TIDMGVC
RNS Number : 6183A
GVC Holdings PLC
13 September 2018
13 September 2018
GVC Holdings PLC
("GVC" or the "Group")
Interim Results
GVC Holdings PLC (LSE: GVC), the multinational sports-betting
and gaming group, is pleased to announce its Interim Results for
the six months ended 30 June 2018.
Group Reported(1) Proforma(2)
Constant
Six months to 30 June 2018 2017 2018 2017 Change currency(3)
GBPm GBPm GBPm GBPm % %
-------- ------ -------- -------- ------- -------------
Net gaming revenue (NGR) 1,125.1 386.6 1,717.0 1,591.0 8% 8%
Revenue 1,105.9 374.8 1,694.3 1,572.8 8% 8%
Gross profit 763.2 272.4 1,163.4 1,098.2 6%
Underlying EBITDA(4) 235.0 100.7 349.5 314.1 11%
Underlying operating profit(5) 188.6 78.6 277.9 236.9 17%
Underlying profit before
tax(5) 162.1 64.4
Profit / (loss) after tax 113.8 (6.4)
Diluted EPS (p) 24.9 (2.1)
Adjusted diluted EPS(6)
(p) 32.2 24.7
Dividend per share (p) 16.0 14.6
-------------------------------- -------- ------ -------- -------- ------- -------------
Financial highlights (proforma basis(2) )
-- Proforma Group NGR up 8% at GBP1,717.0m
-- Proforma Group revenue up 8% at GBP1,694.3m
-- Proforma Group underlying EBITDA(4) up 11% at GBP349.5m
-- Proforma Group underlying operating profit(5) of GBP277.9m up 17%
-- Adjusted diluted EPS(6) of 32.2p up 30%
-- Interim dividend of 16.0p per share (H1 2017: 14.6p)
-- Adjusted net debt at 30 June 2018 of GBP1,887.0m (2.69x LTM underlying EBITDA)
Operational highlights (proforma basis(2) )
-- Good momentum in Online with market share gains in all key
territories; NGR up 18% (+20% in constant currency ("cc")(3) );
Sports brands +19% (+21% cc(3) ) and Games brands +13% (+15% cc(3)
)
-- UK Retail like-for-like(7) NGR -3%; a good World Cup helping
offset the impact of poor weather in first half
-- European Retail NGR +29% (+26% cc(3) ) with strong growth in Italy
-- Positive World Cup tournament driven by both gross win margin and volumes
-- Completed the acquisition of the Ladbrokes Coral Group on 28
March; Capex synergies of at least GBP30m now identified.
Integration progressing well and on target to achieve at least
GBP130m cost synergies by 2021.
Update and Current Trading(2) (Q3 for period 1 July 2018 to 2
September 2018)
-- Established a 50/50 joint venture with MGM Resorts to create
a leading sports-betting and online gaming platform in the U.S.
-- Strong current trading: Group proforma NGR +14% with strong
growth in Online (NGR +30%) and European Retail (NGR +26%)
-- Product development and marketing driving continued market share gains
Kenneth Alexander (CEO) said:
"The performance of the GVC Group in the first half has been
extremely pleasing in what has been a very busy period. Strong
momentum in Online and European Retail has continued, and a
positive World Cup helped improve trends in UK Retail in the second
quarter. The acquisition of Ladbrokes Coral completed on 28 March
and the integration of that business is progressing well. We have
now identified capex synergies of at least GBP30m in addition to
the GBP130m cost synergies and we are well placed to deliver those
savings while driving top line growth. We are gaining market share
in all our key markets and we will look to reinvest to further
strengthen our market position.
The repeal of PASPA by the U.S. Supreme Court in May provides a
significant new market opportunity and we are delighted to have
announced a joint venture with MGM Resorts to provide
sports-betting and online gaming services in the US. The
combination of MGM's leading brands together with GVC's proprietary
technology, and both businesses' combined betting and gaming
expertise, puts the Group in the best possible position to benefit
from what could become the world's largest regulated sports-betting
market.
