TIDMENT
RNS Number : 3677S
Entain PLC
09 March 2023
9 March 2023
Entain plc
("Entain" or the "Group")
Continued strategic diversification driving sustainable
growth
Strong Group performance with underlying EBITDA (1,3) up 13% at
GBP993m
Entain plc (LSE: ENT), the global sports betting, gaming and
interactive entertainment Group, is pleased to announce its results
for the year ended 31 December 2022.
Key Highlights:
-- Group Net Gaming Revenue ("NGR") up +12% (+10%cc(2) ) in the year
o Group NGR including 50% share of BetMGM up +18% (+15%cc(2) )
representing a three year compound growth of +11%cc (2)
-- Online NGR down -1% (-2%cc(2) ) in 2022, with positive
underlying momentum demonstrated across all key markets
o Underlying Online NGR growth of approximately +3%, excluding
the Netherlands and the impacts of regulatory changes in the UK
o Active customers grew by +7% as we continue to broaden our
customer base
o Continued strategic progress driving 3 year compound growth of
Online NGR of +12% cc (2)
-- Retail NGR up +66% (9) (+66%cc (,2,9) ) reflecting lapping of
Covid comparators in the first half of the year as well as an
improved customer offer through betting and gaming terminals
-- BetMGM continues to perform strongly and is on track to be EBITDA positive in H2 2023
o 2022 NGR of $1.44bn up +71% year on year, ahead of
expectations(6)
o 29%(8) share in iGaming and 18%(7,8) share in sports-betting
and iGaming in the markets where BetMGM operates
o 2023 net revenue from operations expected to be in the range
of $1.8bn-$2bn
-- Continued growth strategy with further diversification across
regulated geographies and products
o Five transactions announced during 2022, including
establishing Entain CEE to unlock significant growth opportunities
across the region
o Launch of unikrn in Brazil and Canada marks our first steps
into the esports and skill based wagering market
-- Further progress on leadership of responsibility and sustainability
o Only global operator with 100% revenue from regulated or
regulating markets
o Groundbreaking ARC(TM) player protection programme rolled out
across 22 markets
o Entain and BetMGM led US online operators' commitment to the
first responsible gaming standards for the industry
o Awarded GamCare's Advanced Safer Gambling Standard, SBC's
Global Socially Responsible Operator of the Year for 2022 and
numerous safer gambling awards including from S&P and EGR
Financial Highlights:
-- Strong financial performance with Group underlying
EBITDA(1,3) up +13% at GBP993m at the top of upgraded guidance
range
o Online underlying EBITDA(1,3) down -8% at GBP828m reflecting
strong prior year Covid comparators and absorption of regulatory
changes in major markets
o Retail underlying EBITDA(1,3) of GBP280m up +319% versus the
prior year
-- Group profit after tax(1) was GBP33m, down -88% versus 2021
-- Adjusted diluted EPS(5) (pre FX and BetMGM) of 93.2p up +15%
-- Second Interim Dividend of GBP50m (8.5p per share) announced,
bringing the total dividend for the year to GBP100m (17p per
share)
-- Successful refinancing of Term Loans with strong global demand
-- Year end adjusted net debt of GBP2,750m with leverage at 2.8x
(2.6x on a proforma basis), reflecting a strong and flexible
balance sheet to support investment in our growth strategy
Jette Nygaard-Andersen, CEO of Entain, commented:
"We made excellent financial, operational and strategic progress
during 2022, and took significant strides towards our goal of being
the global leader in betting, gaming and interactive entertainment.
I am particularly proud that Entain leads our industry on
responsible gaming and we are now the only global operator
exclusively in domestically regulated or regulating markets. It is
a mark of the strong progress we have made in executing our
sustainable growth strategy, and we continue to see a vast array of
opportunities around the world as we expand into the $170bn
addressable market that we have identified.
We have a business model that is truly diversified across more
than 40 territories, a platform that gives us demonstrable
competitive advantages, and a total commitment to providing our
ever-broadening customer base with a safe environment in which to
enjoy our products and services. These factors, combined with the
strong underlying momentum across our business, mean that we
continue to look to the future with confidence."
Group Reported(1)
Year ended 31 December 2022 2021 Change CC(2)
GBPm GBPm % %
-------- -------- ------- ------
Net gaming revenue (NGR) 4,348.9 3,886.3 12% 10%
Revenue 4,296.9 3,830.0 12% 11%
Gross profit 2,714.7 2,435.8 11%
Underlying EBITDAR(3) 1,008.5 898.8 12%
Underlying EBITDA(3) 993.2 881.7 13%
Underlying operating profit(4) 541.8 484.1 12%
Underlying profit before tax(4) 321.8 527.3
Profit after tax 32.9 275.6
Diluted EPS (p) 6.3 44.7
Continuing adjusted diluted
EPS(5) (p) 60.5 53.8
Continuing adjusted diluted
EPS excl US(5) (p) 93.2 81.1
Dividend per share (p) 17.0 -
--------------------------------- -------- -------- ------- ------
Dividend
In line with the dividend policy announced with the H1 Results
in August 2022, the Board proposed a total dividend for 2022 of
GBP100m. This is to be paid to shareholders in equal instalments
with H1 and FY results. As such, a second interim dividend of
GBP50m (8.5p share) will be paid to shareholders on 27 April
2023.
Outlook
The Group has delivered strong 2022 results, reflecting the
diversity and scale of the business, and the strength and
competitive advantage of our unique platform.
As we look to 2023, while we continue to face some regulatory
headwinds, we remain excited by the opportunities ahead. As we
continue to deliver on our strategy we will provide customers with
even more innovative and engaging moments of excitement, and drive
further diversification through geographic expansion, product
development and a broader customer base. We have started 2023 with
positive underlying momentum and we remain confident in our
long-term strategic prospects.
Notes
(1) 2022 and 2021 reported results are audited and relate to continuing operations
(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
(5) Adjusted for the impact of separately disclosed items,
foreign exchange movements on financial indebtedness and
losses/gains on derivative financial instruments (see note 6 in the
financial statements. EPS is also disclosed excluding BetMGM as
this gives a better view of the EPS attributable to the Entain
trading businesses)
(6) BetMGM guidance on 2022 NGR of over $1.3bn, as stated at Business Update on 19 January 2022
(7) BetMGM revenues comprise of sports (Online and Retail) and iGaming revenues
(8) Three month period to December 2022, in markets in which
BetMGM operates, excluding AZ as yet to report
(9) Retail performance numbers are quoted on a LFL basis and
also excludes the post acquisition performance of shops in
Croatia
Note: Retail operates in UK, Italy, Belgium, Croatia and
Republic of Ireland. During 2022, there was an average of 4,310
shops in the estate, compared to an average of 4,540 in the same
period last year.
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
Aimee Remey, VP US Investor Relations aimee.remey@entaingroup.com
Callum Sims, IR Manager callum.sims@entaingroup.co m
Media - Entain plc media@entaingroup.com
Lisa Attenborough, Head of Corporate Communications lisa.attenborough@entaingroup.com
Jay Dossetter, Head of Corporate PR 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
Presentation and webcast
The Full Year 2022 Results presentation for analysts and
investors will be held today, Thursday 9(th) March at 9:00am
GMT.
Participants may join via webcast or by conference call dial in,
approximately 15 minutes ahead of the event.
Live webcast link: https://kvgo.com/IJLO/Entain_2022-Full_Year_Results
To participate in the Q&A, please also connect via the
conference call dial in details:
UK +44 (0) 330 551 0200
US +1 786 697 3501
Access Code: Quote Entain when prompted by operator
The presentation slides will be available on our website shortly
before the event:
https://entaingroup.com/investor-relations/results-centre/
A replay of the presentation and transcript will be available on
our website :
https://entaingroup.com/investor-relations/results-centre/
Upcoming dates:
Q1 Trading Update: 18 April 2023
2023 Interim results: 10 August 2023
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 is one of the
world's largest sports betting and gaming groups, operating both
online and in the retail sector. The Group owns a comprehensive
portfolio of established brands; Sports brands include BetCity,
bwin, Coral, Crystalbet, Eurobet, Ladbrokes, Neds, Sportingbet,
Sports Interaction and SuperSport; Gaming brands include Foxy
Bingo, Gala, GiocoDigitale, Ninja Casino, Optibet, Partypoker and
PartyCasino. The Group owns proprietary technology across all its
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 and is the only global operator to
exclusively operate in domestically regulated or regulating markets
operating in over 40 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
A differentiated leader in a global growth industry
Entain is a leading consumer-focussed business operating in a
global industry with attractive growth dynamics. The Group
continues to make excellent progress as a global leader in betting,
gaming and interactive entertainment. As the most diversified
leader of scale with regulated market growth embedded in the
business, the Group delivers profitable and sustainable returns for
our stakeholders.
I am pleased to report that 2022 was another year of strong
financial, operational and strategic progress for the Group,
despite facing some headwinds. Alongside further growth in our
revenues, the Group delivered underlying EBITDA (1,6) up +13%,
announced five transactions including establishing Entain CEE
("Central & Eastern Europe") to unlock significant growth
opportunities across the region, and through unikrn launched a new
segment of skill based wagering for esports.
The dynamics of our global industry remain highly attractive
with the powerful combination of regulation, digitalisation and
evolving customer behaviours underpinning a total addressable
market opportunity of approximately $170bn over the medium term.
Entain's position as a differentiated leader across diverse and
regulated markets enables us to maximise this growth opportunity
with the potential to treble the size of our business.
Our operations span over 40 regulated or regulating territories,
with established leading brands in each of our key markets. Group
Net Gaming Revenues ("NGR") for 2022 grew +15%cc (3) including our
50% share of BetMGM (up +10%cc (3) excluding BetMGM). Our growth
continues to be both diversified and sustainable through our
growing global footprint, expanding product offer and broadening
customer base. Our online business has 7% more active customers
than in 2021 achieving record levels during the final quarter.
We continue to set the standards for our industry on
responsibility and sustainability. Our ground-breaking approach to
player protection through our Advanced Responsibility and Care(TM)
programme ("ARC(TM) ") was rolled out internationally to 22 markets
during the year. Regulation is the cornerstone of a sustainable
business and we are proud that we lead the industry with 100% of
our revenue now coming from markets that are either domestically
regulated or in the process of regulating - setting a new benchmark
for our industry. Our commitment to this important agenda,
elevating integrity within our industry and doing the right thing
sees us absorb responsible gambling initiatives and impacts from
changes in regulated and regulating markets. This has been
particularly evident in the UK with the implementation of regulator
enforced affordability checks, which created a headwind of
approximately 10% on UK Online revenues in 2022, with ongoing
impacts expected in 2023. We are tremendously proud of the
leadership role we play in raising the bar for our industry and our
efforts continue to be recognised with numerous awards as well as
related index inclusions.
We have made excellent progress in 2022 across both our growth
and sustainability pillars, to drive greater diversification across
our business model, greater scale to leverage our capabilities as
well as higher quality and more sustainable earnings. These
achievements are testament to the high quality and talented teams
we have across the Entain Group. I would like to thank all of our
teams across the globe for their dedication and their commitment
throughout the year that underpins this success.
Entain Platform powering growth
The Entain Platform continues to distinguish us as an operator
of excellence; providing a unique competitive advantage and
supporting strategic execution focused around the customer.
Leveraging this powerful and unrivalled platform enables Entain to
optimise core growth and embrace new opportunities, whilst focusing
our customer centric approach across our business.
The Entain Platform is a unique and powerful combination that
includes: our in-house technology; leading global brand portfolio;
market leading product and content; CRM capabilities; marketing
excellence; data analytics; industry leading talent; player
protection; innovation; and, regulatory and operational expertise.
It enables us to differentiate our offer, be flexible, responsive
and agile, driving significant competitive advantages. This unique
combination, operating at scale, creates a multiplier effect that
helps drive outperformance in each of the markets in which we
operate.
As we grow in more markets around the world, we continue to
evolve our structures and processes to maximise the scale
efficiencies and benefits of the Entain Platform, while ensuring
that we remain local and agile for our customers in each of our
markets. Our in-house technology platform is the largest regulated
platform in our industry supporting approximately GBP3bn of Online
NGR in 2022. As we look to migrate more of our operations onto one
core technology framework, fulfil our significant growth ambitions
and broaden our customer appeal in interactive entertainment we are
constantly looking to evolve our technology platform both through
in-house development and by adding further capabilities through
small bolt-on acquisitions. This will not only unlock further
synergies and efficiencies, but will enable us to fully exploit the
flywheel effects of our business model.
Our strategy of leveraging and embracing the powerful advantages
of the unique Entain Platform to deliver on our core pillars of
growth and sustainability is clear. Entain is a truly
differentiated business with customers at our core. Our unwavering
ambition to be the world leader in betting, gaming and interactive
entertainment and benefit from the sizeable growth opportunities
ahead of us will drive significant value creation for our
stakeholders.
Our strategy for Growth
Entain is a business delivering sustainable and profitable
growth. We operate in a global industry with attractive dynamics
embedded as regulation, online migration and customer behaviours
expand the markets available to us. Today we operate in over 40
regulated or regulating territories with our betting and gaming
offering across both online and retail.
Our online operations have delivered a three year compound
annual growth rate of +12%cc(3) , or +18%cc(3) including our share
of BetMGM. Our Retail operations are +66%(5) ahead of a lockdown
impacted 2021 and customer volumes in our two largest retail
estates, the UK and Italy, are ahead of pre-Covid levels.
Our growth strategy comprises four pillars which will continue
to broaden our reach, diversify our audiences, increase our scale
and drive a strong sustainable performance across the Group. These
pillars are: leadership in the US; grow our presence in existing
markets; expand into new regulated markets - both organically and
via M&A; and extend into interactive entertainment.
Leadership in the US
BetMGM is firmly established as a leading operator of sports
betting and iGaming in the US and Ontario, Canada. This success is
built on the Entain Platform comprising powerful scaled
capabilities including in-house technology, industry leading
talent, data, analytics and MarTech, supported by the brand
strength of our joint venture partner. The North American market is
expected to be worth around $37bn (which includes Canada) over the
long term, and we are on track for our expected market share of
20-25% over the long term.
Throughout 2022, we continued to build on early successes and
BetMGM has gone from strength to strength, delivering NGR of
$1.44billion for the year, ahead of expectations(4) . In 2023, we
expect that this will grow to $1.8bn - $2.0bn in NGR.
Through the Entain Platform we expanded our BetMGM footprint,
launching on day one in six new online markets and opening four new
retail sportsbooks. As at the end of December 2022, we were live in
24 jurisdictions, with further launches in Ohio and Massachusetts
in early 2023, meaning we now have access to approximately 48% of
the adult US population.
In the three months to December 2022, our share of GGR (gross
gaming revenue) in the sports betting and iGaming markets in which
we operate was 18% and 20% excluding New York.
Our leadership in iGaming continues with a 29% market share. The
unique range of own and exclusive products provided through our
platform and award winning in-house studios continues to
differentiate BetMGM's offer, drive customer engagement and embed
our competitive advantage as market leader. In sports betting, we
continue to build our position with a 12% share in GGR across
active markets, in spite of our increasing focus on NGR, discussed
below. We continue to make improvements to our offer with the
revamp of BetMGM's sportsbook app, updating the design, improving
the user experience with simpler and faster optionality and overall
enabling easier navigation of the end to end customer journey. As
well as garnering positive feedback, ratings by third party
industry bodies have improved and have driven greater customer
engagement and retention. In Q4 2022, BetMGM's average monthly
active gaming customers were up +51% and up +61% for active
sports-betting customers, compared to Q4 2021.
Alongside our success in securing a market leadership position,
we have also maintained strong financial discipline. Supported by
the significant embedded margin advantage BetMGM enjoys through its
parental structure, 2022 saw us increase focus on building a
sustainable and profitable business for the long term. The
prioritisation of NGR over GGR, through progressively strategic
bonus optimisation, has seen sports NGR margins double year on year
in Q4. More rigorous customer segmentation and player analytics,
coupled with a data-led approach to marketing, enables bonusing to
be effective and efficient. Key customer metrics of cost per
acquisition (CPA) and first time depositors (FTD) are ahead or
inline with forecasts, which reaffirms expectation of long-term CPA
of approximately $250.
