84.0 57.4 18.9
Cash and cash equivalents 465.5 487.1 396.4
1,013.2 1,107.4 903.3
--------------------------------------- ----- ---------- ------------ ----------
Assets in disposal group classified
as held for sale - - 213.9
TOTAL ASSETS 7,457.1 7,252.0 7,249.9
--------------------------------------- ----- ---------- ------------ ----------
LIABILITIES
Current liabilities
Trade and other payables (702.7) (695.8) (750.3)
Balances with customers (194.9) (205.9) (205.3)
Lease liabilities (62.4) (78.2) (84.8)
Interest bearing loans and borrowings (131.8) (121.1) (22.9)
Corporate tax liabilities (52.8) (59.1) (84.0)
Provisions (42.6) (43.5) (36.3)
Other financial liabilities 14 (62.4) (36.1) (211.7)
(1,249.6) (1,239.7) (1,395.3)
--------------------------------------- ----- ---------- ------------ ----------
Non-current liabilities
Interest bearing loans and borrowings (2,271.0) (2,161.3) (2,028.3)
Lease liabilities (213.9) (215.5) (229.1)
Deferred tax liabilities (407.8) (408.0) (365.3)
Provisions (5.5) (6.4) (9.5)
Other financial liabilities 14 (2.8) (52.6) (8.5)
--------------------------------------- ----- ---------- ------------ ----------
(2,901.0) (2,843.8) (2,640.7)
--------------------------------------- ----- ---------- ------------ ----------
Liabilities in disposal group
classified as held for sale - - (173.2)
--------------------------------------- ----- ---------- ------------ ----------
TOTAL LIABILITIES (4,150.6) (4,083.5) (4,209.2)
--------------------------------------- ----- ---------- ------------ ----------
NET ASSETS 3,306.5 3,168.5 3,040.7
--------------------------------------- ----- ---------- ------------ ----------
EQUITY
Issued share capital 4.8 4.8 4.8
Share premium 1,207.3 1,207.3 1,207.2
Merger reserve 2,527.4 2,527.4 2,527.4
Translation reserve 174.4 63.4 103.0
Retained deficit (605.6) (635.8) (863.6)
Equity shareholder's funds 3,308.3 3,167.1 2,978.8
--------------------------------------- ----- ---------- ------------ ----------
Non-controlling interests (1.8) 1.4 61.9
TOTAL SHAREHOLDERS' EQUITY 3,306.5 3,168.5 3,040.7
--------------------------------------- ----- ---------- ------------ ----------
The accompanying notes form part of these financial
statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
Issued Equity Total
share Share Merger Translation Retained shareholders Non-controlling shareholders
capital premium Reserve reserve(1) deficit funds interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------------
At 1 January
2021 4.8 1,206.6 2,527.4 191.7 (901.3) 3,029.2 52.3 3,081.5
----------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------------
Profit for the
period - - - - 74.5 74.5 10.2 84.7
Other
comprehensive
expense - - - (88.7) 11.1 (77.6) - (77.6)
----------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------------
Total
comprehensive
income - - - (88.7) 85.6 (3.1) 10.2 7.1
-----------------
Share options
exercised - 0.6 - - - 0.6 - 0.6
Share-based
payments
charge - - - - 2.1 2.1 - 2.1
Equity dividends - - - - - - (14.8) (14.8)
Acquisition of
investments - - - - (50.0) (50.0) 14.2 (35.8)
-----------------
At 30 June 2021 4.8 1,207.2 2,527.4 103.0 (863.6) 2,978.8 61.9 3,040.7
----------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------------
At 1 January
2022 4.8 1,207.3 2,527.4 63.4 (635.8) 3,167.1 1.4 3,168.5
----------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------------
Profit for the
period - - - - 27.0 27.0 (2.0) 25.0
Other
comprehensive
income - - - 111.0 (2.8) 108.2 - 108.2
----------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------------
Total
comprehensive
income - - - 111.0 24.2 135.2 (2.0) 133.2
Share options
exercised - - - - - - -
Share-based
payments
charge - - - - 6.2 6.2 - 6.2
Equity dividends - - - - - - - -
Purchase of
Non-controlling
Interest - - - - (0.2) (0.2) (1.2) (1.4)
At 30 June 2022 4.8 1,207.3 2,527.4 174.4 (605.6) 3,308.3 (1.8) 3,306.5
----------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------------
1. The translation reserve is used to record exchange
differences arising from the translation of the financial
statements of foreign subsidiaries with non-sterling functional
currencies.