Our strategy to build scale and diversification through organic
growth and acquisition is more relevant today than ever. Gaming
regulation continues to evolve globally creating both opportunities
and challenges, with barriers to entry rising all the time. Against
this backdrop, GVC is well positioned to continue to create further
shareholder value. We also recognise the importance of corporate
social responsibility and in particular that actions speak louder
than words. Over the coming months we will announce a number of new
initiatives across all areas of CSR.
We have announced an interim dividend of 16 pence, 10 per cent
ahead of last year, and the positive performance of the Group in
the first half means that we are confident of delivering a full
year result in-line with the Board's expectations."
Notes
(1) 2018 and 2017 reported results are unaudited and reflect the
acquisition of the Ladbrokes Coral Group plc on 28 March 2018
(2) The Group's proforma results are unaudited and presented as
if the current Group, post the acquisition of Ladbrokes Coral Group
plc, had existed since 1 Jan 2017. As such, it excludes the results
of the Turkish business which was discontinued during 2017 and the
360 shops that the Ladbrokes Coral Group plc was required to divest
on the merger of Ladbrokes PLC and the Coral Group. The results of
Crystalbet are included from the date of acquisition (11 April
2018) and the results of Kalixa are excluded from the date of
disposal (31 May 2017)
(3) Growth on a constant currency basis is calculated by
translating both current and prior year performance at the 2018
exchange rates
(4) Stated pre separately disclosed items and shared based payments
(5) Stated pre separately disclosed items
(6) Adjusted for the impact of separately disclosed items,
foreign exchange movements on financial indebtedness and gains on
derivative financial instruments (see note 7 in the interim
financial statements)
(7) UK Retail numbers are quoted on a LFL basis. During H1 there
was an average of 3,563 shops in the estate, compared to an average
of 3,663 in the same period last year
Presentation and live webcast
An analyst presentation will be held at 9:30am (BST) at Deutsche
Bank, Winchester House, 1 Great Winchester St, London EC2N 2DB.
The presentation will be webcast live and will be available via
the following link:
https://edge.media-server.com/m6/p/brci2i6u
Replays will be available on the GVC website.
Enquiries:
GVC Holdings PLC
Kenneth Alexander, Chief Executive Officer
Paul Bowtell, Chief Financial Officer
Nick Batram, Director of Investor Relations & External Communications
Paul Tymms, Head of Investor Relations (investors@gvc-plc.com)
Media enquiries:
Buchanan Communications
David Rydell/Henry Harrison-Topham/Chris Lane Tel: +44 (0) 20 7466 5066
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,
our results of operations, financial condition, liquidity,
prospects, growth, strategies and the business we operate. By their
nature, these statements involve uncertainty since future events
and circumstances can cause results and developments to differ
materially from those anticipated. The forward-looking statements
reflect knowledge and information available at the date of
preparation of this document and, unless otherwise required by
applicable law, the Company undertakes no obligation to update or
revise these 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 GVC Holdings PLC
GVC Holdings PLC 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 bwin, Coral, Crystalbet, Eurobet, Ladbrokes
and Sportingbet; Gaming Brands include CasinoClub, Foxy Bingo,
Gala, Gioco Digitale, partypoker and PartyCasino. The Group owns
proprietary technology across all of its core product verticals and
in addition to its B2C operations provides services to a number of
third-party customers on a B2B basis. GVC acquired Ladbrokes Coral
Group plc on 28 March 2018 and is now the UK's largest high street
bookmaker, with over 3,500 betting shops. The Group, incorporated
in the Isle of Man, is a constituent of the FTSE 100 index and has
licences in more than 20 countries, across 5 continents.
For more information see the Group's website:
www.gvc-plc.com
LEI: 213800GNI3K45LQR8L28
CHIEF EXECUTIVE'S REVIEW
Overview
The Group made significant progress in the first six months of
the year. The acquisition of the Ladbrokes Coral Group was
completed on the 28 March 2018, and the enlarged Group was
subsequently admitted to the FTSE 100 index on 16 June 2018. A
ground-breaking joint venture with MGM Resorts was announced in
July, which leaves the Group very well placed to take advantage of
current and future regulation and liberalisation of the US
sports-betting market. We also acquired a controlling interest in
Crystalbet, one of Georgia's leading online gaming companies. The
main sporting event during the period was the World Cup, which was
a good tournament for the Group as a whole with volumes, margins
and the value of first time deposits all ahead of expectations.