Having already achieved profitability in several states, we
expect BetMGM to be EBITDA positive in the second half of 2023 and
a long term target EBITDA margin of 30-35%. In summary, BetMGM
remains firmly on track for its path to profitability and has
secured its position as a leader in the US sports-betting and
iGaming markets.
Grow presence in our existing markets
Entain's operations span over 40 regulated or regulating
territories, with established leading brands in many of our
markets. Our existing markets are expected to grow by approximately
mid to high single digit over the medium term, presenting a
significant addressable market opportunity. We are well positioned
to benefit from this long growth runway with the Entain Platform
providing a differentiated competitive advantage.
The Entain Platform powers our brands to outperform their
markets enabling our Online business as a whole to grow at a
compound annual growth rate over the last three years of 12%,
including acquisitions.
Excluding our share of BetMGM, full year Group NGR was up +12%
(+10%cc(3) ) year on year. Online NGR was -2%cc(3) lower year on
year, behind our initial expectations, as the business lapped
strong Covid comparators and faced regulatory headwinds,
particularly in the UK as well as the required closure of our
Netherlands business ahead of new licencing. We estimate regulatory
changes, particularly affordability measures in the UK, created a
mid-single digit headwind in terms of Group NGR growth over the
year. Having fully lapped prior year Covid comparators by the end
of Q3, we returned to year on year Online NGR growth in Q4 of
+8%cc(3) , helped by the men's World Cup.
We have continued to evolve our offering and appeal, creating
moments of excitement and entertainment for a broader, more
recreational customer base. This resulted in record active customer
levels in the year, up +7% year on year.
In the UK, we made further progress on our brand re-positioning
strategy to engage with a broader and more recreational audience.
As a result online actives were +13% higher year on year. Our Rocky
and GalaLand advertising campaigns, the Coral Racing Club and
innovative Jockeycam, as well as Ladbrokes Fanzone all drove
increased customer engagement. Our award winning Rocky campaign
increased new visitors to our website by 75%. Ladbrokes Fanzone
has, since launch, seen over 90% of customer enrolled selecting a
Premier League team and unlocking personalised benefits such as
boosted markets and free 5-a-side bets. We further enhanced our
customer offering and user experience with new games, products and
content, documentaries and social channel engagement.
In Australia, our business continues to go from strength to
strength with excellent performances from both Ladbrokes and Neds.
NGR was up +12% (+8%cc (3) ) versus 2021 despite lapping strong
Covid comparators. By leveraging our different brands as well as
launching new and innovative products and content, we continue to
outperform the market and grow market share, with active customers
up +7% versus last year. During the year Ladbrokes' launch of Mates
Mode is resonating well with customers, enabling them to chat,
share and bet as a group. Neds continued to perform strongly, with
its exclusive partnership with the UFC delivering both engagement
and branding, as well as its eye catching and humorous 'Take it to
the Ned's Level' advertising, illustrating our unwavering focus on
customer experience. We have also collaborated with the Australian
Hotels Associates (AHA) New South Wales in a long term advertising
and sponsorship agreement, providing Ladbrokes and Neds the
opportunity to reach new customers across AHA's 1,800 licenced
venues.
Our business in Italy performed strongly again in 2022 despite
lapping a year heavily impacted by Covid. We continue to see the
benefits of our omni-channel offering with combined online and
retail NGR up +22%cc (3) year on year, with Online NGR growing at
+26%cc (3) on a 3 year CAGR basis.
Our Brazilian business continues to perform well in this fast
growing market. Despite heightened competition ahead of regulation,
NGR was up +20%cc (3) year on year. Actives were up +25%,
demonstrating the strength of our Sportingbet brand, quality of
offer and operational expertise. While domestic regulation has been
held up following the election of a new Government, we look forward
to a market post regulation with clear demand for the high quality
customer experiences and breadth of product offering which Entain
provides.
In Germany, whilst our gaming licenses were issued in late 2022,
the German market is only just starting to experience the emergence
of a robust regulatory regime, although there remains much for the
regulator still to do. As such, the German online betting and
gaming market remained challenging for compliant operators like us,
whilst also seeing the introduction of deposit limits for sports
customers. We look forward to 2023 with optimism and the
expectation of greater regulatory oversight providing a more
balanced trading environment and a safe and entertaining experience
for all customers. Bwin is a leading brand across Germany (as well
as in many of our other global markets) underpinned by the quality
of our products and offer as well as great partnerships with the
DFB and UEFA Europa League.
Enlabs in the Baltics delivered another strong year despite the
challenging economic environment in the region, with proforma (2)
NGR up +5%cc (3) compared to 2021. Entain's core products are now
fully integrated in the customer proposition, strengthening our
product offering and helping to drive actives, which are up +17%
proforma (2) year on year. Ninja Casino launched in Sweden in H2
and early results have been promising.
In Georgia, the Crystalbet brand remains the market leader and
has responded well to the new regulatory regime which came into
effect at the start of 2022.
Our Party brands continue to perform in-line with expectations.
We are delighted our Party brands are now active in the newly
regulated Ontario market, alongside our bwin and BetMGM brands. We
welcomed Ontario customers to their first poker tournament series,
the Ontario Poker Championships in September. Party has continued
with its renewed focus on the recreational player's entertainment
experience, with Partypoker Sports launching its first free-to-play
game, Football Full House. This correct score game enables cross
sell to customers with sport, casino and poker prizes available to
win.
In the Netherlands, having been required, along with all
responsible operators, to withdraw from the market by the regulator
in Q4 2021, we are pleased to have acquired BetCity which provides
us with a strong platform to drive further growth in this newly
regulated market.
Our Retail operations have performed strongly during 2022, a
year which was largely uninterrupted by Covid related restrictions.
On a like-for-like basis, Retail NGR for 2022 was +66% (5) ahead of
a lockdown impacted 2021 and customer volumes in our two largest
retail estates, the UK and Italy, are ahead of pre Covid levels.
This is clear evidence that our customers value and enjoy the
in-shop experience. The reinvigoration of our retail offering
leveraging digital touchpoints, our best in class betting and
gaming terminals combined with our shop colleagues' interaction
provides customers in the UK with an enjoyable and engaging
experience whilst also broadening our audience demographic.
Expand into new regulated markets
Regulation and evolving consumer needs and behaviours continue
to prove to be exciting growth drivers as we expand into the $170bn
addressable market we have identified for betting, gaming and
interactive entertainment. We can expand into these opportunities
through organic or inorganic expansion as well as developing an
offer into new product verticals.
We have a strong track record of integration and value creation
through M&A - the acquisitions over the last four years
(excluding SuperSport and BetCity) will see us double their value
and create approximately GBP900m of value in the first three years
of acquisition. This reflects the revenue and cost synergies
benefits as well as improved margins that we can generate as these
businesses benefit from the scale and efficiencies of the Entain
Platform. Many of these businesses have high quality in-house
technology into which we are able to plug products and capabilities
to support synergy delivery. As we evolve our technology platform
we expect that many of the businesses we have acquired will, over
time, migrate more fully on to the Entain Platform, providing
further synergy benefits in years to come.
During the year we announced five acquisitions. In Canada we
acquired Avid Gaming which saw Sports Interaction join our bwin,
Party and BetMGM brands licensed to operate in Ontario. Sports
Interaction provides access to the highly attractive, fast growing
and regulating sports betting and gaming market across Canada,
outside of the province of Ontario. The acquisition of Klondaika in
Latvia, and Totolotek in Poland, expanded and deepened our access
in these regulated markets where we provide a broader offering of
engaging products and services for customers in their respective
markets.
Our acquisition of BetCity, announced in June, and completed in
early January 2023, brought one of the Netherlands' leading
operators in the newly regulated online sports betting and gaming
market into the Group. Since its licencing in October 2021, BetCity
has grown strongly, establishing a share of over 20% of this
attractive and fast-growing market.
In August 2022, we partnered with EMMA Capital, a leading
investment firm in the Central and Eastern European region to form
Entain CEE as an innovative approach to expansion into the CEE
region. Entain CEE's first acquisition was SuperSport, the leading
gaming and sportsbook operator in Croatia . SuperSport has both
online and retail operations with its unrivalled brand and
proprietary technology solution delivering a c.50% share in the
fully regulated Croatian market.
The Group's portfolio of strong and globally recognised brands
enables us to expand into new markets organically where no clear
M&A opportunity provides a more attractive proposition. During
the year, we launched bwin in Zambia and Ninja in Sweden. New
market entries via both M&A and organic expansion, contributed
to Online NGR during the year, with SuperSport also generating
retail revenue.
There continues to be significant growth opportunities in
regulated markets across the globe, and we continue to look for
further opportunities where we can drive incremental value for
shareholders. There are at least 40 markets where we do not
currently operate today, including Central & Eastern Europe,
Latin America as well as Africa and potentially over time, parts of
Asia.
Extending into interactive entertainment
Technology continues to change consumer behaviours, creating new
trends and experiences, and opportunities for Entain to
explore.
We listen to customers to better understand these trends to
inform how we adapt and innovate to capture growth across new
audiences. Customers are seeking more content, more engagement,
more interactive and social experiences, more video, more audio and
more free to play entertainment. Interactive entertainment and
media are converging with our traditional markets of betting and
gaming. Entain sits at the heart of this convergence and as such
provides us with a unique strategic opportunity as we continue to
expand our product, offering and content ensuring our customer
experience evolves to remain engaging, innovative and relevant.
Towards the end of 2022 we took our first steps into the esports
and skill based wagering market with the launch of unikrn's new
esports offer. unikrn soft launched in Brazil and Canada (outside
of Ontario) with an offer that includes innovative new features
that meet the needs of the skill based wagering market for esports,
such as round the clock video game stream featuring the world's
most popular video game titles, and offering players more ways to
bet while watching and playing their favourite games. The esports
market continues to grow strongly, and we will be expanding our
presence as we rollout to further markets during 2023.
Technology continues to evolve and the diverse scale of the
Entain Platform puts us in a unique position to be able to explore
and innovate to further create exciting new unique products and
experiences for our customers.
Sustainability
Entain proudly places sustainability as one of our two strategic
pillars and it remains at the heart of everything we do. We embrace
our role within society and lead our industry on the issues that
matter to us - sustainability, diversity and responsibility - with
our firmly held belief 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 the core principles of our Sustainability Charter
which outlines our ESG leadership ambitions.
We aim 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. Our Sustainability
strategy is underpinned by four pillars of: lead on responsibility;
diversify our regulated activities; broaden our customer base; and,
invest in our people and communities.
Lead on responsibility
Responsible engagement and player protection is an important
part of our sustainability commitment. ARC(TM) is our pioneering
approach to customer protection and its ongoing development
continues. During 2022, we saw greater accuracy of our predictive
tools, as well as ARC(TM) being rolled out internationally, with
its principles implemented across 22 of our markets by the end of
2022. ARC(TM) has delivered over 3.7 million proactive interactions
in the UK, and our most successful ARC(TM) model showed a 36% drop
in customer risk rating following intervention, demonstrating that
ARC(TM) is successfully preventing harmful behaviours amongst our
customers and helping them to keep their play safe with us.
The ARC(TM) programme represents a step-change in player
protection and we were pleased to see the success of our approach
recognised in 2022 with the award of the Advanced Safer Gambling
Standard by GamCare.
Safer betting and gaming underpins everything we do. Reflecting
this, metrics regarding the effectiveness of ARC(TM) as well as
completion levels for colleagues' safer betting and gaming training
are included in our Group wide annual bonus plan.
In the US, BetMGM was amongst the first operators to have
supported PlayPause, a project intended to introduce cross-state
self-exclusion. We also led a collaboration of four of the leading
US operators to establish the 12 Principles of Responsible Online
Gaming, providing an industry benchmark for responsible operators.
A number of other operators have since joined the
collaboration.
Diversify our regulated activities
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 regulated
markets. Operating in a well-structured regulatory regime enables
us to deliver higher quality earnings with greater certainty and
sustainability as we continue to grow and expand our global
footprint and scale.
During 2022, Entain made further and significant progress
towards our commitment to only operate in regulated markets, and in
January 2023 we announced that we would accelerate our plans. As a
result, Entain is the only global operator with 100% of revenues
from domestically regulated or regulating markets. Of these markets
where there is a clear path to regulation in due course, Brazil is
the most significant for Entain operations.
In the UK, we continue to wait for the publication of the White
Paper outlining the review of the regulatory framework of the 2005
Gambling Act. 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 related
sports and industries.
Entain is a strong supporter of good regulation. We engage
openly and proactively with regulators around the world to
encourage well-structured and robust regulatory environments which
balance the highest regulatory standards and responsible player
protection, whilst also upholding customer freedoms and right of
choice.
Broaden our customer appeal
We made further progress in broadening our appeal towards more
recreational audiences, providing a safe and engaging entertainment
experience. Understanding our customers and changing trends enables
the evolution of our brands and offering to remain engaging and
relevant to an ever-broadening customer base.
The Entain Platform's powerful capabilities and data analytics
underpin the execution of our audience expansion. As part of this
broadening customer experience, we continue to enhance our customer
proposition with new games, experiences, products and content,
documentaries and social channel interactions.
Invest in our people and communities
Investing in our people and communities is a cornerstone of our
strategic sustainability pillar. Recruiting, retaining, and
nurturing top talent from diverse backgrounds is important to
ensure that we maintain our industry leading entertainment
proposition. Our ambition is to be the employer of choice,
attracting, engaging and retaining the best talent globally,
bringing the best thinking to the business from inside and outside
of our sector.
Our "Everyone's in The Game" people strategy is underpinned by
diversity and inclusion, to ensure everyone at Entain feels valued,
respected and included. 2022 was the first year of our new
Diversity, Equity, and Inclusion ("DE&I") strategy, supported
by a key commitment to creating a safe place to work. We
proactively listen to our people to shape our DE&I agenda,
leveraging the nine employee forums globally and the results of our
2022 Your Voice employee engagement survey.
2022 was an important year for the Group in delivering against
our efforts to reduce our impact on the environment, as we set out
on our pathway to be Net Zero for carbon emissions throughout our
operations by 2035. Having achieved our previous greenhouse gas
(GHG) emissions reduction target, we are now focused on achieving
our new 'near term' science-based targets. Our commitment to a
reduction of 29.4% (1) in our scope 1, 2 and 3 emissions by 2027
has been formally submitted to the Science-based Targets initiative
to ensure our journey to decarbonization is in line with limiting
global warming to 1.5 degrees, as per the Paris Agreement.
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.
Building on our EnTrain initiative, with its goal to positively
impact one million people through education in technology by the
end of the decade, we announced a new partnership with McLaren
Racing in January 2023 to support women returning to the tech
sector. Through our joint returnship programme, we aim to help
reignite the careers of women returning to roles in STEM (Science,
Technology, Engineering and Mathematics). We have also initiated
returnship programmes in our offices in Hyderabad, India and
Manila, Philipines.
A key focus for the Entain Foundation is supporting grassroots
sports through our Pitching In programme. Our extended partnership
with the Pitching In Trident Leagues supports 248 clubs and over
15,000 community based non-league football players. In 2022 we
launched the Pitching In Volunteer Hub, a unique online platform
enabling 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,
Spain, Greece, Latin America and Africa.
Notes
(1) This target has been restated from our 2021 ESG Report as
part of our submission to the Science-Based Targets Initiative
(SBTi).
(2) Proforma results are presented as if the Group had owned the entities since 1 January 2021
(3) Growth on a constant currency basis is calculated by
translating both current and prior year performance at the 2022
exchange rates
(4) BetMGM guidance on 2022 NGR of over $1.3bn, as stated at Business Update on 19 January 2022
(5) Retail performance numbers are quoted on a LFL basis and
also excludes the post acquisition performance of shops in
Croatia
(6) 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
Note: Retail operates in UK, Italy, Belgium, Croatia and
Republic of Ireland. During 2022, there was an average of 4,310
shops in the estate, compared to an average of 4,540 in the same
period last year.
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 has 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.
The Group's operating segments are aggregated into five
reportable segments; Online, Retail, New Opportunities, Other and
Corporate. This reporting structure is in line with the Group's
reporting to the executive management team ("CODM").