The accompanying notes form part of these financial
statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months
ended ended
30 June 30 June
2022 2021
Notes GBPm GBPm
--------------------------------------------------- ------ ----------- -----------
Cash generated by operations 12 470.9 337.9
Income taxes paid (40.6) (41.4)
Net finance expense paid (32.5) (29.6)
--------------------------------------------------- ------
Net cash generated from operating activities 397.8 266.9
Cash flows from investing activities:
Acquisitions (195.7) (403.0)
Cash acquired on acquisition of business 16.2 22.3
Purchase of intangible assets (56.5) (46.0)
Purchase of property, plant and equipment (47.4) (25.6)
Investment in joint venture (113.1) (72.6)
Net cash used in investing activities (396.5) (524.9)
--------------------------------------------------- ------ ----------- -----------
Cash flows from financing activities:
Proceeds from issue of ordinary shares - 0.6
Settlement of financial instruments and other
financial liabilities (19.9) (1.6)
Lease payments (48.6) (44.0)
Net repayment of borrowings and settlement
of derivatives (1) 34.3 (21.9)
Dividends paid to non-controlling interests - (14.8)
--------------------------------------------------- ------ ----------- -----------
Net cash utilised from financing activities (34.2) (81.7)
--------------------------------------------------- ------ ----------- -----------
Net decrease in cash and cash equivalents (32.9) (339.7)
Effect of changes in foreign exchange rates 11.3 18.1
Cash and cash equivalents at beginning of the
period 487.1 749.8
Cash and cash equivalents at end of the period(2) 465.5 428.2
--------------------------------------------------- ------ ----------- -----------
1. Net repayment of borrowings includes GBP38.6m of cash
received in relation to the settlement of derivative financial
instruments (2021: cash paid GBP19.1m)
2. Cash and cash equivalents at the end of the period includes
GBPnil (31 December 2021 GBPnil, 30 June 2021, GBP31.8m) of cash
within assets in disposal group classified as held for sale.
The accompanying notes form part of these financial
statements.
1. Corporate information
Entain plc ("the Company") is a public limited company
incorporated and domiciled in the Isle of Man whose shares are
publicly traded. The principal activities of the Company and its
subsidiaries ("the Group") are described in Note 3.
2. Basis of preparation
(a) In adopting the going concern basis of preparation in the
interim financial statements, the directors have considered the
current trading performance of the Group, the principal risks and
uncertainties as considered in the 2021 year and longer term
viability statement and the current macro-economic environment. The
assessment performed over going concern included assessing the
impact of the crystallisation of the Group's principal risks in
"severe but plausible" downside scenarios as well as downside
sensitivities for the broader macro-economic environment.
At 30 June 2022, the Group had accessible cash of cGBP0.4bn with
a further cGBP0.5bn available under the Group's RCF. Given the
level of the Group's current financing facilities, the first
material tranche of which does not mature until H2 2023, and the
forecast covenant headroom even under the sensitised downside
scenarios, the directors believe the Group is well placed to manage
the risks and uncertainties it faces. As such, the directors have a
reasonable expectation that the Group will have adequate financial
resources to continue in operational existence and have, therefore,
considered it appropriate to adopt the going concern basis of
preparation in the interim financial statements.
(b) The Group's annual financial statements for the year ended
31 December 2021 were prepared in accordance with International
Financial Reporting Standards ("IFRS") adopted pursuant to
regulation (EC) No 1606/2002 as it applies in the European Union.
The interim condensed consolidated financial statements for the six
months ended 30 June 2022 have been prepared in accordance with IAS
34 Interim Financial Reporting adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union. As required by
the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority, the interim condensed consolidated financial
statements have been prepared applying the accounting policies and
presentation that were applied in the preparation of the company's
published consolidated financial statements for the year ended 31
December 2021.
The financial statements are presented in million Pounds
Sterling, rounded to one decimal place. They are prepared on the
historical cost basis except for the revaluation to fair value of
certain financial instruments. Non-current assets and disposal
groups held for sale are stated at the lower of previous carrying
amounts and fair value less costs to sell.
The accounting policies adopted in the preparation of the
interim financial statements are consistent with those followed in
the preparation of the Group's annual financial statements for the
year ended 31 December 2021 other than those listed in 2(f).
The interim financial information was approved by a duly
appointed and authorised committee of the Board of Directors on 11
August 2022 and is unaudited.
The financial information does not amount to full statutory
accounts within the meaning of the Isle of Man Companies Act 2006
and does not include all of the information and disclosures
required for full annual financial statements. It should be read in
conjunction with the Annual Report and Accounts of Entain plc for
the year ended 31 December 2021 which was prepared in accordance
with IFRS as adopted by the European Union and was filed with the
Registrar of Companies in the Isle of Man. This report is available
either on request from the Company's registered office or to
download from
https://entaingroup.com/investor-relations/financial-reports/ . The
auditor's report on these accounts was unqualified, did not include
a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report, and did not
contain a statement under the Isle of Man Companies Act 2006.
The condensed interim financial statements have been prepared in
accordance with the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority and with International
Accounting Standard 34 'Interim Financial Reporting'. It should be
read in conjunction with the Annual Report and Accounts for the
year ended 31 December 2021, which were prepared in accordance with
applicable law and International Financial Reporting Standards.
(c) Critical judgements and estimates
In preparing these Condensed Consolidated Interim Financial
Statements, the Group has made its best estimates and judgements of
certain amounts included in the financial statements, giving due
consideration to materiality. The Group regularly reviews these
estimates and updates them as required.
The existing critical accounting estimates, assumptions and
judgements set out in note 4.2 of the Group's Annual Report and
Accounts for the 12 months ended 31 December 2021 remain relevant
to these Condensed Consolidated Interim Financial Statements.
(d) To assist in understanding the underlying performance, the
Group has separately disclosed the following items of pre-tax
income and expense:
- amortisation of acquired intangibles resulting from IFRS 3
"Business Combinations" fair value exercises;
- profits or losses on disposal, closure or impairment of non-current assets or businesses;
- costs associated with business restructuring;
- corporate transaction costs;
- changes in the fair value of contingent consideration;
- the impact of significant tax legislation; and
- the related tax impact effect on these items.