The Group's financial performance in the period was very
pleasing. Looking at the business on a proforma basis and before
separately disclosed items, NGR was 8% ahead and underlying EBITDA
11% ahead at GBP349.5m. Meanwhile, underlying operating profit
increased 17% to GBP277.9m, with underlying reported profit before
tax 152% higher at GBP162.1m. Adjusted fully diluted EPS grew by
30% to 32.2p and an interim dividend of 16.0p per share was
declared, an increase of 1.4p on the previous year. Our intention
is to pay dividends on a 50:50 (H1:H2) basis. As at 30 June 2018,
adjusted net debt was GBP1,887.0m, reflecting leverage of 2.69x the
last twelve months underlying EBITDA.
Online NGR grew strongly and was 18% ahead of last year and 20%
ahead on a constant currency basis. Momentum continued in the
legacy GVC brands with NGR up 22%, and 25% on a constant currency
basis, supported by new product launches and the World Cup.
Partypoker continues to take market share, while the newly acquired
Crystalbet business delivered very strong growth post its
acquisition in April. The Ladbrokes Coral online brands also
performed well, with NGR +14% (+15% constant currency). There were
many positives in the first half with Ladbrokes.com.au in Australia
and Eurobet.it in Italy continuing to gain market share,
Coral.co.uk also performed ahead of key peers and Ladbrokes.com
showed strong NGR growth in Q2 with NGR 21% ahead. In markets where
we see an opportunity to continue to grow market share we will look
to reinvest excess returns into accelerating growth.
UK Retail business growth was in-line with our expectations,
with like-for-like NGR 3% down. The positive tailwind from the
World Cup was partly offset by the very cold weather in Q1 and also
a Triennial Review "hangover" as the negative coverage of FOBTs
that dominated the UK press and news outlets undoubtedly fed its
way into customers' spending on Machines. Now that a final
Triennial Review decision has been made, the business can look
forward with certainty and ensure that we are able to quickly
transition to a smaller more sustainable estate post the
implementation of the GBP2 B2 stake limit. In the meantime, the
rollout of next generation FOBTs, trials of in-house SSBTs and the
EPOS2 shop till system will help support both the top and bottom
line.
European Retail NGR was up 29%, primarily driven by continuing
good growth in Eurobet Retail, albeit helped by the soft margins in
the prior period. Our Italian retail estate of over 830 units, and
our long-established multi-channel expertise of acquiring online
customers through our retail estate in that market, will prove to
be a significant advantage over online-only operators following the
marketing and promotions restrictions implemented by the new
Italian government. We have moved quickly to secure key marketing
contracts ahead of the implementation of the full ban in July
2019.
The integration of the Ladbrokes Coral business is well
underway. Detailed synergy delivery plans are finalised in key
areas, with new top-level organisation structures already in place.
The high quality of our people coupled with the speed at which we
implemented new structures meant that we were able to continue to
drive growth whilst at the same time commence integration. We
therefore remain very confident in our integration timetable and
synergy targets. Crucially, we will always strive to ensure that
integration doesn't come at the expense of product development or
business-as-usual operations. Our ongoing commitment to new product
delivery is demonstrated by a range of new features on our Sports
brands, including increased options on the build-a-bet offering,
continued improvements to user experience and real-time CRM, as
well as the launch of new gaming content across all gaming brands.
The performance of the business since acquisition reflects the ever
growing importance of continued product development.
Discussions with Playtech regarding the development of our
existing relationship are progressing well. We believe there is an
opportunity for both parties to benefit; the Group from additional
flexibility to realise operational synergies by consolidating its
IT infrastructure and for Playtech to provide product and content
in markets where they don't currently support GVC.