CHIEF FINANCIAL OFFICER'S REVIEW
FINANCIAL PERFORMANCE REVIEW
Group
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
GBPm GBPm % %
---------- -------- ------- ------
NGR 4,348.9 3,886.3 12% 10%
VAT/GST (52.0) (56.3) 8% 9%
---------- -------- ------- ------
Revenue 4,296.9 3,830.0 12% 11%
Gross profit 2,714.7 2,435.8 11%
Contribution 2,128.9 1,851.5 15%
Operating costs (1,120.4) (952.7) (18%)
Underlying EBITDAR(3) 1,008.5 898.8 12%
Rent and associated costs (15.3) (17.1) 11%
Underlying EBITDA(3) 993.2 881.7 13%
Share based payments (19.2) (12.3) (56%)
Underlying depreciation and amortisation (238.1) (222.8) (7%)
Share of JV (loss)/income (194.1) (162.5) (19%)
Underlying operating profit(4) 541.8 484.1 12%
------------------------------------------ ---------- -------- -------
Reported Results(1) :
The Group delivered strong year on year growth in NGR and
Revenue of +12% (+10%cc(2) and +11%cc(2) respectively). Online NGR
was down -1% (-2%cc(2) ) reflecting strong Covid comparators and
the absorption of regulatory changes, whilst Retail performed
strongly with NGR up +66%(5) (+66% cc(2,5) ) and ahead of pre-covid
levels in our two biggest markets, the UK and Italy on a
like-for-like basis ("LFL")(5) .
Contribution for the year of GBP2,128.9m was +15% higher than
last year reflecting the increase in NGR and an increase in the
contribution margin of +1.3pp due to a higher Retail segmental mix
versus a Covid impacted 2021. Operating costs (before rent) were
18% higher due to a full year of trading in Retail and underlying
inflation in Online. Underlying EBITDA(1,3) of GBP993.2m was +13%
higher than 2021.
Share based payment charges were GBP6.9m higher than last year,
while underlying depreciation and amortisation was 7% higher
reflecting the impact of businesses acquired in the year, the
annualisation of prior year acquisitions and continued investment
in the business. Share of JV losses of GBP194.1m includes a loss of
GBP193.9m relating to BetMGM, which is in line with expectations.
Group underlying operating profit(4) was +12% ahead of 2021. After
separately disclosed items of GBP213.2m excluding GBP5.7m recorded
in interest (2021: GBP128.3m excluding GBP5.8m recorded in
interest), operating profit was GBP328.6m, a decrease of GBP27.2m
on 2021.
Online
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
GBPm GBPm % %
--------- --------- -------- ------
Sports wagers 14,090.5 14,165.9 (1%) (3%)
Sports margin 12.9% 12.7% 0.2pp 0.2pp
Sports NGR 1,443.7 1,444.3 flat (2%)
Gaming NGR 1,576.9 1,595.9 (1%) (3%)
B2B NGR 29.9 26.3 14% 14%
--------- --------- -------- ------
Total NGR 3,050.5 3,066.5 (1%) (2%)
VAT/GST (52.0) (56.3) 8% 9%
--------- --------- -------- ------
Revenue 2,998.5 3,010.2 flat (2%)
Gross profit 1,829.6 1,871.5 (2%)
Contribution 1,254.2 1,294.7 (3%)
Contribution margin 41.1% 42.2% (1.1pp)
Operating costs (425.0) (393.7) (8%)
Underlying EBITDAR(3) 829.2 901.0 (8%)
Rent and associated costs (1.0) (2.0) 50%
Underlying EBITDA(3) 828.2 899.0 (8%)
Share based payments (7.8) (5.3) (47%)
Underlying depreciation and amortisation (118.3) (116.7) (1%)
Share of JV (loss)/income (0.2) (1.0) 80%
Underlying operating profit(4) 701.9 776.0 (10%)
------------------------------------------ --------- --------- --------
Reported Results(1) :
Our Online business continues to perform strongly on an
underlying basis with full year NGR and Revenue down -2%cc(2) year
on year as the business lapped a Covid boosted 2021 and absorbed
material effects of regulatory changes, particularly in the UK.
Full year NGR of GBP3,050.5m reflects a 3 year CAGR of +12%cc(2)
illustrating the strength of the Group's Online offering and
underlying growth. The Group continues to focus on expanding its
recreational customer base and we are delighted that actives were
+7% ahead of last year. We are also pleased to exit 2022 with Q4
NGR back in growth at +8%cc(2) year on year.
In the UK, NGR was -9% behind 2021 as the business absorbed a
number of regulatory changes and lapped Covid boosted comparators
from the prior year. Online NGR in the first half of 2022 was -15%
year on year, reflecting the greater levels of disruption from
Covid-19 versus that experienced in H2. We are pleased to exit the
year with UK Online NGR in line during Q4 and active customers at a
record high, with full year actives +13% versus 2021.
In Italy, constant currency NGR was in line year on year despite
lapping strong Covid comparatives and losing domestic football in
Q4 whilst Italy was absent from the FIFA World Cup. Our
Omni-channel strategy in Italy continues to benefit the business
with combined Online and Retail NGR up +22%cc(2) year on year, and
Online NGR growing at +26%cc(2) on a 3 year CAGR basis.
Australia has continued to perform strongly with NGR up +8%cc(2)
on 2021, and gaining further market share. Active customers were up
+7% year on year as our focus on brand differentiation, the
customer and new innovative product launches continues to benefit
the business.
In Germany, new regulation and a lack of regulatory enforcement
continues to impact the business with NGR
-22%cc(2) year on year. Importantly, however, we received our
gaming licences in late November, so we are hopeful that much
needed robust enforcement action will now be more evident in
2023.
Brazil continues to grow with NGR +20%cc(2) higher than 2021,
ahead of the anticipated regulation of the market. The Sportingbet
brand in Brazil continues to resonate well with our customers with
actives +25% ahead of the prior year.
In Georgia, NGR was -7%cc(2) lower year on year following the
introduction of new regulation at the start of the year which
restricted betting opportunities for certain population cohorts.
Crystalbet has responded well to these changes in regulation and
maintains its position as the market leader in Georgia.
Our operations in Canada continue to perform well following the
new regulation in Ontario.
In the Baltics, despite high levels of inflation in the region,
our brands continue to show their resilience with proforma(6)
underlying NGR +5%cc(2) YoY and actives +17%.
Our new Entain CEE business which acquired SuperSport in
November 2022 has also performed well during the year with
proforma(6) NGR +24%.
Underlying EBITDAR(1,3) of GBP829.2m and underlying EBITDA(1,3)
of GBP828.2m were -8% behind 2021 reflecting lower Online NGR, a
-1.1pp reduction in contribution margin and underlying inflation
which was in line with guidance. The Online marketing rate was in
line with 2021 and gross profit margin was -1.0pp behind as a
result of territory mix and increased taxation in Georgia and
Australia, giving rise to the aforementioned reduction in
contribution margin of -1.1pp. Resulting underlying operating
profit(4) of GBP701.9m was -10% behind 2021 and , after charging
GBP114.0m of separately disclosed items, operating profit was
GBP587.9m, GBP34.1m lower than last year.
Retail
The Retail business is made up of our Retail estates in the UK,
Italy, Belgium, Croatia and Republic of Ireland.
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
GBPm GBPm % %
-------- -------- -------- ------
Sports wagers(5) 3,817.0 2,277.5 68% 68%
Sports margin 18.3% 18.1% 0.2pp 0.2pp
Sports NGR/Revenue 705.2 426.1 66% 65%
Machines NGR/Revenue 572.6 365.0 57% 57%
NGR/Revenue 1,277.8 791.1 62% 61%
Gross profit 860.0 535.8 61%
Contribution 852.1 529.0 61%
Contribution margin 66.7% 66.9% (0.2pp)
Operating costs (558.4) (447.5) (25%)
Underlying EBITDAR(3) 293.7 81.5 260%
Rent and associated costs (13.5) (14.6) 8%
Underlying EBITDA(3) 280.2 66.9 319%
Share based payments (2.3) (1.9) (21%)
Underlying depreciation and amortisation (112.4) (102.4) (10%)
Share of JV income - - -
Underlying operating profit/(loss)(4) 165.5 (37.4) 543%
------------------------------------------ -------- -------- --------
Reported Results(1) :
With the exception of some restrictions in Belgium during the
first quarter, the full year was largely unaffected by the Covid
restrictions that have disrupted the previous two years. The strong
recovery post Covid, particularly in our two largest markets, the
UK and Italy, has been particularly pleasing resulting in full year
NGR of GBP1,277.8m, +62% ahead of last year (+66%cc(2) on LFL(5)
basis) and representing a LFL 3 year CAGR of +1%cc(2) (pre
SuperSport).
In the UK, NGR was +56% ahead of 2021 with both sports and
gaming up +56% year on year. The strong performance in the year has
been driven by our ongoing focus on market leading content for our
gaming machines and betting terminals. Both sports and gaming NGR
was ahead during H2, with increased sports volumes predominantly
driven by our SSBT's, which provide an experience akin to the
digital offering and now represent over one third of our total
sports NGR in UK Retail. Gaming NGR, which was also ahead in H2,
was supported by our best in class machines combined with the most
differentiated content on the high street.
Our focus on the customer is producing strong financial results
and, as such, we are delighted to recognise the great work done by
our shop colleagues, who will now be paid a minimum of GBP10.90 per
hour, an increase of +9%.
NGR in Italy was up +107%cc(2) year on year with H1 2021 heavily
impacted by Covid restrictions. Our Retail business in Italy has
recovered quickly post Covid benefitting from our ability to
maintain ongoing relationships with our customers throughout Covid
via our omni-channel offering.
In Belgium, NGR was up +40%cc(2) year on year despite
temporarily closing our estate in January due to local Covid
restrictions and the introduction of EPIS checks in Q4. Belgium has
been slower to return to pre Covid levels compared the UK and Italy
as a result of the lingering Covid restrictions in the early part
of the year. Following the year end, the EPIS checks introduced in
Q4 have been cancelled in their current form.
Contribution of GBP852.1m is +61% ahead of 2021 and in line with
the increase in NGR. Contribution margin was -0.2pp behind year on
year due to the geographic mix of revenues.
Operating costs including rent were 24% higher than in 2021 as a
result of a full year of trading largely uninterrupted by Covid
related closures, the non-repetition of prior year furlough
receipts (receipts which were repaid during 2022) and the impact of
cost of living payments to shop staff in light of the current
inflationary pressures.
Resulting underlying EBITDA(1,3) of GBP280.2m was GBP213.3m
ahead of 2021. Depreciation of GBP112.4m was 10% higher than 2021
due to continued investment in our retail estates and the
annualisation of depreciation charges on our Omnia till system in
the UK. Underlying operating profit(4) of GBP165.5m was GBP202.9m
ahead of 2021 and, after charging GBP57.4m of separately disclosed
items, operating profit was GBP108.1m, GBP144.1m ahead of last
year.
As at 31 December 2022, there were a total of 4,455
shops/outlets (2021: 4,346): UK 2,454 (2021: 2,580), Italy 940
(2021: 940), Belgium shops 286, outlets 341 (2021: shops 291,
outlets 402), Ireland 122 (2021: 133) and Croatia 312.
New Opportunities
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
GBPm GBPm % %
------- ------ --------- ------
Underlying EBITDAR(3) (28.9) (8.8) (228%)
Rent and associated costs (0.2) - -
Underlying EBITDA(3) (29.1) (8.8) (231%)
Share based payments (0.3) - -
Underlying depreciation and amortisation (4.5) (0.4) (1,025%)
Share of JV (loss)/income (0.4) - -
Underlying operating loss(4) (34.3) (9.2) (273%)
------------------------------------------ ------- ------ ---------
Reported Results(1) :
New Opportunities underlying costs(3) of GBP29.1m primarily
reflect operating costs associated with the launch phase of unikrn
which soft launched in Q4 as well as innovation costs. After
depreciation and amortisation and share of JV loss, New
Opportunities underlying operating loss(4) was GBP34.3m, an
increase of GBP25.1m on 2021. Separately disclosed items for the
year were GBPnil, resulting in an operating loss of GBP34.3m.
Other
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
GBPm GBPm % %
------- ------- ------- ------
NGR/Revenue 25.1 32.8 (23%) 18%
Gross profit 25.1 28.5 (12%)
Contribution 25.0 27.8 (10%)
Operating costs (20.0) (22.1) 10%
Underlying EBITDAR(3) 5.0 5.7 (12%)
Rent and associated costs (0.1) (0.1) -
Underlying EBITDA(3) 4.9 5.6 (13%)
Share based payments - (0.1) 100%
Underlying depreciation and amortisation (2.7) (2.9) 7%
Share of JV income 0.4 0.4 -
Underlying operating profit(4) 2.6 3.0 (13%)
------------------------------------------ ------- ------- -------
Reported Results(1) :
NGR of GBP25.1m was -23% lower than 2021 due to the prior year
disposal of our Exchange business. Excluding the disposal, NGR was
+12% ahead year on year as our greyhound tracks recover from prior
year Covid restrictions. Underlying EBITDAR(1,3) of GBP5.0m and
underlying EBITDA(1,3) of GBP4.9m were GBP0.7m behind 2021
respectively as a result of the disposal. Underlying operating
profit(4) of GBP2.6m was -13% behind and, after charging GBP0.7m of
separately disclosed items, operating profit was GBP1.9m, GBP0.6m
ahead of last year.
Corporate
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
GBPm GBPm % %
-------- -------- ------- ------
Underlying EBITDAR(3) (90.5) (80.6) (12%)
Rent and associated costs (0.5) (0.4) (25%)
Underlying EBITDA(3) (91.0) (81.0) (12%)
Share based payments (8.8) (5.0) (76%)
Underlying depreciation and amortisation (0.2) (0.4) 50%
Share of JV loss (193.9) (161.9) (20%)
Underlying operating loss(4) (293.9) (248.3) (18%)
------------------------------------------ -------- -------- -------
Reported Results(1) :
Corporate underlying costs (3) of GBP90.5m were GBP9.9m higher
than last year driven by increases in our contributions to
Research, Education and Treatment including GambleAware, additional
contributions to the Entain foundation and other Group ESG
initiatives and investment in our governance policies and
procedures. After share based payments, depreciation and
amortisation and share of JV losses, Corporate underlying operating
loss (4) was GBP293.9m, an increase of GBP45.6m , largely as a
result of the expected incremental loss in the US JV, BetMGM. After
separately disclosed items of GBP41.1m, the operating loss of
GBP335.0m was GBP112.7m behind 2021.
Notes
(1) 2022 and 2021 reported results are audited and relate to continuing operations
(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
(5) Retail performance numbers are quoted on a LFL basis and
also excludes the post acquisition performance of shops in
Croatia
(6) Proforma results are presented as if the Group had owned the entities since 1 January 2021
Note: Retail operates in UK, Italy, Belgium, Croatia and
Republic of Ireland. During 2022, there was an average of 4,310
shops in the estate, compared to an average of 4,540 in the same
period last year.
STATUTORY PERFORMANCE REVIEW
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
GBPm GBPm % %
-------- -------- ------- ------
NGR 4,348.9 3,886.3 12% 10%
Revenue 4,296.9 3,830.0 12% 11%
Gross profit 2,714.7 2,435.8 11%
Contribution 2,128.9 1,851.5 15%
Underlying EBITDAR(3) 1,008.5 898.8 12%
Underlying EBITDA(3) 993.2 881.7 13%
Share based payments (19.2) (12.3) (56%)
Underlying depreciation and amortisation (238.1) (222.8) (7%)
Share of JV loss (194.1) (162.5) (19%)
Underlying operating profit(4) 541.8 484.1 12%
Net underlying finance costs(4) (84.7) (75.0)
Net foreign exchange/financial
instruments (135.3) 118.2
Profit before tax pre separately
disclosed items 321.8 527.3
Separately disclosed items:
Amortisation of acquired intangibles (116.9) (144.2)
Other (102.0) 10.1
Profit before tax 102.9 393.2
Tax (70.0) (117.6)
Profit after tax from continuing
activities 32.9 275.6
Discontinued operations (13.4) (14.9)
Profit after tax 19.5 260.7
------------------------------------------ -------- -------- ------- ------
NGR and Revenue
Group reported NGR and revenue were +12% ahead of last year, up
+10% and +11% respectively on a constant currency basis(2) , with
Online NGR -1% and Retail NGR +62% year on year - further details
are provided in the Financial Performance Review section.