- any other items are considered individually by virtue of their nature or size.
The separate disclosure of these items allows a clearer
understanding of the trading performance on a consistent and
comparable basis, together with an understanding of the effect of
non-recurring or large individual transactions upon the overall
profitability of the Group.
The items disclosed separately have been included within the
appropriate classifications in the consolidated income statement
and are detailed in note 4. The directors have also presented Net
Gaming Revenue, Contribution, Underlying EBITDAR and Underlying
EBITDA as these are measures used frequently within the industry.
All of these items are reconciled within the Income Statement.
(e) Accounting policies
Depreciation
Depreciation is applied using the straight-line method to
specific classes of asset to reduce them to their residual value
over their estimated useful economic lives.
The estimated useful lives are as follows:
Land and buildings Lower of 50 years, or estimated useful
life of the building, or lease. Indefinite
lives are attached to any land held
and therefore it is not depreciated
Plant and equipment 3 - 5 years
Fixtures, fittings and equipment 3 -10 years
--------------------------------- --------------------------------------------
Amortisation
Amortisation is charged to the income statement on a
straight-line basis over the estimated useful lives of intangible
assets, unless such lives are indefinite. All indefinite lived
assets are subject to an annual impairment review from the year of
acquisition. Other intangible assets are amortised from the date
they are available for use.
The estimated useful lives are as follows:
Retail licences Lower of 15 years, or duration of
licence
Software 2 -15 years
Capitalised development expenditure 3 - 5 years
Trademarks and brand names 10 -15 years, or indefinite life
Customer relationships 3 -15 years
------------------------------------ ----------------------------------
Impairment
An impairment review is performed for goodwill and indefinite
life assets on at least an annual basis. For all other non-current
assets an impairment review is performed where there are indicators
of impairment. This requires an estimation of the recoverable
amount which is the higher of an asset's fair value less costs to
sell and its value in use. Estimating a value in use amount
requires management to make an estimate of the expected future cash
flows from each cash generating unit and to discount cash flows by
a suitable discount rate in order to calculate the present value of
those cash flows. Estimating an asset's fair value less costs to
sell is determined using future cashflow and profit projections as
well as industry observed multiples and publicly observed share
prices for similar gambling companies.
Within Retail the cash generating units are generally an
individual Licensed Betting Office ("LBO") and therefore,
impairment is first assessed at this level for licences, property,
plant and equipment and right of use ("ROU") assets, any impairment
arising booked first to licences then to property, plant and
equipment and ROU assets.
Separately Disclosed Items
For a full explanation of what is defined as a separately
disclosed item and how they are disclosed, please refer to note
2(d).
(f) Updates to IFRS
A number of amendments to IFRSs became effective for the
financial year beginning 1 January 2022:
IFRS 'Business Combinations' Amendments updating a reference 1 January
3 to the Conceptual Framework 2022
IFRS 'Financial Instruments' Amendments resulting from 1 January
9 Annual Improvements to 2022
IFRS standards 2018-2020
------------------------------------ --------------------------------- ----------
IAS 'Property, Plant and Equipment' Amendments prohibiting 1 January
16 a company from deducting 2022
from the cost of property,
plant and equipment amounts
received from selling items
produced while the company
is preparing the asset
for its intended use.
------------------------------------ --------------------------------- ----------
IAS 'Provisions, Contingent Liabilities Amendments regarding the 1 January
37 and Contingent Assets' costs to include when assessing 2022
whether a contract is onerous.
------------------------------------ --------------------------------- ----------
None of the amendments to IFRS noted above had a significant
effect on the financial statements.
3. Segment information
The Group's operating segments are based on the reports reviewed
by the Executive management team (who are collectively considered
to be the Chief Operating Decision Maker (CODM) to make strategic
decisions and allocate resources.
IFRS 8 requires segment information to be presented on the same
basis as that used by the CODM for assessing performance and
allocating resources, and the Group's operating segments are now
aggregated into the five reportable segments.
- Online: comprises betting and gaming activities from online
and mobile operations. Sports Brands include bwin, Coral,
Crystalbet, Eurobet, Ladbrokes and Sportingbet; Gaming Brands
include CasinoClub, Foxy Bingo, Gala, Gioco Digitale, partypoker
and PartyCasino, Optibet and Ninja;
- Retail: comprises betting and retail activities in the shop
estate in Great Britain, Northern Ireland, Jersey, Republic of
Ireland, Belgium and Italy;
- New opportunities: Unikrn and innovation spend;
- Corporate: includes costs associated with Group functions
including Group executive, legal, Group finance, US joint venture,
tax and treasury; and
- Other segments: includes activities primarily related to
telephone betting, Stadia, Betdaq, and on course pitches.
The Executive management team of the Group have chosen to assess
the performance of operating segments based on a measure of net
revenue, EBITDAR, EBITDA and operating profit with finance costs
and taxation considered for the Group as a whole. Transfer prices
between operating segments are on an arm's-length basis in a manner
similar to transactions with third parties.