Strategically we are now in a very good position to continue to
grow the business both in existing and new markets. Scale,
geographic diversification, a portfolio of leading brands and
end-to-end proprietary technology are all enablers of growth, as
evidenced by the joint venture announced with MGM Resorts, which we
believe positions us very well in the race for sustainable market
share in the newly regulating US sports-betting market. The joint
venture will utilise GVC's leading technology and online
sports-betting expertise alongside the MGM brands, and through
market access agreements, we expect to gain access to all key
states as regulation develops.
The Group continues to evaluate a number of new geographic
markets through either organic entry or via acquisition. One of the
key strengths of GVC is the experience we have across diverse
international markets and we expect to enter a number of new
territories over the coming 12 months.
As the Group evolves it is important that the Board evolves too,
reflecting the growing scale and internationalisation of the
business. In June we announced the appointment of Virginia McDowell
as an independent non-executive director. Virginia brings
exceptional industry experience, having worked in the US gaming
market for 35 years. Virginia is also Chair of the newly created
Corporate Social Responsibility Committee, with her experience as
Vice Chairperson of Global Gaming Women, a non-profit organisation
with a mission to inspire and influence the development of women in
the gaming industry, a major asset for the Group. We have also
announced today the appointment of Pierre Bouchut to the Board as
an independent non-executive director. Pierre has significant
experience in senior finance and operational roles at a number of
multinational businesses including CFO at Delhaize and Carrefour.
He is currently a non-executive director and chairman of the audit
committee at Hammerson plc and Firmenich SA, and with immediate
effect will succeed Stephen Morana as chairman of GVC's Audit
Committee. Finally, we would like to thank Will Whitehorn who
stepped down as non-executive director in June.
Corporate Social Responsibility (CSR)
The past 10 years has seen GVC become one of the world's leading
gaming companies. In 2007, the Group had less than 40 employees,
compared to over 28,000 today. With this growth in scale comes
increased corporate social responsibility, to our employees, our
customers and the communities in which we operate. It is important
that companies such as GVC take the lead and work positively with
regulators and government to ensure a safe environment.
Following the acquisition of Ladbrokes Coral we established the
Corporate Social Responsibility Committee, a Board level group that
is led by Virginia McDowell. This will have full oversight across
all areas of CSR within the business. We have also appointed a Head
of CSR who is responsible for the co-ordination of CSR with all key
stakeholders across the Group. The formulation of a new
comprehensive CSR strategy is in progress and over the coming
months we will be announcing a number of major new initiatives
across all key areas of the business.
Responsible gaming: We are continuing to actively work on
numerous positive projects being undertaken by the relevant
industry bodies and regulators, as well as engaging closely with
our peers. However, we also recognise the unique position we hold
in the industry and believe that by taking a positive lead others
will be encouraged to follow. We already contribute 0.1% of UK GGR
to responsible gaming initiatives but will go materially beyond
this going forward. Investment in technology, training and
education to aid prevention is a key area of investment. As an
example the new EPOS system being rolled-out across the UK retail
estate will have the most advanced responsible gaming tools in the
industry when fully up and running. In the US, GVC is to become a
Platinum Member of the National Council on Problem Gambling and are
providing funding for a proposed National Survey of Gambling in
America.
Corporate culture: GVC would not have achieved the success it
has to date without the hard work and dedication of our employees.
The creation of an entrepreneurial culture where all have the
opportunity to succeed is at the core of the Group. A number of key
new initiatives will further build upon the positive environment we
cultivate:
-- Improving Gender Diversity: A new programme aimed at
supporting the progression of our female leaders "Horizon - Women
in Leadership" has been established to encourage and support the
progression of the many thousands of talented women working at
GVC.
-- Improved recruiting and selection processes adopted to remove
any potential for selection bias.
-- GDPR: Training rolled out to all employees to ensure
compliance with treatment of employee and customer data.
-- Health & Safety: A dedicated Safety Management Centre has
been established for the UK Retail estate, along with a number of
other safety and security improvements.
There is rightly much commentary concerning the economic
footprint of large companies who operate in the UK. Based on the
2017 PWC Total Tax Contribution Survey, the Group was a top 25 tax
contributor to the UK Government.