Underlying operating profit (4)
Group reported underlying operating profit(4) of GBP541.8m was
+12% ahead of 2021 (2021: GBP484.1m), with underlying EBITDA(3)
ahead by +13% as a result of the increase in revenue. The increase
in underlying EBITDA(3) was partially offset by an increase in
losses from the Group's share of the BetMGM joint venture and an
increase in depreciation and amortisation. BetMGM losses in the
year were GBP193.9m, GBP32.0m higher than 2021 as the business
continued to invest in new jurisdictions as they opened, with 8
launches in 2022 and early 2023. Analysis of the Group's
performance for the year is detailed in the Financial Performance
Review section.
Financing costs
Underlying finance costs(4) of GBP84.7m excluding separately
disclosed items (2021: GBP75.0m) were GBP9.7m higher than 2021 with
the increase in costs largely due to the interest on the Group's
new $1bn USD term loan which was raised in Q4.
Net losses on financial instruments, driven primarily by a
foreign exchange loss on re-translation of debt related items, were
GBP135.3m in the year (2021: GBP118.2m gain). This loss is offset
by a foreign exchange gain on the translation of assets in overseas
subsidiaries which is recognised in reserves and forms part of the
Group's commercial hedging strategy.
Separately disclosed items
Items separately disclosed before tax for the period amount to a
GBP218.9m charge (2021: GBP134.1m) and relate primarily to
GBP116.9m of amortisation on acquired intangibles (2021:
GBP144.2m), a GBP45.5m repayment of amounts received in 2021 under
the UK Government furlough scheme (2021: GBPnil), corporate
transaction costs of GBP23.9m (2021: GBP9.4m), integration and
restructuring costs of GBP11.8m (2021: GBP17.3m), legal and onerous
contract costs of GBP8.1m (2021: GBP26.2m) and an impairment of
GBP7.0m on closed shops in the UK (2021: GBP3.3m). The Group also
recorded a loss on disposal of assets of GBP1.0m (2021: profit of
GBP1.9m) and incurred GBP5.7m on bridging loan fees used to
facilitate acquisitions in the year (2021: GBP9.7m including fee
write-off on refinancing) as well as releasing GBP1.0m from
contingent consideration liabilities reflecting the latest estimate
of the likely economic outflow (2021: GBP6.1m charge). In the prior
year, the Group also recorded an GBP80.2m credit in relation to tax
litigation, primarily against the Greek Tax Assessment following a
court ruling in the Group's favour.
Separately disclosed items
2022 2021
GBPm GBPm
-------------------------------------- -------- --------
Amortisation of acquired intangibles (116.9) (144.2)
Furlough (45.5) -
Corporate transaction costs (23.9) (9.4)
Integration/restructuring costs (11.8) (17.3)
Legal and onerous contract costs (8.1) (26.2)
Impairment (7.0) (3.3)
(Loss)/profit on sale of assets (1.0) 1.9
Tax litigation/one-off legislative
impacts - 80.2
Movement in fair value of contingent
consideration 1.0 (6.1)
Other including issue cost write-off (5.7) (9.7)
Total (218.9) (134.1)
-------------------------------------- --------
Profit before tax
Profit before tax and separately disclosed items was GBP321.8m
(2021: GBP527.3m), a year-on-year decrease of GBP205.5m with the
growth in underlying EBITDA(3) offset by an increase in BetMGM
losses, depreciation, interest and the loss on the retranslation of
debt. After charging separately disclosed items, the Group recorded
a pre-tax profit from continuing operations of GBP102.9m (2021:
GBP393.2m).
Taxation
The tax charge on continuing operations for the year was
GBP70.0m (2021: GBP117.6m), reflecting an underlying effective tax
rate pre-BetMGM losses and foreign exchange gains on external debt
of 15.4% (2021: 14.2%) and a tax credit on separately disclosed
items of GBP27.9m (2021: charge of GBP27.5m).
Cashflow
Year ended 31 December 2022 2021
GBPm GBPm
Cash generated by operations 846.9 803.8
Corporation tax (106.1) (98.7)
Interest (100.6) (73.3)
Net cash generated from operating activities 640.2 631.8
Cash flows from investing activities:
Acquisitions & disposals (738.6) (447.9)
Cash acquired/disposed 29.9 (31.4)
Capital expenditure (212.0) (176.2)
Dividends from associates 3.6 -
Investment in associates and other investments - (29.4)
Investment in Joint ventures (175.1) (164.4)
---------- --------
Net cash used in investing activities (1,092.2) (849.3)
Cash flows from financing activities:
Equity issue - 0.7
Net proceeds from borrowings 838.4 797.2
Repayment of borrowings (271.8) (566.1)
Subscription of funds from non-controlling 174.3 -
interest
Settlement of financial instruments and
other financial liabilities 8.7 (149.8)
Repayment of finance leases (83.0) (87.9)
Equity dividends paid (50.0) (24.5)
Net cash used in financing activities 616.6 (30.4)
Foreign exchange 6.8 (14.8)
Net increase/(decrease) in cash 171.4 (262.7)
------------------------------------------------ ----------
During the year, the Group had a net cash inflow of GBP171.4m
(2021: outflow of GBP262.7m).
Net cash generated by operations was GBP846.9m (2021: GBP803.8m)
including GBP993.2m of underlying EBITDA (3) (2021: GBP881.7m).
This was partially offset by separately disclosed items, excluding
those relating to amortisation, depreciation and impairment, of
GBP88.3m (2021: GBP26.7m income), a loss on discontinued operations
of GBP13.4m (2021: GBP14.9m) and a working capital outflow of
GBP44.7m (2021: GBP86.6m). Included within the working capital
outflow is a GBP47.9m outflow for balances held with payment
service providers and the German regulator as well as customer
funds, which are net debt neutral (2021: GBP4.3m inflow).
During the year GBP106.1m was paid out in relation to corporate
taxes (2021: GBP98.7m) with a further GBP100.6m paid out in
interest (2021: GBP73.3m).
Net cash used in investing activities for the year was
GBP1,092.2m (2021:GBP849.3m), including cash outflows for M&A
activity of GBP738.6m (2021: GBP447.9m), investment in capital
expenditure of GBP212.0m (2021: GBP176.2m) and an additional
GBP175.1m invested in BetMGM (2021: GBP164.4m) partially offset by
cash acquired of GBP29.9m (2021: GBP31.4m cash disposed) and
GBP3.6m in dividends received from associates (2021: GBPnil).
During the year the group received a net GBP566.6m (2021:
GBP231.1m) from financing activities. GBP838.4m was raised through
new financing facilities (2021: GBP797.2m) and GBP271.8m of debt
was repaid, including GBP100.0m against the Group's retail bond
(2021: GBP566.1 term loan) and the repayment of GBP162.8.m (2021:
GBPnil) of debt within the acquired SuperSport business. As part of
the establishment of Entain CEE and acquisition of SuperSport, the
Group received GBP174.3m of cash for the 25% ownership in Entain
CEE of the minority interest (2021: GBPnil). GBP8.7m was received
on the settlement of other financial instruments and liabilities
including GBP41.6m of income on the partial settlement on a number
of swap arrangements (2021: GBP19.1m cost) partially offset by
GBP32.9m of contingent consideration on previous acquisitions
(2021: GBP130.7m).
During the year, the Group also paid GBP50.0m in equity
dividends (2021: GBPnil) with the prior year dividend payment of
GBP24.5m to the minority holding in Crystalbet prior to the
acquisition of the remaining 49% of equity in that business, and
lease payments of GBP83.0m (2021: GBP87.9m) including those on
non-operational shops.
Net debt and liquidity
As at 31 December 2022, adjusted net debt was GBP2,749.8m and
represented an adjusted net debt to underlying EBITDA(3) ratio of
2.8x (2.6x proforma). There was no drawdown on the Group's
revolving credit facility.
Par value Issue costs/ Total
Premium
GBPm GBPm GBPm
----------- ------------- ----------
Bonds (400.0) (4.1) (404.1)
Term loans (2,743.5) 40.6 (2,702.9)
Interest accrual (7.0) - (7.0)
----------- ------------- ----------
(3,150.5) 36.5 (3,114.0)
Cash 658.5
----------
Accounting net debt (2,455.5)
Cash held on behalf of customers (200.5)
Fair value of swaps held against debt instruments (6.5)
Short term investments/deposits
held 43.8
Balances held with payment service
providers 149.8
Lease liabilities (280.9)
----------
Adjusted net debt (2,749.8)
---------------------------------------- ----------- ------------- ----------
Going Concern
In adopting the going concern basis of preparation in the
financial statements, the directors have considered the current
trading performance of the Group, the financial forecasts, the post
balance sheet events disclosed in note 14 and the principal risks
and uncertainties. In addition, the directors have considered all
matters discussed in connection with the long-term viability
statement including the modelling of "severe but plausible"
downside scenarios, which have been run individually and in
combination, and include but are not limited to legislation changes
impacting the Group's Online business and severe data privacy and
cyber security breaches. These forecasts are not reliant on any
refinancing occurring in the going concern assessment period.
Despite the net current liability position, given the level of
the Company and Group's available cash of GBP0.3bn post Bet City
acquisition, available financing facilities (including an undrawn
revolving credit facility of GBP0.5bn) 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 that it faces. As such, the directors have a
reasonable expectation that the Company and Group will have
adequate financial resources to continue in operational existence
for twelve months from the date of signing this report, and have,
therefore, considered it appropriate to adopt the going concern
basis of preparation in the financial statements.
Notes
(1) 2022 and 2021 reported results are audited
(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 and emerging risks
Key risks, both threats and opportunities, 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 threats that are identified. The Board
has overall responsibility for enterprise 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 2022
and are as follows:
Data privacy and cyber security
The Group processes sensitive personal customer data (including
name, address, age, bank details and betting and gaming history) as
part of its business and therefore must comply with strict data
protection and privacy laws in all jurisdictions in which the Group
operates. The Group is exposed to the risk that this data could be
wrongfully obtained through either a cyber-attack or a breach in
data security. This could result in prosecutions including
financial penalties, sanctions, the loss of the goodwill of its
customers and an inability to deliver growth and deliver technology
synergies.
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 and additional costs might be incurred
in order to comply with any new laws or regulations in multiple
jurisdictions.
Failure to maintain our technology platform excellence
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 financial controls and customer service systems
and may impact the Group's ability to retain existing, and attract
new, customers to deliver the Group's growth strategy.
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 the levels of taxation to
which the Group is subject may change in the future. If additional
taxes are levied, this may have an adverse effect on the amount of
tax payable by the Group.
Further taxes may include corporate income tax, value added tax
(VAT) or other indirect taxes. Group companies may be subject to
VAT or similar taxes on transactions, which have previously been
treated as exempt.
Strategy Execution in Growth Markets
Risk of ineffective execution of growth strategy may impact the
Group's goal of leadership in key growth markets such as those in
the Americas and other emerging countries, resulting in a
deterioration in NGR growth opportunities in regulated and
regulating territories
Safer betting and gaming
Providing a safe and enjoyable betting and gaming experience for
our customers in at the centre of everything that Entain does.
Failure to meet the high standards we, and others, expect of Entain
could have a significant impact on our customers and their
wellbeing as well as impact the Group's profitability and
reputation.
Health, Safety, Security & Wellbeing of Employees, Customers
and Communities
Failure to meet the requirements of the various domestic and
international rules and regulations relating to the health and
safety of our employees and customers in both retail and digital
markets could expose the Group, including individual employees and
directors, to material civil, criminal and or regulatory action
with the associated financial and reputational consequences.
In addition, as a large corporate we recognise our impact on
society and local communities in which we operate and as a large
Group the expectations on us. Failure to meet these expectations
could have widespread 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 sports risk management
processes.
Loss of key locations
Whilst the Group operates out of a number of geographical
locations, there are several key sites which are critical to the
day to day operations of the Group. Disruption in any of these
locations could have an impact on day to day operations.
Attracting and retaining key talent
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.
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2022 2021
Notes Underlying Separately Total Underlying Separately Total
items disclosed items disclosed
Items Items
(note (note
3) 3)
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
Net Gaming Revenue 4,348.9 - 4,348.9 3,886.3 - 3,886.3
VAT/GST (52.0) - (52.0) (56.3) - (56.3)
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
Revenue 2 4,296.9 - 4,296.9 3,830.0 - 3,830.0
Cost of sales (1,582.2) - (1,582.2) (1,394.2) - (1,394.2)
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
Gross profit 2,714.7 - 2,714.7 2,435.8 - 2,435.8
Administrative costs (1,978.8) (213.2) (2,192.0) (1,789.2) (128.3) (1,917.5)
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
Contribution 2,128.9 - 2,128.9 1,851.5 - 1,851.5
Administrative costs excluding
marketing (1,393.0) (213.2) (1,606.2) (1,204.9) (128.3) (1,333.2)
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
Group operating profit/(loss)
before share of results from joint
ventures and associates 735.9 (213.2) 522.7 646.6 (128.3) 518.3
Share of results from joint ventures
and associates (194.1) - (194.1) (162.5) - (162.5)
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
Group operating profit/(loss) 541.8 (213.2) 328.6 484.1 (128.3) 355.8
Finance expense 4 (89.0) (5.7) (94.7) (77.1) (5.8) (82.9)
Finance income 4 4.3 - 4.3 2.1 - 2.1
(Losses)/gains arising from change
in fair value of financial instruments 4 (23.1) - (23.1) 62.0 - 62.0
(Losses)/gains arising from foreign
exchange on debt instruments 4 (112.2) - (112.2) 56.2 - 56.2
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
Profit/(loss) before tax 321.8 (218.9) 102.9 527.3 (134.1) 393.2
Income tax (97.9) 27.9 (70.0) (90.1) (27.5) (117.6)
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
Profit/(loss) from continuing
operations 223.9 (191.0) 32.9 437.2 (161.6) 275.6
Loss for the year from discontinued
operations after tax - (13.4) (13.4) (5.6) (9.3) (14.9)
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
Profit/(loss) for the year 223.9 (204.4) 19.5 431.6 (170.9) 260.7
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
Attributable to:
Equity holders of the parent 225.6 (201.4) 24.2 420.2 (170.9) 249.3
Non-controlling interests (1.7) (3.0) (4.7) 11.4 - 11.4
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
223.9 (204.4) 19.5 431.6 (170.9) 260.7
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
Earnings per share on profit for
the year
60.9p 54.3p
from continuing operations (1) 6.4p (1) 45.1p
60.9p 53.3p
From profit for the year 6 (1) 4.1p (1) 42.6p
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
Diluted earnings per share on profit
for the year
60.5p 53.8p
from continuing operations (1) 6.3p (1) 44.7p
60.5p 52.8p
From profit for the year 6 (1) 4.1p (1) 42.2p
--------------------------------------- ----- ---------- ---------- --------- ---------- ---------- ---------
Memo
EBITDAR(2) 1,008.5 (89.3) 919.2 898.8 19.2 918.0
Rent and associated costs(3) (15.3) - (15.3) (17.1) - (17.1)
-------------------------------------- ------- ------- ------- ------- ------- -------
EBITDA 993.2 (89.3) 903.9 881.7 19.2 900.9
Share-based payments (19.2) - (19.2) (12.3) - (12.3)
Depreciation, amortisation and
impairment (238.1) (123.9) (362.0) (222.8) (147.5) (370.3)
Share of results from joint ventures
and associates (194.1) - (194.1) (162.5) - (162.5)
-------------------------------------- ------- ------- ------- ------- ------- -------
Group operating profit/(loss) 541.8 (213.2) 328.6 484.1 (128.3) 355.8
-------------------------------------- ------- ------- ------- ------- ------- -------
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 6 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 and
on page 12 of the report.