The segment results for the six months ended 30 June 2022 were
as follows:
2022 Elimination
All Other of internal Total
Online Retail Segments New Opportunities Corporate revenue Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------- ------- --------- ----------------- --------- ------------ -------
NGR 1,470.7 636.0 13.1 - - (2.2) 2,117.6
VAT/GST (22.7) - - - - - (22.7)
Revenue 1,448.0 636.0 13.1 - - (2.2) 2,094.9
Gross Profit 886.1 428.6 13.1 - - - 1,327.8
------------------------------- ------- ------- --------- ----------------- --------- ------------ -------
Contribution 587.3 425.1 13.1 - - - 1,025.5
Operating costs excluding
marketing/rental costs (201.9) (275.8) (10.1) (14.6) (43.0) - (545.4)
------------------------------- ------- ------- --------- ----------------- --------- ------------ -------
Underlying EBITDAR before
separately disclosed items 385.4 149.3 3.0 (14.6) (43.0) - 480.1
Rental costs (0.7) (8.2) - - (0.2) - (9.1)
------------------------------- ------- ------- --------- ----------------- --------- ------------ -------
Underlying EBITDA before
separately disclosed items 384.7 141.1 3.0 (14.6) (43.2) - 471.0
Share based payments (1.3) (0.5) - (0.1) (3.3) - (5.2)
Depreciation and Amortisation (57.2) (53.0) (1.3) (1.6) (0.1) - (113.2)
Share of joint ventures and
associates 1.8 - 0.7 - (108.6) - (106.1)
------------------------------- ------- ------- --------- ----------------- --------- ------------ -------
Operating profit/(loss) before
separately disclosed items 328.0 87.6 2.4 (16.3) (155.2) - 246.5
Separately disclosed items (50.5) (50.1) - - (12.3) - (112.9)
------------------------------- ------- ------- --------- ----------------- --------- ------------ -------
Group operating profit/(loss) 277.5 37.5 2.4 (16.3) (167.5) - 133.6
------------------------------- ------- ------- --------- ----------------- --------- ------------ -------
Net finance expense (94.1)
------------------------------- ------- ------- --------- ----------------- --------- ------------ -------
Profit before tax 39.5
Income tax (11.4)
------------------------------- ------- ------- --------- ----------------- --------- ------------ -------
Profit for the period from
continuing operations 28.1
------------------------------- ------- ------- --------- ----------------- --------- ------------ -------
Loss for the period from
discontinued operations after
tax (3.1)
------------------------------- ------- ------- --------- ----------------- --------- ------------ -------
Profit for the period after
discontinued operations 25.0
------------------------------- ------- ------- --------- ----------------- --------- ------------ -------
The segment results for the six months ended 30 June 2021 were
as follows:
2021 Elimination
All Other of internal Total
Online Retail Segments Corporate revenue Group
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ------- ------- --------- --------- ------------ -------
NGR 1,587.6 191.3 15.5 - (1.8) 1,792.6
VAT/GST (25.6) - - - - (25.6)
Revenue 1,562.0 191.3 15.5 - (1.8) 1,767.0
Gross Profit 989.1 134.2 13.0 - - 1,136.3
------------------------------------------- ------- ------- --------- --------- ------------ -------
Contribution 683.8 131.3 12.7 - - 827.8
Operating costs excluding marketing/rental
costs (187.1) (185.7) (10.3) (34.2) - (417.3)
------------------------------------------- ------- ------- --------- --------- ------------ -------
Underlying EBITDAR before separately
disclosed items 496.7 (54.4) 2.4 (34.2) - 410.5
Rental costs (0.8) (8.3) (0.1) (0.2) - (9.4)
------------------------------------------- ------- ------- --------- --------- ------------ -------
Underlying EBITDA before separately
disclosed items 495.9 (62.7) 2.3 (34.4) - 401.1
Share based payments (3.5) (1.3) - (1.8) - (6.6)
Depreciation and Amortisation (56.9) (51.1) (1.7) (0.2) - (109.9)
Share of joint ventures and associates - - (0.8) (78.2) - (79.0)
------------------------------------------- ------- ------- --------- --------- ------------ -------
Operating profit/(loss) before
separately disclosed items 435.5 (115.1) (0.2) (114.6) - 205.6
Separately disclosed items (92.6) (5.6) (1.7) (16.2) - (116.1)
------------------------------------------- ------- ------- --------- --------- ------------ -------
Group operating profit/(loss) 342.9 (120.7) (1.9) (130.8) - 89.5
------------------------------------------- ------- ------- --------- --------- ------------ -------
Net finance income 41.1
------------------------------------------- ------- ------- --------- --------- ------------ -------
Profit before tax 130.6
Income tax (39.7)
------------------------------------------- ------- ------- --------- --------- ------------ -------
Profit for the period from continuing
operations 90.9
------------------------------------------- ------- ------- --------- --------- ------------ -------
Loss for the period from discontinued
operations after tax (6.2)
------------------------------------------- ------- ------- --------- --------- ------------ -------
Profit for the period after
discontinued operations 84.7
------------------------------------------- ------- ------- --------- --------- ------------ -------
There were no revenue or costs relating to the New Opportunities
segment in H1 2021.
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.