Communities: The Group and its employees play an active role in
the many communities in which we operate. One such example is the
Ladbrokes Coral Trust, which has donated more than GBP8m to nearly
1,000 local charities/good causes since it was created. Although,
the recent triennial review will have a negative impact on the
quantum of monies raised and donated by the charity, it will remain
an important part of our communities programme. Within the UK
Retail estate we also teamed up with the Bobby Moore Trust,
contributing GBP100,000 following a fund raising campaign in our
shops during the World Cup. The positive role our colleagues play
in their local communities is often overlooked, be we are proud of
the contribution they make.
As part of the CSR strategy we are looking at how and whom we
work with in terms of the communities in which we operate. The
cornerstones of the new strategy will be greater coordination,
focus and most importantly funding.
Regulatory Update
In the UK, the Government announced its final Triennial Review
decision, reducing maximum B2 stakes to GBP2 per spin. We estimate
that this will result in the closure of around1,000 Ladbrokes Coral
shops. We await a decision from the Government on an implementation
date, but we expect enactment of the new legislation to be complete
by the end of the calendar year.
The newly formed Italian Government has implemented wide-ranging
restrictions on betting and gaming promotions and advertising. All
forms of direct marketing and sponsorship will be prohibited when
the ban comes into full effect in mid-2019. The benefit of running
an 836-strong retail estate in Italy in this environment will be
significant, as in- store recruitment of customers becomes the only
viable way of attracting customers online.
In Spain, online duty was reduced from 25% to 20% on 1 July 2018
while in Sweden licences for online sports and betting are expected
to be issued at the start of 2019, a process that GVC has entered
into.
All of the Australian states have now confirmed online point of
consumption tax (POCT) rates and implementation dates. The majority
of states will implement the new tax on 1 January 2019, with the
exceptions being Queensland (1 October 2018) and South Australia
(already implemented; started on 1 July 2017). The blended rate
impact for the Group is c11.5% of gross gaming revenue.
There has been no material update on the German regulatory
position since the Group's 2017 full year results announcement; a
number of states are still pushing for some form of gaming
regulation, and a working party of state representatives is due to
meet later in the year to consider options.
During the prior year, the Group received a tax audit assessment
from the Greek Audit Centre for Large Enterprises in respect of
2010 and 2011 (the "Assessment"). During this period the business
was owned by Sportingbet plc, prior to its acquisition by GVC in
2013. The total amount of the Assessment is EUR186.77m,
substantially higher than total Greek revenues generated by the
subsidiary during the relevant periods. Whilst the directors, based
on tax and legal advice received, believe that there are strong
grounds for appeal, on 28 February 2018 , in order to enable the
Group's subsidiary to continue to trade normally, the Group entered
into a payment scheme where payments are held on account by the
relevant authority. As at 30 June, GBP46.6m has been paid by the
Group under this arrangement. Whilst there have been very few
developments on this matter since entering into the payment scheme,
the Directors continue to be of the view that, based on legal and
tax advice received, the Group has strong grounds for appeal and it
is not probable that a liability will arise. As such, following the
resolution of this matter, the Directors believe that the Group
will recover the amounts paid through either a repayment or
deduction from future tax liabilities.
Separately, the Greek Ministry of Finance has recently announced
proposals to introduce a permanent online licensing scheme, to
replace the interim licensing regime. The proposals, which include
a license fee of EUR4m for sports betting and EUR1m for online
games, will be subject to a public consultation in October and
subsequently notified to the European Commission. The Group
welcomes the move to a permanent licensing scheme.
In the US, several states have introduced or authorised
legislation expanding sports-betting post the repeal of PASPA.
Delaware, New Jersey and Mississippi have already introduced or
expanded sports-betting options.
Following the result of a national referendum in Switzerland,
legislation to restrict foreign operators from participating
directly in the online gaming market cleared a key hurdle. The
implementation of the legislation has yet to be confirmed and
potential legal challenges remain. The proposed effective date is 1
January 2019 and if implemented, casino and poker operators would
have to partner with a land based casino in order to continue
offering online services. The Group is currently in discussions
with a land-based casino to provide such services. Only the two
national lottery operators will be permitted to offer online
sports-betting, and as such, if the legislation is implemented in
its current form, the Group will have to cease offering all
sports-betting into Switzerland. Switzerland sports-betting
represents less than 1% of total Group NGR.