3. Rent and associated costs include VAT and rent not captured
by IFRS 16. These are predominantly driven by VAT on rental charges
not being recoverable and held over leases.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December Notes 2022 2021
GBPm GBPm
P rofit for the year 19.5 260.7
------------------------------------------------------------------------- ------ -------
Other comprehensive i ncome/ (expense):
Items that may be reclassified to profit or loss:
Currency differences on translation of foreign operations 182.9 (128.3)
Total items that may be reclassified to profit or loss 182.9 (128.3)
------------------------------------------------------------------------- ------ -------
Items that will not be reclassified to profit or loss:
Re-measurement of defined benefit pension scheme (24.7) 31.2
Tax on re-measurement of defined benefit pension scheme 8.6 (10.9)
Deficit on revaluation of other investment (2.6) -
Total items that will not be reclassified to profit or loss (18.7) 20.3
------------------------------------------------------------------------- ------ -------
Other comprehensive i ncome/ (expense) for the year, net of tax 164.2 (108.0)
------------------------------------------------------------------------- ------ -------
Total comprehensive income for the year 183.7 152.7
------------------------------------------------------------------------- ------ -------
Attributable to:
---------------------------------------------------------------- ------ ------ -------
Equity holders of the parent 182.3 141.3
Non-controlling interests 1.4 11.4
------------------------------------------------------------------------- ------ -------
CONSOLIDATED BALANCE SHEET
At 31 December 2022 2021
Notes GBPm GBPm
--------------------------------------------- ----- --------- ---------
Assets
Non-current assets
Goodwill 7 3,979.2 3,217.0
Intangible assets 7 2,677.7 2,152.5
Property, plant and equipment 507.2 467.2
Interest in joint venture - 9.7
Interest in associates and other investments 53.5 58.4
Trade and other receivables 38.6 3.0
Other financial assets 0 .2 0.3
Deferred tax assets 157.3 141.4
Retirement benefit asset 63.8 95.1
--------------------------------------------- ----- --------- ---------
7,477.5 6,144.6
--------------------------------------------- ----- --------- ---------
Current assets
Trade and other receivables 500.3 539.8
Income and other taxes recoverable 30.7 23.1
Derivative financial instruments 72.9 57.4
Cash and cash equivalents 658.5 487.1
--------------------------------------------- ----- --------- ---------
1 ,262.4 1,107.4
Total assets 8,739.9 7,252.0
--------------------------------------------- ----- --------- ---------
Liabilities
Current liabilities
Trade and other payables (719.8 ) (695.8)
Balances with customers ( 200.5) (205.9)
Lease liabilities (65.1 ) (78.2)
Interest bearing loans and borrowings 9 (424.9 ) (121.1)
Corporate tax liabilities (45.3) (59.1)
Provisions (20.6) (43.5)
D erivative financial instruments (79.2 ) -
Other financial liabilities (208.8) (36.1)
--------------------------------------------- ----- --------- ---------
(1,764.2) (1,239.7)
--------------------------------------------- ----- --------- ---------
Non-current liabilities
Interest bearing loans and borrowings 9 (2,689.1) (2,161.3)
Lease liabilities (215.8) (215.5)
Deferred tax liabilities (495.4) (408.0)
Provisions (5.4) (6.4)
Other financial liabilities (253.4) (52.6)
(3,659.1) (2,843.8)
--------------------------------------------- ----- --------- ---------
Total liabilities (5,423.3) (4,083.5)
--------------------------------------------- ----- --------- ---------
Net assets 3,316.6 3,168.5
--------------------------------------------- ----- --------- ---------
Equity
Issued share capital 4.8 4.8
Share premium 1,207.3 1,207.3
Merger reserve 2,527.4 2,527.4
Translation reserve 240.2 63.4
Retained earnings (846.9) (635.8)
--------------------------------------------- ----- --------- ---------
Equity shareholders' funds 3,132.8 3,167.1
--------------------------------------------- ----- --------- ---------
Non-controlling interests 183.8 1.4
--------------------------------------------- ----- --------- ---------
Total shareholders' equity 3,316.6 3,168.5
--------------------------------------------- ----- --------- ---------
J Nygaard-Andersen R Wood
(Chief Executive Officer) (Deputy Chief Executive Officer/Chief
Financial Officer)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued Share Merger Translation Retained Equity Non- Total
share premium Reserve reserve1 earnings shareholders' controlling Shareholders'
capital funds Interests 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
year - - - - 249.3 249.3 11.4 260.7
Other
comprehensive
income - - - (128.3) 20.3 (108.0) - (108.0)
Total
comprehensive
income - - - (128.3) 269.6 141.3 11.4 152.7
Share options
exercised - 0.7 - - - 0.7 - 0.7
Share-based
payments charge - - - - 6.9 6.9 - 6.9
Business
combinations
(note 11) - - - - (50.0) (50.0) 14.2 (35.8)
Purchase of
non-controlling
interests - - - - 39.0 39.0 (52.0) (13.0)
Equity dividends
(note
5) - - - - - - (24.5) (24.5)
At 31 December
2021 4.8 1,207.3 2,527.4 63.4 (635.8) 3,167.1 1.4 3,168.5
---------------- -------- -------- -------- ----------- --------- -------------- -------------- --------------
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
year - - - - 24.2 24.2 (4.7) 19.5
Other
comprehensive
income - - - 176.8 (18.7) 158.1 6.1 164.2
---------------- -------- -------- -------- ----------- --------- -------------- -------------- --------------
Total
comprehensive
income - - - 176.8 5.5 182.3 1.4 183.7
Share-based
payments charge - - - - 18.3 18.3 - 18.3
Business
combinations
(note 11) - - - - - - 178.9 1 78.9
Recognition of
put option
liability - - - - ( 181.2) ( 181.2) - ( 181.2)
Purchase of
non-controlling
interests - - - - (3.7) (3.7) 2.1 (1.6)
Equity dividends
(note
5) - - - - (50.0) (50.0) - (50.0)
At 31 December
2022 4.8 1,207.3 2,527.4 240.2 (846.9) 3,132.8 183.8 3,316.6
---------------- -------- -------- -------- ----------- --------- -------------- -------------- --------------
1. The translation reserve is used to record exchange
differences arising from the translation of the financial
statements of subsidiaries with non-sterling functional
currencies.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December Notes 2022 2021
GBPm GBPm
Cash generated by operations 10 846.9 803.8
Income taxes paid (1 06.1) (98.7)
(100.6
Net finance expense paid ) (73.3)
Net cash generated from operating activities 640.2 631.8
Cash flows from investing activities:
-------------------------------------------------------- ----- -------- -------
(738.6
Acquisitions (1) ) (449.8)
Cash acquired on business combinations 29.9 22.3
Cash disposed on sale of business - (53.7)
D ividends received from associates 3.6 -
Purchase of intangible assets ( 129.9) (106.4)
(82.1
Purchase of property, plant and equipment ) (69.8)
Proceeds from the sale of property, plant and equipment
including disposal of shops - 1.9
Purchase of investments in associates and other
investments - (29.4)
Investment in joint ventures ( 175.1) (164.4)
(1,092.2
Net cash used in investing activities ) (849.3)
-------------------------------------------------------- ----- -------- -------
Cash flows from financing activities:
-------------------------------------------------------- ----- -------- -------
Proceeds from issue of ordinary shares - 0.7
Net proceeds from borrowings 838.4 797.2
Repayment of borrowings (109.0) (566.1)
Repayment of borrowings on acquisition ( 162.8) -
S ubscription of funds from non-controlling interests 174.3 -
Settlement of derivative financial instruments 41.6 (19.1)
S ettlement of other financial liabilities (32.9) (130.7)
Payment of lease liabilities (83.0) (87.9)
Dividends paid to shareholders (50.0) -
Dividends paid to non-controlling interests - (24.5)
-------------------------------------------------------- ----- -------- -------
Net cash used in financing activities 616.6 (30.4)
-------------------------------------------------------- ----- -------- -------
Net i ncrease/ ( decrease) in cash and cash equivalents 164.6 (247.9)
Effect of changes in foreign exchange rates 6.8 (14.8)
Cash and cash equivalents at beginning of the year 487.1 749.8
-------------------------------------------------------- ----- -------- -------
Cash and cash equivalents at end of the year 658.5 487.1
-------------------------------------------------------- ----- -------- -------
1. Included within cash flows from acquisitions is GBP1.7m
(2021: GBPnil) relating to the purchase of minority holdings in
Scout Gaming AB and Global Gaming Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
1 Summary of significant accounting policies
1.1 Basis of preparation
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2022
or 2021 but is derived from those accounts. Statutory accounts for
2021 have been delivered to the registrar of companies, and those
for 2022 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified and (ii) did
not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report.
The consolidated financial statements of the Group have been
prepared in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union and with the Isle of Man Companies
Act 2006 applicable to companies reporting under IFRSs. The
accounting policies set out in this section as detailed have been
applied consistently year on year other than for the changes in
accounting policies set out in note 1.
1.2 Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Group at 31 December each year. The consolidation
has been performed using the results to 31 December for all
subsidiaries, using consistent accounting policies. With the
exception of a small number of immaterial subsidiaries, the
financial statements of those subsidiaries are prepared to 31
December. Control is achieved where the Company is exposed, or has
rights, to variable returns from its involvement with the investee
and has the ability to affect these returns through its power over
the investee.
All intragroup transactions, balances, income and expenses are
eliminated on consolidation.
Subsidiaries are consolidated, using the acquisition method of
accounting, from the date on which control is transferred to the
Group and cease to be consolidated from the date on which control
is transferred from the Group. On acquisition, the assets and
liabilities and contingent liabilities of a subsidiary are measured
at fair value at the date of acquisition. Any excess of the cost of
acquisition over the fair values of the separately identifiable net
assets acquired is recognised as goodwill. Where necessary,
adjustments are made to the financial statements of subsidiaries to
bring the accounting policies used in line with those used by the
Group.
1.3 Critical accounting estimates and judgements
The preparation of financial information requires the use of
assumptions, estimates and judgements about future conditions. Use
of available information and application of judgement are inherent
in the formation of estimates. Actual results in the future may
differ from those reported.
Judgements
Management believes that the areas where judgement has been
applied are:
- separately disclosed items (note 3).
Separately disclosed items
To assist in understanding the underlying performance of the
Group, management applies judgement to identify those items that
are deemed to warrant separate disclosure due to either their
nature or size. Whilst not limited to, the following items of
pre-tax income and expense are generally disclosed separately:
- 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;
- corporate transaction and restructuring costs;
- legal, regulatory and tax litigation;
- changes in the fair value of contingent consideration; and
- the related tax effect of these items.
Any other non-recurring items are considered individually for
classification as separately disclosed by virtue of their nature or
size. During 2022 the Group separately disclosed a net charge on
continuing operations of GBP218.9m including GBP116.9m of
amortisation of acquired intangibles resulting from IFRS 3.
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 separately disclosed items have been included within the
appropriate classifications in the consolidated income statement.
Further details are given in note 3.
1.4 Other accounting policies
Estimates
Included within the financial statements are a number of areas
where estimation is required.
Management believes that the area where this is most notable
within the financial statements is the accounting for business
combinations (note 11).
Business combinations
For business combinations, the Group estimates the fair value of
the consideration transferred, which can include assumptions about
the future business performance of the business acquired and an
appropriate discount rate to determine the fair value of any
contingent consideration.
The Group then estimates the fair value of assets acquired and
liabilities assumed in the business combination. The area of most
notable estimation within the fair value exercise relates to
separately identifiable intangible assets including brands,
customer lists, and licences. These estimates also require inputs
and assumptions to be applied within the relief from royalty
calculation of fair values with the more significant assumptions
relating to future earnings, customer attrition rates and discount
rates. The Group engages external experts to support the valuation
process, where appropriate. IFRS 3 'Business Combinations' allows
the Group to recognise provisional fair values if the initial
accounting for the business combination is incomplete.
The fair value of contingent consideration recognised in
business combinations is reassessed at each reporting date, using
updated inputs and assumptions based on the latest financial
forecasts for the relevant business. Fair value movements and the
unwinding of the discounting is recognised within the income
statement as a separately disclosed item. See note 3 and note 11
for further details.
Goodwill on acquisition is initially measured at cost, being the
excess of the cost of the business combination over the Group's
interest in the net fair value of the separately identifiable
assets, liabilities and contingent liabilities at the date of
acquisition in accordance with IFRS 3 Business Combinations.
Goodwill is not amortised but reviewed for impairment at the first
reporting period after acquisition and then annually thereafter. As
such it is stated at cost less any provision for impairment of
value. Any impairment is recognised immediately in the consolidated
income statement and is not subsequently reversed.
On acquisition, any goodwill acquired is allocated to cash
generating units for the purpose of impairment testing. Where
goodwill forms part of a cash generating unit and part of the
operation within that unit is disposed of, the goodwill associated
with the disposal is included in the carrying amount of the assets
when determining the gain or loss on disposal. On the current year
acquisitions, any non-controlling interests where put options are
in place are recognised using the present access method where the
Group assesses that the non-controlling shareholder has present
access to the returns associated with their equity interests.
'Put' options over the equity of subsidiary companies
The potential cash payments related to put options issued by the
Group over the equity of subsidiary companies are accounted for as
financial liabilities. The amounts that may become payable under
the option on exercise are initially recognised at the present
value of the expected gross obligation with the corresponding entry
being recognised in retained earnings. Such options are
subsequently measured at amortised cost, using the effective
interest rate method, in order to accrete the liability up to the
amount payable under the option at the date at which it first
becomes exercisable. The present value of the expected gross
obligation is reassessed at the end of each reporting period and
any changes are recorded in the income statement. In the event that
an option expires unexercised, the liability is derecognised with a
corresponding adjustment to retained earnings.
Intangible assets
Intangible assets acquired separately are capitalised at cost
and those acquired as part of a business combination are
capitalised separately from goodwill. The costs relating to
internally generated intangible assets, principally software costs,
are capitalised if the criteria for recognition as assets are met.
Other expenditure is charged in the year in which the expenditure
is incurred. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and any
accumulated impairment losses.
The useful lives of these intangible assets are assessed to be
either finite or indefinite. Indefinite lived assets are not
amortised and are subject to an annual impairment review from the
year of acquisition. Where amortisation is charged on assets with
finite lives, this expense is taken to the consolidated income
statement through the 'operating expenses, depreciation and
amortisation' line item.
A summary of the policies applied to the Group's intangible
assets is as follows:
Licences Lower of 15 years, or duration
of licence
--------------------------------
Software - purchased & internally 2-15 years
capitalised costs
--------------------------------
Trademarks & brand names 10-15 years, or indefinite life
--------------------------------
Customer relationships 3-15 years
---------------------------------- --------------------------------
The useful lives of all intangible assets are reviewed at each
financial period end. Impairment testing is performed annually for
intangible assets which are not subject to systematic amortisation
and where an indicator of impairment exists for all other
intangible assets.
An intangible asset is derecognised on disposal, with any gain
or loss arising (calculated as the difference between the net
disposal proceeds and the carrying amount of the item) included in
the consolidated income statement in the year of disposal.
Pensions and other post-employment benefits
The Group's defined benefit pension plan holds assets separately
from the Group. The pension cost relating to the plan is assessed
in accordance with the advice of independent qualified actuaries
using the projected unit credit method.
Actuarial gains or losses are recognised in the consolidated
statement of comprehensive income in the period in which they
arise.
Any past service cost is recognised immediately. The retirement
benefit asset recognised in the balance sheet represents the fair
value of scheme assets less the value of the defined benefit
obligations.
In accounting for the Group's defined benefit pension plan, it
is necessary for management to make a number of estimates and
assumptions each year. These include the discount rates, inflation
rates and life expectancy. In making these estimates and
assumptions, management considers advice provided by external
advisers, such as actuaries. Where actual experience differs to
these estimates, actuarial gains and losses are recognised directly
in other comprehensive income. Refer to note 30 for details of the
values of assets and obligations and key assumptions used. Although
the Group anticipates that plan surpluses will be utilised during
the life of the plans to address member benefits, the Group
recognises its pension surplus in full on the basis that there are
no substantive restrictions on the return of residual plan assets
in the event of a winding up of the plan after all member
obligations have been met.
The Group's contributions to defined contribution scheme are
charged to the consolidated income statement in the period to which
the contributions relate.
There is a degree of estimation involved in predicting the
ultimate benefits payable under defined benefit pension
arrangements. The pension scheme liabilities are determined using
actuarial valuations. The actuarial valuation involves making
assumptions about discount rates, mortality rates and future
pension increases. Due to the long-term nature of this plan, such
estimates are subject to uncertainty.
The Gala Coral Pension Plan has a net asset position when
measured on an IAS 19 basis. Judgement is applied, based on legal,
actuarial, and accounting guidance in IFRIC 14, regarding the
amounts of net pension asset that is recognised in the consolidated
balance sheet. The Ladbrokes Pension Plan was bought-out in
2021.
Impairment
On acquisition, any goodwill acquired is allocated to cash
generating units for the purpose of impairment testing. Where
goodwill forms part of a cash generating unit and part of the
operation within that unit is disposed of, the goodwill associated
with the disposal is included in the carrying amount of the assets
when determining the gain or loss on disposal.