Geographical information
Revenue by destination for the Group, is
as follows:
Six months ended Six months ended
30 June 2022 30 June 2021
GBPm GBPm
----------------------------------------- ---------------- ----------------
United Kingdom 1,028.9 775.1
Australia 213.7 179.0
Italy 225.3 178.4
Rest of Europe (1) 456.4 513.5
Rest of the World (2) 170.6 121.0
----------------------------------------- ---------------- ----------------
Total 2,094.9 1,767.0
----------------------------------------- ---------------- ----------------
1. Rest of Europe is predominantly driven by markets in Germany, Belgium and Georgia.
2. Rest of the World is predominantly driven by the market in Brazil.
4. Separately disclosed items
Six months Six months
ended ended
30 June 2022 30 June 2021
GBPm GBPm
Amortisation of acquired intangibles(1) 51.5 94.7
Furlough(2) 45.5 -
Impairment loss /loss on disposal(3) 3.5 3.3
Restructuring costs(4) 4.5 -
Corporate transaction costs(5) 12.5 3.4
Legal and onerous contract provisions(6) 4.7 6.2
Movement in fair value of contingent consideration
(7) (9.3) 0.2
Integration costs(8) - 10.1
Tax litigation/ one-off legislative impacts(9) - (2.5)
Other one-off items - 0.7
Total before tax 112.9 116.1
Tax on separately disclosed items(10) (19.3) (10.3)
----------------------------------------------------- ------------- -------------
Separately disclosed items for the period
from continuing operations 93.6 105.8
Separately disclosed items for the period
from discontinued operations 3.1 3.7
----------------------------------------------------- ------------- -------------
Separately disclosed items for the period
after discontinued operations 96.7 109.5
----------------------------------------------------- ------------- -------------
1. Amortisation charges in relation to acquired intangible
assets primarily arising from the acquisitions of Ladbrokes Coral
Group plc, Crystalbet, Enlabs, Bet.pt, Avid, Klondaika, and
Totolotek.
(2.) Repayment of certain amounts received by the Group under
the Government Coronavirus Job Retention Scheme ("Furlough
Scheme").
(3.) During the period the Group recognised a non-cash
impairment charge of GBP2.2m against closed shops and offices, and
GBP1.3m loss on sale of certain assets.
(4.) Costs associated with the Group's restructuring program
Evolve.
(5.) Deal fees associated with M&A activity in the
period.
(6.) Relates primarily to costs associated with certain
litigation and legal claims.
(7.) Income reflecting a change in the estimated likely payments
under contingent consideration arrangements.
(8.) Costs associated with the integration of Ladbrokes Coral
Group plc and GVC businesses, including redundancy costs.
(9.) Relates primarily to the additional amounts received in the
prior year in relation to the Ladbrokes VAT claim.
(10.) The tax credit on separately disclosed items of GBP19.3m
(2021: GBP10.3m credit) represents 17.0% (2021: 8.9%) of the
separately disclosed items incurred of GBP112.9m (2021: GBP116.1m).
This is lower than the expected tax credit at 19.0% (2021: 19.0%)
due to certain corporate transaction costs that are not deductible
for tax purposes and lower average overseas tax rates.
Included within discontinued operations are separately disclosed
costs associated with the now disposed business, Intertrader.
5. Finance expense and income
Six months Six months
ended ended
30 June 2022 30 June 2021
GBPm GBPm
---------------------------------------- ------------- -------------
Bank loans and overdrafts (33.9) (30.2)
Interest arising on lease liabilities (6.3) (6.6)
Losses arising on foreign exchange on
debt instruments (118.5) -
---------------------------------------- ------------- -------------
Total finance expense (158.7) (36.8)
----------------------------------------- ------------- -------------
Interest receivable 1.1 0.8
Gains arising on financial derivatives 63.5 24.3
Gains arising on foreign exchange on
debt instruments - 52.8
Net finance (expense)/income (94.1) 41.1
----------------------------------------- ------------- -------------
6. Taxation
The tax charge on continuing operations for the six months ended
30 June 2022 was GBP11.4m (30 June 2021: charge of GBP39.7m) of
which a credit of GBP19.3m (30 June 2021: credit of GBP10.3m)
related to separately disclosed items. The effective tax rate on
continuing operations (before the effect of JV losses and foreign
exchange) before separately disclosed items was 11.4% (six months
ended 30 June 2021: 20.2%).
The current period's tax charge on continuing operations before
separately disclosed items was higher than the UK statutory rate of
19% due to deferred tax assets on losses arising in BetMGM not
being recognised in the period, partially offset by the effects of
Gibraltar's temporary enhanced marketing deduction.
In the Gibraltar Budget on 20 July 2021, the Chief Minister
announced a temporary enhanced tax deduction for qualifying
business marketing and promotion costs, which would apply for the
year ending 31 December 2021 and 31 December 2022. This was
substantively enacted on 30 July 2021 and is reflected in the tax
charge for the six months to 30 June 2022.
However, in the subsequent Gibraltar Budget on 28 June 2022, the
Chief Minister unexpectedly announced the retrospective removal of
this enhanced deduction, except in very limited circumstances. This
had not been substantively enacted by the balance sheet date and so
is not reflected in the tax charge for the six months to 30 June
2022.
As a result, the effective tax rate on continuing operations for
the full year ended 31 December 2022 reflecting the withdrawal of
the enhanced marketing deduction, but excluding the impact of
foreign exchange and BetMGM losses, is forecast to be 18%.
The deferred tax assets and liabilities are measured at the tax
rates of the respective territories which are expected to apply to
the year in which the asset is realised, or the liability is
settled, based on tax rates (and tax laws) that have been enacted
or substantively enacted at the balance sheet date.
7. Dividends
An interim dividend of 8.5p per share (30 June 2021: GBPnil) has
been proposed by the directors.