An impairment review is performed for goodwill and other
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 betting and gaming companies. See
note 8 for details on sensitivity analysis performed around these
estimates.
Within UK and European Retail, the cash generating units are
generally an individual Licenced Betting Office ("LBO") and
therefore, impairment is first assessed at this level for licences,
right of use ("ROU") assets and property, plant and equipment, with
any impairment arising booked to licences and property, plant and
equipment on a pro-rata basis.
Impairment losses are recognised in the consolidated income
statement.
Investments in joint ventures
A joint venture is an entity in which the Group holds an
interest on a long-term basis, and which is jointly controlled by
the Group and one or more other venturers under a contractual
agreement.
Joint control exists only when decisions about the relevant
activities require the unanimous consent of the parties that
collectively control the arrangement.
The Group's share of results of joint ventures is included in
the Group consolidated income statement using the equity method of
accounting. Investments in joint ventures are carried in the Group
consolidated balance sheet at cost plus post-acquisition changes in
the Group's share of net assets of the entity less any impairment
in value. The carrying value of investments in joint ventures
includes acquired goodwill.
If the Group's share of losses in the joint venture equals or
exceeds its investment in the joint venture, the Group does not
recognise further losses, unless it has obligations to continue to
provide financial support to the joint venture.
Investments in associates
Associates are those businesses in which the Group has a
long-term interest and is able to exercise significant influence
over the financial and operational policies but does not have
control or joint control over those policies.
The Group's share of results of associates is included in the
Group's consolidated income statement using the equity method of
accounting. Investments in associates are carried in the Group's
consolidated balance sheet at cost plus post-acquisition changes in
the Group's share of net assets of the entity less any impairment
in value. The carrying value of investments in associates includes
acquired goodwill. If the Group's share of losses in the associate
equals or exceed its investments in the associate, the Group does
not recognise further losses, unless it has obligations to continue
to provide financial support to the associate.
Property, plant and equipment
Land is stated at cost less any impairment in value.
Buildings, plant and equipment are stated at cost less
accumulated depreciation and any impairment in value.
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.
Land and buildings Lower of 50 years, or estimated useful
life of the building, or lease. Indefinite
lives are attached to any freehold
land held and therefore it is not
depreciated.
--------------------------------------------
Plant and equipment 3-5 years
--------------------------------------------
Fixtures and fittings 3-10 years
---------------------- --------------------------------------------
Right of Use ("ROU") assets arising under lease contracts are
depreciated over the lease term (as defined in IFRS 16) being the
period to the expiry date of the lease, unless it is expected that
a break clause will be exercised when the lease term is the period
to the date of the break.
The carrying values of property, plant and equipment are
reviewed for impairment where an indicator of impairment exists,
being events or changes in circumstances indicating that the
carrying values may not be recoverable. If any such indication
exists and where the carrying values exceed the estimated
recoverable amount, the assets or cash generating units are written
down to their recoverable amount.
The recoverable amount of property, plant and equipment is the
greater of fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset. For an asset that does not
generate largely independent cash inflows, the recoverable amount
is determined for the cash generating unit to which the asset
belongs.
An item of property, plant and equipment is derecognised upon
disposal, with any gain or loss arising (calculated as the
difference between the net disposal proceeds and the carrying
amount of the item) included in the consolidated income statement
in the year of disposal.
Leases
The Group has applied IFRS 16 only to those contracts that were
previously identified as a lease under IAS 17 Leases; any contracts
not previously identified as leases have not been reassessed for
the purposes of adopting IFRS 16. Accordingly, the definition of a
lease under IFRS 16 has only been applied to contracts entered into
on or after 1 January 2019.
Leases, other than those with a lease period of less than one
year at inception, or where the original cost of the asset acquired
would be a negligible amount, are capitalised at inception at the
present value of the minimum lease payments. Lease payments are
apportioned between the finance charges and reduction of the lease
liability so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are charged
directly against income.
ROU assets are included within property, plant and equipment at
cost and depreciated over their estimated useful lives, which
normally equates to the lives of the leases, after considering
anticipated residual values.
ROU assets which are sub-leased to customers are classified as
finance leases if the lease agreements transfer substantially all
the risks and rewards of usage to the lessee. All other sub-leases
are classified as operating leases. When assets are subject to
finance leases, the present value of the sub-lease is recognised as
a receivable, net of allowances for expected credit losses and the
related ROU asset is de-recognised. The difference between the
gross receivable and the present value of the receivable is
recognised as unearned finance lease income.
Finance lease interest income is recognised over the term of the
lease using the net investment method (before tax) so as to give a
constant rate of return on the net investment in sub-leases.
Operating lease rental income is recognised on a straight-line
basis over the life of the lease.
Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand,
short-term deposits (and customer balances).
Financial assets
Financial assets are recognised when the Group becomes party to
the contracts that give rise to them. The Group classifies
financial assets at inception as financial assets at amortised
cost, financial assets at fair value through profit or loss or
financial assets at fair value through other comprehensive
income.
Financial assets at amortised cost are non-derivative financial
assets with fixed or determinable payments that are not quoted in
an active market. On initial recognition, financial assets at
amortised cost are measured at fair value net of transaction
costs.
Trade receivables are generally accounted for at amortised cost.
Expected credit losses are recognised for financial assets recorded
at amortised cost, including trade receivables. Expected credit
losses are calculated by using an appropriate probability of
default, taking accounts of a range of possible future scenarios
and applying this to the estimated exposure of the Group at the
point of default.
Financial assets at fair value through profit or loss include
derivative financial instruments. Financial assets through profit
or loss are measured initially at fair value with transaction costs
taken directly to the consolidated income statement. Subsequently,
the fair values are remeasured, and gains and losses are recognised
in the consolidated income statement.
Financial assets at fair value through other comprehensive
income comprise equity investments that are designated as such on
acquisition. These investments are measured initially at fair
value. Subsequently, the fair values are remeasured, and gains and
losses are recognised in the consolidated statement of
comprehensive income.
Financial liabilities
Financial liabilities comprise trade and other payables,
interest bearing loans and borrowings, contingent consideration,
ante-post bets, guarantees and derivative financial instruments. On
initial recognition, financial liabilities are measured at fair
value net of transaction costs where they are not categorised as
financial liabilities at fair value. Financial liabilities measured
at fair value include contingent consideration, derivative
financial instruments, ante-post bets and guarantees.
Financial liabilities at fair value are measured initially at
fair value, with transaction costs taken directly to the
consolidated income statement. Subsequently, the fair values are
remeasured and gains and losses from changes therein are recognised
in the consolidated income statement.
Trade and other payables are held at amortised cost and include
amounts due to clients representing customer deposits and winnings,
which are matched by an equal and opposite amount within cash and
cash equivalents.
All interest-bearing loans and borrowings are initially
recognised at fair value net of issue costs associated with the
borrowing. After initial recognition, interest bearing loans and
borrowings are subsequently measured at amortised cost using the
effective interest rate method.
Derecognition of financial assets and liabilities
Financial assets are derecognised when the right to receive cash
flows from the assets has expired or when the Group has transferred
its contractual right to receive the cash flows from the financial
assets or has assumed an obligation to pay the received cash flows
in full without material delay to a third party, and either:
- substantially all the risks and rewards of ownership have been transferred; or
- substantially all the risks and rewards have neither been
retained nor transferred but control is not retained.
Financial liabilities are derecognised when the obligation is
discharged, cancelled or expires.
Derivative financial instruments
The Group uses derivative financial instruments such as cross
currency swaps, foreign exchange swaps and interest rate swaps, to
hedge its risks associated with interest rate and foreign currency
fluctuations. Derivative financial instruments are recognised
initially and subsequently at fair value. The gains or losses on
remeasurement are taken to the consolidated income statement.
Derivative financial instruments are classified as assets where
their fair value is positive, or as liabilities where their fair
value is negative. Derivative assets and liabilities arising from
different transactions are only offset if the transactions are with
the same counterparty, a legal right of offset exists, and the
parties intend to settle the cash flows on a net basis.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
Provisions are measured at the directors' best estimate of the
expenditure required to settle the obligation at the balance sheet
date and are discounted to present value where the effect is
material using a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to
the liability. The unwinding of the discount is recognised as a
finance expense.
Foreign currency translation
The presentational currency of Entain plc and the functional
currencies of its UK subsidiaries are Pounds Sterling (GBP).
Other than Sterling the main functional currencies of
subsidiaries are the Euro (EUR), the US Dollar ($) and the
Australian Dollar (A$). At the reporting date, the assets and
liabilities of non-sterling subsidiaries are translated into Pounds
Sterling (GBP) at the rate of exchange ruling at the balance sheet
date and their cash flows are translated at the weighted average
exchange rates for the year. The post-tax exchange differences
arising on the retranslation are taken directly to other
comprehensive income.
Transactions in foreign currencies are initially recorded in the
subsidiary's functional currency and translated at the foreign
currency rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are
retranslated at the foreign currency rate of exchange ruling at the
balance sheet date.
All foreign currency translation differences are taken to the
consolidated income statement. Non-monetary items that are measured
at historical cost in a foreign currency are translated using the
exchange rate at the date of the initial transaction. Non-monetary
items measured at fair value in a foreign currency are translated
using the exchange rate at the date when the fair value was
determined.
On disposal of a foreign entity, the deferred cumulative
retranslation differences previously recognised in equity relating
to that particular foreign entity are recognised in the
consolidated income statement as part of the profit or loss on
disposal.
The following exchange rates were used in 2022 and 2021:
2022 2021
----------------- --------------
Currency Average Year end Average Year
end
Euro (EUR) 1. 175 1.1 28 1.159 1.190
U S Dollar 1.2
($) 45 1.2 08 1.375 1.354
Australian 1.7
Dollar (A$) 88 1.77 5 1.832 1.862
------------- ------- -------- ------- -----
Income tax
Deferred tax is provided on all temporary differences at the
balance sheet date, between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes
except:
- on the initial recognition of goodwill;
- where the deferred tax liability arises from the initial
recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects
neither the accounting profit nor the tax profit; and
- associated with investments in subsidiaries, joint ventures
and associates, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary
differences and carry forward of unused tax assets and unused tax
losses, to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences and
carry forward of unused tax assets and unused tax losses can be
utilised. The carrying amount of deferred tax assets is reviewed at
each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to
allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates
that are expected to apply to the year when the asset is realised
or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at the balance sheet
date. Deferred tax balances are not discounted.
Interest or penalties payable and receivable in relation to
income tax are recognised as an income tax expense or credit in the
consolidated income statement.
Income tax expenses are recognised within profit or loss except
to the extent that they relate to items recognised in other
comprehensive income or directly in equity, in which case they are
recognised in other comprehensive income or directly in equity.
Revenues, expenses and assets are recognised net of the amount
of sales tax except:
- where the sales tax incurred on a purchase of goods and
services is not recoverable from the taxation authority, in which
case the sales tax is recognised as part of the cost of acquisition
of the asset or as part of the expense item as applicable; and
- receivables and payables are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the
taxation authority is included as part of receivables or payables
in the consolidated balance sheet.
Accounting for uncertain tax positions
The Group is subject to various forms of tax in a number of
jurisdictions. Given the nature of the industry within which the
Group operates, the tax and regulatory regimes are continuously
changing and, as such, the Group is exposed to a small number of
uncertain tax positions. Judgement is applied to adequately provide
for uncertain tax positions where it is believed that it is more
likely than not that an economic outflow will arise. In particular,
during 2022 judgement has been applied in the Group's accounting
for Greek tax and further disclosure is given in note 12.
Equity instruments and dividends
Equity instruments issued by the Company are recorded at the
fair value of proceeds received net of direct issue costs.
Final dividends proposed by the Board of Directors and unpaid at
the year-end are not recognised in the financial statements until
they have been approved by shareholders at the Annual General
Meeting. Interim dividends are recognised when paid.
Revenue
The Group reports the gains and losses on all betting and gaming
activities as revenue, which is measured at the fair value of the
consideration received or receivable from customers less free bets,
promotions, bonuses and other fair value adjustments. Revenue is
net of VAT/GST. The Group considers betting and gaming revenue to
be out of the scope of IFRS 15 Revenue, and accounts for those
revenues within the scope of IFRS 9 Financial Instruments.
For licensed betting offices (LBOs), on course betting, Core
Telephone Betting, mobile betting, Digital businesses (including
sportsbook, betting exchange, casino, games, other number bets),
revenue represents gains and losses, being the amounts staked and
fees received, less total payouts recognised on the settlement of
the sporting event or casino gaming machine roulette or slots spin.
Open betting positions ("ante-post") are carried at fair value and
gains and losses arising on these positions are recognised in
revenue.
The following forms of revenue, which are not significant in the
context of Group revenue, are accounted for within the scope of
IFRS 15 Revenue. Revenue from the online poker business reflects
the net income (rake) earned from poker hands completed by the year
end. In the case of the greyhound stadia, revenue represents income
arising from the operation of the greyhound stadia in the year,
including broadcasting rights, and sales of refreshments, net of
VAT. Given the nature of these revenue streams they are not
considered to be subject to judgement over the performance
obligations, amount received or timing of recognition.
Finance expense and income
Finance expense and income arising on interest bearing financial
instruments carried at amortised cost are recognised in the
consolidated income statement using the effective interest rate
method. Finance expense includes the amortisation of fees that are
an integral part of the effective finance cost of a financial
instrument, including issue costs, and the amortisation of any
other differences between the amount initially recognised and the
redemption price. All finance expenses are recognised over the
availability period.
Share-based payment transactions
Certain employees (including directors) of the Group receive
remuneration in the form of equity settled share-based payment
transactions, whereby employees render services in exchange for
shares or rights over shares (equity settled transactions).
The cost of equity settled transactions is measured by reference
to the fair value at the date on which they are granted. In valuing
equity settled transactions, no account is taken of any performance
conditions, other than conditions linked to the price of the shares
of Entain plc (market conditions).
The cost of equity settled transactions is recognised in the
consolidated income statement, with a corresponding credit in
equity, over the period in which the performance conditions are
fulfilled, ending on the date on which the relevant employees
become fully entitled to the award (vesting date). The cumulative
expense recognised for equity settled transactions at each
reporting date until the vesting date reflects the extent to which
the vesting period has expired and the number of awards that, in
the opinion of the directors of the Group at that date, based on
the best available estimate of the number of equity instruments,
will ultimately vest.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or
not the market condition is satisfied, provided that all other
performance conditions are satisfied.
The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of earnings per share
as shown in note 6.
1.5 Future accounting developments
The standards and interpretations that are issued, but not yet
effective, excluding those relating to annual improvements, up to
the date of issuance of the Group's financial statements are
disclosed below. The Group intends to adopt these standards, if
applicable, when they become effective. None of these are expected
to have a significant effect on the consolidated financial
statements of the Group as set out below:
IAS Presentation of Presentation of Financial Statements 1 January
1 Financial Statements and IFRS Practice Statement 2 Disclosure 2023
of Accounting Policies
IAS Accounting Policies, Definition of Accounting Estimates 1 January
8 Changes in Accounting 2023
Estimates and
Errors
----------------------- ------------------------------------------ ---------------
IAS Income Taxes Deferred Tax related to assets and 1 January
12 liabilities arising from a single 2023
transaction
----------------------- ------------------------------------------ ---------------
IFRS Original issue 1 January
17 Insurance Contracts 2023
----------------------- ------------------------------------------ ---------------
IFRS Leases Lease liability in a sale and leaseback 1 January
16 transaction 2024
----------------------- ------------------------------------------ ---------------
IAS Presentation of Classification of liabilities as current 1 January
1 Financial Statements or non-current 2024
Non-current liabilities regarding
long-term debt with covenants
----------------------- ------------------------------------------ ---------------
IFRS Consolidated Financial Sale or contribution of assets between Date deferred
10 Statements an investor and its associate or joint
venture
----------------------- ------------------------------------------ ---------------
IAS Investments in Sale or contribution of assets between Date deferred
28 Associates and an investor and its associate or joint
Joint Ventures venture
----------------------- ------------------------------------------ ---------------
2 Segment information
The Group's operating segments are based on the reports reviewed
by the Executive Management Team (which is 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. The Group's operating segments are now
aggregated into the five reportable segments as detailed below.