8. Earnings per share
Basic earnings per share has been calculated by dividing the
profit attributable to shareholders of the Company of GBP27.0m (30
June 2021: profit of GBP74.5m) by the weighted average number of
shares in issue during the six months of 587.5m (30 June 2021:
585.4m).
The calculation of adjusted earnings per share which removes
separately disclosed items and foreign exchange gains and losses
arising on financial instruments has also been disclosed as it
provides a better understanding of the underlying performance of
the Group. Separately disclosed items are defined in note 2 and
disclosed in note 4.
Six months Six months
ended ended
Weighted average number of shares (million): 30 June 2022 30 June 2021
Shares for basic earnings per share 587.5 585.4
Potentially dilutive share options and
contingently issuable shares 4.3 6.4
----------------------------------------------- -------------- --------------
Shares for diluted earnings per share 591.8 591.8
----------------------------------------------- -------------- --------------
Six months Six months
ended ended
30 June 2022 30 June 2021
GBPm GBPm
---------------------------------------------- -------------- --------------
Profit attributable to shareholders 27.0 74.5
----------------------------------------------- -------------- --------------
- from continuing operations 30.1 80.7
- from discontinued operations (3.1) (6.2)
----------------------------------------------- -------------- --------------
Gains arising from financial instruments (63.5) (24.3)
Losses/(gains) arising from foreign exchange
of debt instruments 118.5 (52.8)
Tax credit on foreign exchange (5.4) -
Separately disclosed items net of tax (note
4) 96.7 109.5
----------------------------------------------- -------------- --------------
Adjusted profit attributable to shareholders 173.3 106.9
----------------------------------------------- -------------- --------------
- from continuing operations 173.3 109.4
- from discontinued operations - (2.5)
----------------------------------------------- -------------- --------------
Standard earnings Adjusted earnings
per share per share
Six months Six months
ended ended
30 June 30 June
Stated in pence 2022 2021 2022 2021
--------------------------------- --------- --------- ----------- -------
Basic earnings per share
- from continuing operations 5.1 13.8 29.5 18.7
- from discontinued operations (0.5) (1.1) - (0.4)
--------------------------------- --------- --------- ----------- -------
From profit for the period 4.6 12.7 29.5 18.3
--------------------------------- --------- --------- ----------- -------
Diluted earnings per share
- from continuing operations 5.1 13.7 29.3 18.5
- from discontinued operations (0.5) (1.1) - (0.4)
--------------------------------- --------- --------- ----------- -------
From profit for the period 4.6 12.6 29.3 18.1
--------------------------------- --------- --------- ----------- -------
The earnings per share presented above is inclusive of the
performance from the US joint venture BetMGM. Adjusting for the
removal of the BetMGM performance would result in a basic adjusted
earnings per share of 48.0p (2021: 32.0p) and a diluted adjusted
earnings per share of 47.6p (2021: 31.7p) from continuing
operations.
9. Impairment
IAS 36 Impairment of Assets states that an impairment review
must be carried out at least annually for any indefinite lived
assets, such as goodwill and certain brands. Furthermore, it is
necessary to assess whether there is any indication that any other
asset, or cash generating unit (CGU), may be impaired at each
reporting date. Should there be an indication that an asset may be
impaired then an impairment review should be conducted at the
relevant reporting date.
No current indicators which might lead to a material impairment
have been identified by the directors.
10. Net debt
The components of the Group's net debt are as follows:
30 June 31 December 30 June
2022 2021 2021
GBPm GBPm GBPm
Current assets
Cash and short-term deposits 465.5 487.1 428.2
Current liabilities
Interest bearing loans and borrowings (131.8) (121.1) (22.9)
Non-current liabilities
Interest bearing loans and borrowings (2,271.0) (2,161.3) (2,028.3)
------------------------------------------------- --------- ----------- ---------
Accounting net debt (1,937.3) (1,795.3) (1,623.0)
Cash held on behalf of customers (194.9) (205.9) (360.9)
Fair value swaps held against debt instruments 84.0 57.4 18.9
Deposits 20.7 20.3 193.7
Balances held with payment service providers 94.2 130.8 133.9
Adjusted net debt (1,933.3) (1,792.7) (1,637.4)
------------------------------------------------- --------- ----------- ---------
Lease liabilities (276.3) (293.7) (313.9)
Net debt including lease liabilities (2,209.6) (2,086.4) (1,951.3)
------------------------------------------------- --------- ----------- ---------
Cash and short-term deposits include GBPnil (31 December 2021:
GBPnil, 30 June 2021 GBP31.8m) classified as held for sale.
Cash held on behalf of customers represents the outstanding
balance due to customers in respect of their online gaming wallets.
Included within this balance is GBPnil (31 December 2021: GBPnil,
30 June 2021: GBP155.6m) classified as held for sale.
Deposits represent balances with brokers in relation to trading
accounts held by the Group. Included within this balance is GBPnil
(31 December 2021: GBPnil, 30 June 2021: GBP177.9m) classified as
held for sale.
11. Business combinations
Business combinations are accounted for using the acquisition
method. Identifiable assets and liabilities acquired, and
contingent liabilities assumed in a business combination are
measured at their fair values at the acquisition date. The
identification and valuation of intangible assets arising on
business combinations is subject to a degree of judgement. We
engaged independent third parties, including Kroll to assist with
the identification and valuation process. This was performed in
accordance with the Group's policies. The excess of the cost of
acquisition over the fair value of the Group's share of the
identifiable assets acquired is recorded as goodwill. Costs related
to the acquisition are expensed as incurred. Summary of
acquisitions:
Avid
On 7 February, the Group acquired 100% of the share capital of
Avid International Ltd. Avid owns Sports Interaction, a leading
online sports betting brand in Canada, which provides the Group
with access to Canada's highly attractive and fast growing sports
betting and gaming market. In accordance with IFRS 3, as control
has been obtained, the business has been consolidated from the
point of acquisition. Consideration amounted to EUR211.3m.
Klondaika
On 31 January, the Group acquired 100% of the share capital of
Klondaika Ltd, a largely online betting and gaming operator in
Latvia. In accordance with IFRS 3, as control has been obtained,
the business has been consolidated from this point forward.
Consideration amounted to EUR24.6m.
Totolotek
On 16 May, the Group acquired 100% of Totolotek S.A., an online
sports betting operator in Poland. In accordance with IFRS 3, as
control has been obtained, the business has been consolidated from
this point forward. Consideration amounted to EUR6.1m.
We continue to finalise the fair values of acquired intangibles
and goodwill attributed to acquisitions and therefore, the values
disclosed in the table below are provisional. Details of the
purchase consideration, the net assets acquired and goodwill of all
acquisitions in the period are as follows:
Provisional
fair value
GBPm
---------------------------------------- ------------
Intangible assets (excluding goodwill) 94.6
Property, plant and equipment 8.0
Trade and other receivables 9.5
Cash and cash equivalents 16.2
Deferred tax liability (1.7)
Trade and other payables (24.3)
---------------------------------------- ------------
Total 102.3
---------------------------------------- ------------
Net assets acquired 102.3
Goodwill 99.1
---------------------------------------- ------------
Total net assets acquired 201.4
---------------------------------------- ------------
Consideration:
Cash 194.4
Non-controlling interests -
Deferred consideration 7.0
---------------------------------------- ------------
Total consideration 201.4
---------------------------------------- ------------
The acquired businesses contributed revenues of GBP24.7m and
profit before tax of GBP4.3m pre the effect of any fair value
adjustments to the Group for the period post acquisition up to 30
June 2022. If the acquisitions had occurred on 1 January 2022,
consolidated proforma revenue and net profit for the period ended
30 June 2022 would have been GBP2,125.9m and GBP42.9m respectively
before the effect of fair value adjustments and deal related
costs.
12. Note to the statement of cash flows
Six months Six months
ended ended
30 June 30 June
2022 2021
GBPm GBPm
-------------------------------------------------------- ----------- -----------
Profit before tax from continuing operations 39.5 130.6
Net finance expense/(income) 94.1 (41.1)
-------------------------------------------------------- ----------- -----------
Profit before tax and finance expense from continuing
operations 133.6 89.5
Loss before tax and net finance expense from
discontinued operations (3.1) (6.2)
-------------------------------------------------------- ----------- -----------
Profit before tax and net finance expense including
discontinued operations 130.5 83.3
-------------------------------------------------------- ----------- -----------
Adjustments for:
Impairment 2.2 3.3
Depreciation of property, plant and equipment 60.2 58.0
Amortisation of intangible assets 104.5 146.6
Share-based payments charge 5.2 6.6
Increase in trade and other receivables 108.0 (20.8)
Increase in trade and other payables (35.4) 4.6
Increase in other financial liabilities (7.8) 2.1
Decrease in provisions (1.1) (22.7)
Share of results from joint ventures and associates 106.1 79.0
Other non-cash items (1.5) (2.1)
Cash generated by operations 470.9 337.9
-------------------------------------------------------- ----------- -----------
13. Related party transactions
During the period, Group companies entered into the following
transactions with related parties who are not members of the
Group:
Six months Six months
ended ended
30 June 30 June
2022 2021
GBPm GBPm
--------------------- ----------- -----------
Equity investment
- Joint venture (1) 113.1 72.6
Sundry expenditures
- Associates (2) 1.8 17.4
--------------------- ----------- -----------
1. Equity investment in BetMGM.
2. Payments in the normal course of business made to Sports
Information Services (Holdings) Limited, Infiniti Gaming Knokke NV,
Grand Casino de Dinant SA, and Leaderbet NV.
The following table provides related party outstanding
balances:
30 June 31 December 30 June
2022 2021 2021
GBPm GBPm GBPm
---------------------------- -------- ------------ --------
Other payables outstanding
- Associates (0.3) (0.1) (9.3)
---------------------------- -------- ------------ --------
14. Financial instruments
Details of the Group's borrowing are set out in note 10.
Fair value of financial instruments
The major component of the Group's derivative financial assets
measured at fair value consist of currency swaps held against debt
instruments of GBP84.0m (30 June 2021: GBP18.9m, 31 December 2021:
GBP57.4m). The fair value of the Group's other financial assets at
30 June 2022 is not materially different to its original cost.
The major components of the Group's financial liabilities
measured at fair value consist of; deferred and contingent
consideration GBP45.2m (30 June 2021: GBP201.7m, 31 December 2021:
GBP70.8m), currency swaps held against debt instruments of GBPnil
(30 June 2021: GBPnil, 31 December 2021: GBPnil), and ante post
liabilities GBP17.1m (30 June 2020: GBP15.6m, 31 December 2021:
GBP15.3m).