- Online: comprises betting and gaming activities from online
and mobile operations. Sports Brands include bwin, Coral,
Crystalbet, Eurobet, Ladbrokes, Sportingbet, SuperSport, and Sport
Interaction; Gaming Brands include CasinoClub, Foxy Bingo, Gala,
Gioco Digitale, partypoker and PartyCasino, Optibet, and Ninja;
- Retail: comprises betting and retail activities in the shop
estates in Great Britain, Northern Ireland, Jersey, Republic of
Ireland, Belgium, Italy, and Croatia;
- 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 and on course pitches.
The Executive Management Team of the Group has chosen to assess
the performance of operating segments based on a measure of NGR ,
EBITDAR, EBITDA, and operating profit with finance costs and
taxation considered for the Group as a whole. See page 12 of this
annual report for further considerations of the use of Non-GAAP
measures. 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 year ended 31 December were as
follows:
2022 Online Retail All other New opportunities Corporate Elimination Total
segments of internal Group
GBPm revenue
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
NGR(1) 3,050.5 1,277.8 25.1 - - (4.5) 4,348.9
VAT/GST (52.0) - - - - - (52.0)
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
Revenue 2,998.5 1,277.8 25.1 - - (4.5) 4,296.9
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
Gross profit 1,829.6 860.0 25.1 - - - 2,714.7
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
Contribution(2) 1,254.2 852.1 25.0 (2.4) - - 2,128.9
Operating costs excluding
marketing
costs (425.0) (558.4) (20.0) (26.5) (90.5) - (1,120.4)
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
Underlying EBITDAR before
separately
disclosed items 829.2 293.7 5.0 (28.9) (90.5) - 1,008.5
Rental costs (1.0) (13.5) (0.1) (0.2) (0.5) - (15.3)
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
Underlying EBITDA before
separately
disclosed items 828.2 280.2 4.9 (29.1) (91.0) - 993.2
Share based payments (7.8) (2.3) - (0.3) (8.8) - (19.2)
Depreciation and amortisation (118.3) (112.4) (2.7) (4.5) (0.2) - (238.1)
Share of joint ventures and
associates (0.2) - 0.4 (0.4) (193.9) - (194.1)
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
Operating profit/(loss) before
separately disclosed items 701.9 165.5 2.6 (34.3) (293.9) - 541.8
Separately disclosed items (note
3) (114.0) (57.4) (0.7) - (41.1) - (213.2)
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
Group operating profit/(loss) 587.9 108.1 1.9 (34.3) (335.0) - 328.6
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
Net finance expense (225.7)
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
Profit before tax 102.9
Income tax (70.0)
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
Profit for the year from
continuing
operations 32.9
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
Loss for the year from
discontinued
operations
after tax (13.4)
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
Profit for the year after
discontinued
operations 19.5
---------------------------------- ------- ------- --------- ----------------- --------- ------------ ---------
1. Included within NGR are amounts of GBP65.6m (2021: GBP82.6m)
in relation to online poker services and GBP25.1m (2021: GBP20.5m)
arising from the operation of greyhound stadia recognised under
IFRS 15 Revenue.
2. Contribution represents gross profit less marketing costs and
is a key performance metric used by the Group, particularly in
Online.
2 Segment information (continued)
2021 Online Retail All other N ew opportunities Corporate Elimination Total
segments of internal Group
GBPm revenue
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
NGR 3,066.5 791.1 32.8 - - (4.1) 3,886.3
VAT/GST (56.3) - - - - - (56.3)
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
Revenue 3,010.2 791.1 32.8 - - (4.1) 3,830.0
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
Gross profit 1,871.5 535.8 28.5 - - - 2,435.8
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
Contribution(1) 1,294.7 529.0 27.8 - - - 1,851.5
Operating costs excluding marketing
costs (393.7) (447.5) (22.1) (8.8) (80.6) - (952.7)
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
Underlying EBITDAR before
separately
disclosed items 901.0 81.5 5.7 (8.8) (80.6) - 898.8
Rental costs (2.0) (14.6) (0.1) - (0.4) - (17.1)
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
Underlying EBITDA before separately
disclosed items 899.0 66.9 5.6 (8.8) (81.0) - 881.7
Share based payments (5.3) (1.9) (0.1) - (5.0) - (12.3)
Depreciation and amortisation (116.7) (102.4) (2.9) (0.4) (0.4) - (222.8)
Share of joint ventures and
associates (1.0) - 0.4 - (161.9) - (162.5)
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
Operating profit/(loss) before
separately disclosed items 776.0 (37.4) 3.0 (9.2) (248.3) - 484.1
Separately disclosed items
(note 3) (154.0) 1.4 (1.7) - 26.0 - (128.3)
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
Group operating profit/(loss) 622.0 (36.0) 1.3 (9.2) (222.3) - 355.8
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
Net finance income 37.4
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
Profit before tax 393.2
Income tax (117.6)
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
Profit for the year from continuing
operations 275.6
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
Loss for the year from discontinued
operations after tax (14.9)
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
Profit for the year after
discontinued operations 260.7
----------------------------------- ------- ------- --------- ------------------ --------- ------------ -------
1. Contribution represents gross profit less marketing costs and
is a key performance metric used by the Group, particularly in
Online.
3 Separately disclosed items
2022 2 021
Tax Impact Tax Impact
GBPm GBPm GBPm GBPm
------------------------------------------------------ ------ ----------- ------ -----------
Amortisation of acquired intangibles1 116.9 (16.5) 144.2 (24.6)
Furlough2 45.5 (8.6) - -
C orporate transaction costs(3) 2 3.9 (0.6) 9.4 (0.1)
Restructuring costs(4) 1 1.8 (1.4) - -
Legal and onerous contract provisions(5) 8.1 (0.8) 26.2 (2.1)
Impairment loss(6) 7.0 - 3.3 -
Bridging loan fees/ issue cost write-off
(7) 5.7 - 5.8 (1.0)
L oss/(profit) on disposal of property,
plant and equipment(8) 1.0 - (1.9) 1.0
Movement in fair value of contingent consideration(9) (1.0) - 6.1 -
Integration costs (10) - - 17.3 (1.9)
Tax litigation/ one-off legislative impacts(11) - - (80.2) 7.8
Other one-off items(12) - - 3.9 1.3
Change of deferred tax rate on intangible
assets - - - 47.1
Separately disclosed items for the year
from continuing operations 218.9 (27.9) 134.1 27.5
Separately disclosed items for the year
from discontinued operations 13.4 - 9.3 -
------------------------------------------------------ ------ ----------- ------ -----------
T otal before tax 232.3 (27.9) 143.4 27.5
Separately disclosed items for the year
after discontinued operations 2 04.4 170.9
------------------------------------------------------ ------ ----------- ------ -----------
1. Amortisation charges in relation to acquired intangible
assets arising from the various acquisitions made by the Group in
recent years, including Ladbrokes Coral, Crystalbet, Neds, Enlabs,
Avid, and SuperSport.
2. Voluntary repayment of certain amounts received by the Group
under the Government Coronavirus Job Retention Scheme ("Furlough
Scheme").
3. Transaction costs associated with the M&A activity
including the acquisition of SuperSport, Avid and Klondaika (see
note 11).
4. Costs associated with the Group's restructuring programme Project Evolve.
5. Relates primarily to costs associated with certain litigation
and legal claims and regulatory settlements involving the Entain
Group.
6. Non-cash impairment charge against closed shops in its retail estates.
7. Fees incurred in respect of acquisition bridging loan which
was subsequently refinanced. Prior year relates to issue costs
written off on the refinancing of term loans and the Group's
revolving credit facility.
8. Loss on the disposal of certain assets and subsidiaries.
9. Income reflecting a change in the estimated likely payments
under contingent consideration arrangements net of discount
unwind.
10. During the prior year, the Group incurred final costs
associated with the integration of the Ladbrokes Coral Group and
the legacy Entain businesses.
11. During the prior year, the Group recognised a credit in
respect of the 2010/11 Greek tax case following a ruling by the
Athens Administrative Court of Appeal in favour of the Group (see
note 12 for more details).
12. During the prior year, the Group incurred a number of
one-off costs associated with Covid-19.
The items above reflect incomes and expenditures which are
either exceptional in nature or size or are associated with the
amortisation of acquired intangibles. The Directors believe that
each of these items warrants separate disclosure as they do not
form part of the day to day underlying trade of the Group and are
not expected to persist beyond the short term (excluding the
amortisation of acquired intangibles).
4 Finance expense and income
2022 2021
GBPm GBPm
--------------------------------------------------------------- ------- ------
Interest on term loans, bonds and bank facilities (76.2) (63.3)
Interest on lease liabilities(1) (12.8) (13.8)
Bridging loan fees /issue cost write-off (note 3) (5.7) (5.8)
Total finance expense (94.7) (82.9)
--------------------------------------------------------------- ------- ------
Interest receivable 4.3 2.1
(Losses)/gains arising on financial derivatives (23.1) 62.0
(Losses)/gains arising on foreign exchange on debt instruments (112.2) 56.2
--------------------------------------------------------------- ------- ------
(2 25.7
Net finance (expense)/income ) 37.4
--------------------------------------------------------------- ------- ------
Interest on lease liabilities of GBP12.8m (2021: GBP13.8) is net
of GBP0.2m of sub-let interest receivable (2021: GBP0.2m).
5 Dividends
2022 2021
Shares Shares
2022 2021 in issue in issue
Pence per share pence pence number number
---------------------- ------ ------ --------- ---------
Interim dividend paid 8 .5 - 5 88.8 n/a
---------------------- ------ ------ --------- ---------
A second interim dividend of 8.5 pence (2021: nil pence) per
share, amounting to GBP50.0m (2021: GBPnil) in respect of the year
ended 31 December 2022 was proposed by the Directors on 9 March
2023. The estimated total amount payable in respect of the final
dividend is based on the expected number of shares in issue on 9
March 2023. There are no income tax implications for the Group and
Company arising from the proposed second interim dividend. The 2022
interim dividend of 8.5 pence per share (GBP50.0m) was paid on 16
September 2022.
No dividends were paid out to non-controlling interests (2021:
GBP24.5m).
6 Earnings per share
Basic earnings per share has been calculated by dividing the
profit for the year attributable to shareholders of the Company of
GBP24.2m (2021: GBP249.3m) by the weighted average number of shares
in issue during the year of 588.2m (2021: 585.7m).
At 31 December 2022, there were 588.2m EUR0.01 ordinary shares
in issue.
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 1 and
disclosed in note 3.
Total earnings per share
Weighted average number of shares (millions) 2022 2021
------------------------------------------------------------- ------ -----
Shares for basic earnings per share 5 88.2 585.7
Potentially dilutive share options and contingently issuable
shares 4.5 5.4
------------------------------------------------------------- ------ -----
Shares for diluted earnings per share 592.7 591.1
------------------------------------------------------------- ------ -----
2022 2021
Total profit GBPm GBPm
------------------------------------------------------------------ ------ ------
Profit attributable to shareholders 2 4.2 249.3
------------------------------------------------------------------ ------ ------
* from continuing operations 37.6 264.2
* from discontinued operations (13.4) (14.9)
Losses/(gains) arising from financial instruments 23.1 (62.0)
Losses/(gains) arising from foreign exchange debt instruments 112.2 (56.2)
Associated tax charge on gains arising from financial instruments
and foreign exchange debt instruments (2.4) 9.9
Separately disclosed items net of tax (note 3) 201.4 170.9
------------------------------------------------------------------ ------ ------
Adjusted profit attributable to shareholders 358.5 311.9
------------------------------------------------------------------ ------ ------
* from continuing operations 358.5 317.5
* from discontinued operations - (5.6)
------------------------------------------------------------------ ------ ------
Standard earnings Adjusted earnings
per share per share
Earnings per share (pence) 2022 2021 2022 2021
------------------------------------- --------- -------- -------- ---------
Basic earnings per share
* from continuing operations 6.4 45.1 60.9 54.3
* from discontinued operations (2.3) (2.5) - (1.0)
------------------------------------- --------- -------- -------- ---------
From profit for the period 4.1 42.6 60.9 53.3
------------------------------------- --------- -------- -------- ---------
Diluted earnings per share
* from continuing operations 6.3 44.7 60.5 53.8
* from discontinued operations (2.2) (2.5) - (1.0)
------------------------------------- --------- -------- -------- ---------
From profit for the period 4.1 42.2 60.5 52.8
------------------------------------- --------- -------- -------- ---------
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 93.9p (2021: 81.9p) and a diluted adjusted
earnings per share of 93.2p (2021: 81.1p) from continuing
operations.
7 Goodwill and intangible assets
Trade-marks
Customer & brand
Goodwill Licences Software relationships names Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ---------- ---------- ---------- --------------- ----------- -------
Cost
At 1 January 2021 3,352.2 15.7 539.3 948.6 1,954.0 6,809.8
Exchange adjustment (132.8) (0.3) (28.0) (22.5) (32.7) (216.3)
Additions - 12.8 96.7 - - 109.5
Additions from business
combinations 273.1 22.3 21.1 78.9 96.2 491.6
Disposals - (0.8) (8.2) - - (9.0)
Reclassification - - 1.1 - - 1.1
At 31 December 2021 3,492.5 49.7 622.0 1,005.0 2,017.5 7,186.7
Exchange adjustment 153.6 7.1 28.3 34.1 44.9 268.0
Additions - - 129.9 - - 129.9
A dditions from business
combinations (note 11) 62 2.3 147.6 7.4 205.9 206.0 1,189.2
Disposals - (0.5) (13.9) - - (14.4)
R eclassification - - (1 .0) - - (1.0)
At 31 December 2022 4,268.4 203.9 772.7 1,245.0 2,268.4 8,758.4
------------------------- ---------- ---------- ---------- --------------- ----------- -------
Accumulated amortisation
and impairment
At 1 January 2021 291.1 7.4 332.0 871.6 141.2 1,643.3
Exchange adjustment (15.6) (0.1) (22.3) (19.4) (8.6) (66.0)
Amortisation charge - 6.8 102.7 89.8 48.0 247.3
I mpairment charge - - 1.6 - - 1.6
Disposals - (0.8) (8.2) - - (9.0)
------------------------- ---------- ---------- ---------- --------------- ----------- -------
At 31 December 2021 275.5 13.3 405.8 942.0 180.6 1,817.2
Exchange adjustment 13.7 0.3 19.8 23.6 11.7 69.1
Amortisation charge - 12.7 109.1 52.4 54.9 229.1
I mpairment charge - 0.5 - - - 0.5
Disposals - (0.5) (13.9) - - (14.4)
At 31 December 2022 289.2 26.3 520.8 1,018.0 247.2 2,101.5
------------------------- ---------- ---------- ---------- --------------- ----------- -------
Net book value
At 31 December 2021 3,217.0 36.4 216.2 63.0 1,836.9 5,369.5
------------------------- ---------- ---------- ---------- --------------- ----------- -------
At 31 December 2022 3,979.2 177.6 251.9 227.0 2,021.2 6,656.9
------------------------- ---------- ---------- ---------- --------------- ----------- -------
At 31 December 2022, the Group had not entered into contractual
commitments for the acquisition of any intangible assets (2021:
GBPnil).
Included within trade-marks and brand names are GBP1,398.4m
(2021: GBP1,398.4m) of intangible assets considered to have
indefinite lives. These assets relate to the UK Ladbrokes and Coral
brands which are considered to have indefinite durability that can
be demonstrated, and their value can be readily measured. The
brands operate in longstanding and profitable market sectors. The
Group has a strong position in the market and there are barriers to
entry due to the requirement to demonstrate that the applicant is a
fit and proper person with the "know-how" required to run such
operations.
Goodwill reflects the value by which consideration exceeds the
fair value of net assets acquired as part of a business combination
including the deferred tax liability arising on acquisitions.
Licences comprise the cost of acquired betting shop and online
licences.
Software relates to the cost of acquired software, through
purchase or business combination, and the capitalisation of
internally developed software. Additions of GBP129.9m (2021:
GBP96.7m) include GBP58.0m of internally capitalised costs (2021:
GBP46.0m).
Customer relationships, trade-marks and brand names relate to
the fair value of customer lists, trade-marks and brand names
acquired as part of business combinations, primarily relating to
the bwin, Ladbrokes Coral Group plc, Enlabs, Sport Interaction and
SuperSport businesses.