Financial assets and financial liabilities measured at fair
value in the Statement of Financial Position are grouped into three
levels of a fair value hierarchy. The three levels are defined on
the observability of significant inputs to the measurement, as
follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- 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: inputs for the asset or liability that are not based on observable market data.
There are no reasonably probable changes to assumptions or input
that would lead to material changes in the fair value determined,
although the final value will be determined by future sporting
results.
The Group's financial assets and liabilities that are measured
at fair value after initial recognition fall under the 3 levels of
the fair value hierarchy as follows:
-- Level 1 - GBP0.4m assets (30 June 2021: GBP2m, 31 December
2021: GBPnil), and GBPnil liabilities (30 June 2021: GBPnil, 31
December 2021: GBPnil).
-- Level 2 - GBP86.2m assets (30 June 2021: GBP21.9m, 31
December 2021: GBP59.6m), and GBPnil liabilities (30 June 2021:
GBPnil, 31 December 2021:GBPnil).
-- Level 3 - GBP9.6m assets (30 June 2021: GBP5.1m, 31 December
2021: GBP10m), and GBP65.2m liabilities (30 June 2021: GBP217.3m,
31 December 2021: GBP86.1m).
There have been no transfers of assets or liabilities recorded
at fair value between the levels of the fair value hierarchy.
15. Contingent liabilities
Greek tax
In November 2021, The Athens Administrative Court of Appeal
ruled in favour of the Group on the 2010/11 Greek Tax Assessment, a
ruling which has subsequently been appealed by the Greek
authorities. During the first half, the Group has received a
EUR192.6m refund in relation to the claim as a result of the
ruling. In addition, the Group also has a receivable of EUR34.9m,
which reflects interest due in relation to this matter.
Whilst the Group expects to be successful in defending the
appeal by the Greek authorities, should the Greek Supreme
Administrative Court rule in favour of the Greek tax authorities,
then the Group may become liable for the full 2010/11 Assessment
plus interest. Whilst the outcome of the appeal hearing, which is
not expected until 2024, remains uncertain, the Group remains
confident that the Supreme Court will also find in favour of the
Group.
HMRC investigation
On 28 November 2019, one of our UK subsidiaries, Entain Holdings
(UK) Limited, received a production order from HM Revenue &
Customs ("HMRC") requiring it to provide information relating to
the group's former Turkish facing online betting and gaming
business, sold in 2017. At that time, the group understood that
HMRC's investigation was directed at a number of former third party
suppliers, relating to the processing of payments for online
betting and gaming in Turkey. On 21 July 2020, GVC Holdings Plc
announced that HMRC was widening the scope of its investigation and
was examining potential corporate offending by the GVC group. It
had previously been understood that no group company was a subject
of HMRC's investigation. Through ongoing engagement with HMRC we
understand that the group remains a corporate suspect and that the
offences under investigation include, but are not limited to,
offences under sections 1 and 7 of the Bribery Act 2010. The group
continues to co-operate fully with HMRC's enquiries, which are
ongoing.
In addition to the items discussed above, the Group is subject
to a number of other potential litigation claims that arise as part
of the normal course of business and continue to arise throughout
2022. Provision has not been made against these claims as they are
not considered likely to result in an economic outflow. Consistent
with any claims of this nature there can be uncertainty with the
final outcome.
16. Subsequent events
On 14 June 2022, Entain plc announced its agreement to acquire
one of the Netherland's leading online sports betting and gaming
operators, BetCity, which provides the Group with access to the
regulated Dutch markets. On completion, the Group will pay EUR300m
of initial consideration with further contingent payments payable
in 2023 and 2024 subject to the performance of the acquired
business. The total amount payable is capped at EUR850m. The deal
is expected to complete in the second half of the year.
On 11 August 2022, the Group announced the formation of Entain
CEE to drive expansion into Central and Eastern Europe, with the
Entain Group holding 75% of the economic rights of Entain CEE. In
addition, Entain CEE announces the acquisition of SuperSport, the
leading gaming and sportsbook operator in Croatia for initial
consideration of EUR800m with a contingent payment of EUR120m
expected in 2023 based on the 2022 performance of SuperSport. Of
the initial consideration, Entain Plc will pay EUR600m (75% share)
with a further EUR90m potentially payable under the contingent
payment in 2023 (75% share). The acquisition of SuperSport is
expected to complete in the second half of the year.
INDEPENDENT REVIEW REPORT TO ENTAIN PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises condensed
consolidated income statements, condensed consolidated statements
of comprehensive income, condensed consolidated balance sheet,
condensed consolidated statements of changes in equity, condensed
consolidated statement of cash flows and the related explanatory
notes.
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 2022 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and the Disclosure Guidance and Transparency Rules ("the DTR") of
the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued for use in the UK. 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. We
read the other information contained in the half-yearly financial
report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
set of financial statements.
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.
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 of 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 (UK) 2410. However, future events or
conditions may cause the group to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
group 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 DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
The directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34 adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
In preparing the condensed set of financial statements, the
directors are responsible for assessing the group'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
group 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 DTR of the UK FCA. 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.
Mark Flanagan
for and on behalf of KPMG LLP
Chartered Accountants
St Nicholas House
31 Park Row
Nottingham
NG1 6FQ
11 August 2022
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END
IR BBLLFLVLZBBQ
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