8 Impairment testing of goodwill and indefinite life intangible
assets
An impairment loss is recognised for any amount by which an
asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less
costs to sell and its value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units).
Within UK and European Retail, the cash generating units
("CGUs") are generally an individual Licenced Betting Office
("LBO") and, therefore, impairment is first assessed at this level
for licences (intangibles) and property, plant and equipment, with
any impairment arising booked to licences and property, plant and
equipment on a pro-rata basis. Since goodwill and brand names have
not been historically allocated to individual LBOs, a secondary
assessment is then made to compare the carrying value of the
segment against the recoverable amount with any additional
impairment then taken against goodwill first.
For Online the CGU is the relevant geographical location or
business unit, for example Australia, European digital (defined as
websites hosted by proprietary platforms based in European
constituent countries), Digital (defined as websites hosted by
Entain proprietary platforms) etc. and any impairments are made
firstly to goodwill, next to any capitalised intangible asset and
then finally to property, plant and equipment. The expected cash
flows generated by the assets are discounted using appropriate
discount rates that reflect the time value of money and risks
associated with the group of assets.
For both tangible and intangible assets, the future cash flows
are based on the forecasts and budgets of the CGU or business
discounted to reflect time value of money. The key assumptions
within the UK and European Retail budgets are OTC wagers (customer
visits and spend per visit), the average number of machines per
shop, gross win per shop per week, salary increases, the potential
impact of the shop closures and the fixed costs of the LBOs. The
key assumptions within the budgets for Online are the number of
active customers, net revenue per head, win percentage, marketing
spend, revenue shares and operating costs.
The value-in-use calculations use cash flows based on detailed,
board approved, financial budgets prepared by management covering a
three-year period. These forecasts have been extrapolated over
years 4 to 8 representing a declining growth curve from year 3
until the long-term forecast growth rate is reached. The growth
rates used from years 4-8 range from 0% to 16%. From year 9 onwards
long-term growth rates used are between 0% and 2% (2021: between 0%
and 2%) and are based on the long-term GDP growth rate of the
countries in which the relevant CGUs operate or the relevant
outlook for the business. An eight-year horizon is considered
appropriate based on the Group's history of underlying profit as
well as ensuring there is an appropriate decline to long-term
growth rates from those growth rates currently observed in our key
markets. A 0% growth rate has been used for the UK Retail operating
segment. All key assumptions used in the value-in-use calculations
reflect the Group's past experience unless a relevant external
source of information is available.
The discount rate calculation is based on the specific
circumstances with reference to the WACC and risk factors expected
in the industry in which the Group operates.
The pre-tax discount rates used, which have increased
year-on-year due to increasing interest rates, and the associated
carrying value of goodwill by CGU is as follows:
2022 2021 2022 2021
Goodwill % % GBPm GBPm
------------------- -------- ------ --------- -------
Digital 12.6 10.9 2 , 146.5 2,121.5
UK Retail 12.6 10.9 76.4 76.4
Australia 13.5 11.7 347.5 331.2
9.3 -
European Retail 9.5-13.3 11.5 161.5 153.0
10.9 -
European Digital 9.5-13.3 11.5 350.4 332.0
Enlabs 11.8 12.7 209.6 187.7
A vid 12.9 n/a 8 4.2 n/a
S uperSport 11.8 n/a 536.7 n/a
All other segments 12.4 10.9 66.4 15.2
3,979.2 3,217.0
------------------- -------- ------ --------- -------
It is not practical or material to disclose the carrying value
of individual licences by LBO.
Impairment recognised during the year
Impairments of intangible assets and property, plant and
equipment are recognised as separately disclosed items within
operating expenses.
During the current year, the Group recorded a non-cash
impairment charge of GBP7.0m (2021: GBP3.3m) primarily on closed
retail shops.
Sensitivity analysis
A reduction to 0% for the terminal growth rate applied to the
cash flows (with other assumptions remaining constant) would not
result in a material impairment to any CGU.
A 5% decrease in all cash flows, which could be represented by
an increase in the cost base from changing market behaviour and the
impact of group commitment around ESG amongst others, used in the
discounted cash flow model for the value in use calculation (with
other assumptions remaining constant) would not result in a
material impairment to any CGU .
A 0.5pp increase in discount rates used in the discounted cash
flow model for the value in use calculation (with all other
assumptions remaining constant) would not result in a material
impairment to any CGU .
No other reasonably possible change in assumptions to the CGUs
would cause any additional impairment.
9 Net debt
The components of the Group's adjusted net debt are as
follows:
2022 2021
GBPm GBPm
----------------------------------------------------------- --------- ---------
Current assets
Cash and short-term deposits 658.5 487.1
Current liabilities
Interest bearing loans and borrowings (424.9) (121.1)
Non-current liabilities
Interest bearing loans and borrowings (2,689.1) (2,161.3)
------------------------------------------------------------ --------- ---------
Accounting net debt (2,455.5) (1,795.3)
------------------------------------------------------------ --------- ---------
Cash held on behalf of customers (200.5) (205.9)
Fair value swaps held against debt instruments (derivative
financial (liability)/asset) (6.5) 57.4
Deposits 43.8 20.3
Balances held with payment service providers 149.8 130.8
Sub-total (2,468.9) (1,792.7)
------------------------------------------------------------ --------- ---------
Lease liabilities (280.9) (293.7)
------------------------------------------------------------ --------- ---------
Adjusted net debt including lease liabilities (2,749.8) (2,086.4)
------------------------------------------------------------ --------- ---------
Cash held on behalf of customers represents the outstanding
balance due to customers in respect of their online gaming
wallets.
10 Notes to the statement of cash flows
Reconciliation of profit/(loss) to net cash inflow from
operating activities:
2022 2021
GBPm GBPm
---------------------------------------------------------------------------- ------- ------
Profit before tax from continuing operations 102.9 393.2
Net finance e xpense/ (income) 225.7 (37.4)
---------------------------------------------------------------------------- ------- ------
Profit before tax and net finance expense from continuing operations 32 8.6 355.8
Loss before tax and net finance expense from discontinued operations (1 3.4) (14.9)
---------------------------------------------------------------------------- ------- ------
Profit before tax and net finance expense including discontinued operations 31 5.2 340.9
---------------------------------------------------------------------------- ------- ------
Adjustments for:
Impairment 7 .0 3.3
Loss on disposal 1.0 7.3
Depreciation of property, plant and equipment 125.9 120.0
Amortisation of intangible assets 229.1 247.3
Share based payments charge 19.2 12.3
Decrease/(increase) in trade and other receivables 4 4.7 (73.7)
Increase in other financial liabilities 2.2 3.5
(Decrease)/increase in trade and other payables ( 85.9) 1.9
Decrease in provisions (6.9) (18.5)
Share of results from joint venture and associate 19 4.1 162.5
Pension settlement 7.0 -
(5. 7
Other ) (3.0)
Cash generated by operations 846.9 803.8
---------------------------------------------------------------------------- ------- ------
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 estimation. 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; see note 3 for
details.
Summary of acquisitions:
SuperSport
During the year, the Group set up a new subsidiary Entain
Holdings (CEE) Limited which the Group holds 75% of the equity in.
On 22 November 2022, Entain Holdings (CEE) Limited, acquired 100%
of EMMA GAMMA Adriatic d.o.o. EMMA GAMMA owns SuperSport, a leading
online and retail sports betting and gaming brand in Croatia, which
provides the Group access to the Central and Eastern Europe (CEE)
region.
Entain Holdings (CEE) Limited paid EUR623.7m including working
capital adjustments, with further amounts payable in 2023
representing a multiple of 2022 EBITDA and contingent payments in
2024 and 2025 based on future financial performance.
Given the proximity of the acquisition to the period end and as
permitted by IFRS 3 'Business Combinations', the fair value of the
acquired identifiable assets and liabilities has been presented on
a provisional basis. Fair values were determined on the basis of an
initial assessment performed by an independent professional
expert.
Details of the purchase consideration, the net assets acquired
and goodwill are as follows:
Provisional
fair value
GBPm
---------------------------------------- ------------
Intangible assets (excluding goodwill) 465.6
Property, plant and equipment 10.1
Trade and other receivables 18.2
Cash and cash equivalents 11.8
Deferred tax liability ( 83.7)
Loans and borrowings (162.8)
Trade and other payables (24.2)
Lease liabilities (6.6)
------------------------------------------ ------------
Total 228.4
------------------------------------------ ------------
Net assets acquired 228.4
Goodwill (1) 518.8
------------------------------------------ ------------
Total net assets acquired 747.2
------------------------------------------ ------------
Consideration:
Cash 534.4
Contingent consideration 212.8
------------------------------------------ ------------
Total consideration 747.2
------------------------------------------ ------------
As part of the incorporation of Entain Holdings (CEE) Limited
and the acquisition of SuperSport, the Group recognised GBP174.3m
of non-controlling interest in Entain Holdings (CEE) Limited
representing the subscription of funds by the non-controlling
entity in Entain Holdings (CEE) Limited as their share of the cash
consideration and their contribution to the repayment of SuperSport
external debt.
The share purchase agreement provides the Group with the
opportunity to purchase (and the non-controlling interest to sell
(a put option)) the 25% of the share capital of Entain Holdings
(CEE) Limited currently owned by the non-controlling interest, from
22 November 2025.
Within the Group balance sheet as at 31 December 2022 is
EUR202.4m of net assets is associated with the non-controlling
interest in Entain Holdings (CEE) Limited.
Included in the valuation of goodwill is the value attributed to
acquired workforce, and the benefit of future trading potential
including synergies arising as part of the acquisition.
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. 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
SIA Klondaika, 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, including EUR1.6m in relation
to working capital on acquisition. Of the EUR24.6m consideration
EUR4.6m is deferred.
Totolotek
On 16 May, the Group acquired 100% of Totolotek S.A. (renamed to
bwin Poland 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, including EUR1.1m in relation of working
capital on acquisition.
Full House Group
On 16 September 2022, the Group acquired 33% of the share
capital of Full House Group Pty Limited ("FHG") in Australia for
AUD $4.0m. Whilst the group owns 33% of the issued equity, it
controls the board through its voting rights and therefore controls
FHG. In line with IFRS 3, as the group controls the acquired
entity, it is to be consolidated from the date of acquisition.
Given the acquisition of the 33% share reflected an open market
transaction, consideration for the purposes of IFRS 3 is deemed to
be AUD $12.0m.
M3
In July 2022, the Group purchased a small number of shops in
Italy via the acquisition of 100% of shares in Agenzia M3 S.r.l.
The acquisition enabled the Group to develop its franchisee network
in the Puglia region.
Details of the purchase consideration, the net assets acquired
and goodwill of all other business combinations are as follows:
Fair value
GBPm
---------------------------------------- -----------
Intangible assets (excluding goodwill) 101.3
Property, plant and equipment 7.2
Investments 4 .9
Trade and other receivables 6.0
Cash and cash equivalents 18.1
Deferred tax liability ( 2.2)
Trade and other payables (24.9)
Lease Liability (2.9)
Total 107.5
------------------------------------------ -----------
Net assets acquired 107.5
Goodwill (1) 103.5
------------------------------------------ -----------
Total net assets acquired 211.0
------------------------------------------ -----------
Consideration:
Cash 202.5
Non-controlling interests 4.6
Deferred consideration 3.9
------------------------------------------ -----------
Total consideration 211.0
------------------------------------------ -----------
1. Goodwill acquired on business combinations is not tax deductible.
All of the acquired businesses contributed revenues of GBP46.9m
and profit before tax of GBP13.9m.
Had the acquisitions occurred on the first day of the financial
year the revenue for the group would have been GBP4,497.9m with a
profit before tax of GBP189.0m.
Non-controlling interests have been stated at their fair value
on acquisition, which has been determined by reference to the
amount paid for the Group's controlling interest.
Included in the valuation of goodwill is the value attributed to
acquired workforce, and the benefit of future trading potential
including synergies arising as part of the acquisition.
12 Commitments and contingencies
Contingent liabilities
Guarantees have been given in the ordinary course of business in
respect of loans and derivative contracts granted to subsidiaries
amounting to GBP400.0m (31 December 2021: GBP500.0m).
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.
Greek tax
In November 2021, the Athens Administrative Court of Appeal
ruled in favour of the Group's appeal against the tax assessment
raised by the Greek tax authorities in respect of 2010 and 2011. In
February 2022, the Greek tax authorities appealed against the
judgements to the Greek Supreme Administrative Court. The case is
not expected to be heard before the Greek Supreme Administrative
Court before 2024. During the first half of 2022, the Group
received a EUR193m refund of the tax and interest paid. The Group
has a further receivable of EUR35m, which reflects interest due in
relation to this matter. While 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 could become liable for the full
2010-2011 assessment plus interest, an estimated total of EUR267m
at 31 December 2022.
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
2023. 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.
13 Related party disclosures
Other than its associates and joint venture, the related parties
of the Group are the executive directors, non-executive directors
and members of the Executive Committee of the Group.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Group and its
associates and joint venture and other related parties are
disclosed below.
During the year, Group companies entered into the following
transactions with related parties who are not members of the
Group:
2022 2021
GBPm GBPm
------------------- ------ ------
Equity investment
- Joint venture1 175.1 164.4
Sundry expenditure
- Associates 2 (55.5) (59.3)
------------------- ------ ------
1. Equity investment in BetMGM
2. Payments in the normal course of business made to Sports
Information Services (Holdings) Limited, bwin eK Neugersdorf, Gran
Casino Dinant SA, Infiniti Casino Oostende NV, and Leaderbet
NV.
Details of related party outstanding balances
2022 2021
GBPm GBPm
--------------------------- ----- -----
Other amounts outstanding
- Joint venture receivable 87.8 22.1
- Associates receivables 4.4 -
- Associates payables (0.3) (0.1)
--------------------------- ----- -----
Terms and conditions of transactions with related parties
Sales to, and purchases from, related parties are made at market
prices and in the ordinary course of business. Outstanding balances
at 31 December 2022 are unsecured and settlement occurs in cash.
For the year ended 31 December 2022, the Group has not raised any
provision (2021: GBPnil) for doubtful debts relating to amounts
owed by related parties as the payment history has been good. This
assessment is undertaken each financial year through examining the
financial position of the related party and the market in which the
related party operates.
Transactions with directors and key management personnel of the
Group
The remuneration of key management personnel is set out below in
aggregate for each of the categories specified in IAS 24 Related
Party Disclosures. Key management personnel comprise executive
directors and members of the Executive management team. Further
information about the remuneration of individual directors is
provided in the directors' remuneration report.
2022 2021
GBPm GBPm
---------------------------------------------------- ----- -----
Short-term employee benefits 7.9 9.7
P ension-related costs 0 .1 -
Share-based payments 7.6 5.2
---------------------------------------------------- ----- -----
Total compensation paid to key management personnel 15.6 14.9
---------------------------------------------------- ----- -----
Peter Isola, who was a non-executive director of Entain plc
until 21 March 2022, is a director of Europort (International)
Holdings Limited, a property firm in Gibraltar which charged rental
expenses of GBP0.5m to the Group during the year (2021:
GBP2.6m).
The consolidated financial statements include the financial
statements of Entain PLC and its subsidiaries. The companies listed
below are those which were part of the Group at 31 December and
therefore the results, cash flows and balance sheets of all
subsidiaries listed are consolidated into the Group financial
statements, furthermore the results of joint ventures and
associates are accounted for in accordance with the policy set out
in note 1.
14 Subsequent events
On 14 June 2022, the Group announced the acquisition of 100% of
the issued share capital of BetEnt B.V. which trades under the
BetCity.nl name for an initial EUR300m plus further contingent
amounts subject to future trading performance; these are capped at
EUR550m. On 12 January 2023, the Group completed on the
acquisition. The Group are yet to assess the accounting values to
be attributed to this acquisition.
On 11 January 2023, the Group completed the refinancing of the
EUR1,125m term loan B through the issuance of a new EUR800m loan
which matures in June 2028, priced at EURIBOR plus a margin of 375
bps, and a $375m loan which matures in October 2029, priced at SOFR
plus a credit adjustment spread of 10 bps plus margin of 350 bps.
The Euro loan was allocated at an originally issued discount of
97.5 with the USD loan allocated at an original issue discount of
98.75.
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END
FR SSIEFAEDSELD
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March 09, 2023 02:00 ET (07:00 GMT)
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