Current trading and outlook
Trading in the period 1 July 2018 to 2 September was strong.
Group NGR was 14% ahead helped by the final two weeks of the World
Cup.
Online NGR was 30% ahead (27% ahead excluding Crystalbet) with
Sports brands NGR 34% ahead, driven by particularly strong growth
in the legacy GVC brands (NGR 52% ahead; 42% ahead excluding
Crystalbet) and in the UK where Coral.co.uk grew NGR by 28% and
Ladbrokes.com by 19%. Sports brands sports gross win margin was
0.7pp ahead and sports wagering was 22% ahead. Games brands NGR was
17% ahead. European Retail NGR was 26% ahead and UK Retail
like-for-like NGR was 4% behind.
Whilst the prior year comparatives get increasingly tough, with
Q4 2017 being a record quarter for the Group due to exceptional
sports gross win margins, our target of double digit annual online
NGR growth remains on track and we expect to deliver EBITDA and
operating profit in-line with the Board's expectations.
Financial Results (unaudited) and the use of Non-GAAP
measures
The reported statutory results for H1 2018 reflect the
acquisition of Ladbrokes Coral Group which took place at the close
of business on 28 March 2018 and therefore include the results of
the Ladbrokes Coral Group from that date only. As such, H1 2017
reflects the trading for GVC Holdings PLC only as this was prior to
acquisition of the Ladbrokes Coral Group.
In order to aid the comparison of year-on-year results, the
Directors have deemed it appropriate to provide and analyse
proforma results for the combined Group as if it had existed from 1
Jan 2017. Given the changes in capital structure arising from the
acquisition of the Ladbrokes Coral Group, the historical interest,
tax and dividend charges are not deemed to be meaningful. As a
result, proforma results have only been provided down to operating
profit.
Proforma results exclude the results of the Turkish business
which was discontinued during 2017 and the 360 shops that the
Ladbrokes Coral Group was required to divest on the merger of
Ladbrokes and Coral.
As a result of IFRS 3 requirements to fair value acquired
businesses, proforma depreciation and amortisation charges in H1
2018 may not be comparable with those arising post the acquisition.
Therefore, the Directors believe that the provision of EBITDA
within the proforma and segmental information, is appropriate as it
aids the comparability of "underlying" profit whilst the IFRS 3
impact on depreciation and amortisation annualises.
The tables below reconcile the reported results to the proforma
information for H1 2018 and H1 2017, the latter of which was
previously reported in Euros rather than the Group's new reporting
currency which is GBP.
2018 H1 results Reported Ladbrokes Proforma
underlying Coral trading results
results(1) pre acquisition(2) (unaudited)
------------------------- ------------ -------------------- -------------
Net gaming revenue 1,125.1 591.9 1,717.0
---------------------------- ------------ -------------------- -------------
Revenue 1,105.9 588.4 1,694.3
---------------------------- ------------ -------------------- -------------
Gross profit 763.2 400.2 1,163.4
---------------------------- ------------ -------------------- -------------
Contribution 582.0 341.0 923.0
---------------------------- ------------ -------------------- -------------
Underlying EBITDA 235.0 114.5 349.5
Share based payments (5.0) (1.0) (6.0)
Underlying depreciation
& amortisation (42.1) (24.0) (66.1)
Share of JV income 0.7 (0.2) 0.5
---------------------------- ------------ -------------------- -------------
Underlying group
operating profit 188.6 89.3 277.9
---------------------------- ------------ -------------------- -------------
2017 H1 reported Previously Previously Reclass Restated Ladbrokes Proforma
results reported reported of Turkish reported Coral trading results
results results business results(5) pre acquisition(6) (unaudited)
in EUR(3) in GBP to discontinued
(4)
---------------------- ----------- ----------- ----------------- ------------ -------------------- -------------
Net gaming revenue 486.2 428.5 (41.9) 386.6 1,204.4 1,591.0
---------------------- ----------- ----------- ----------------- ------------ -------------------- -------------
Revenue 472.8 416.7 (41.9) 374.8 1,198.0 1,572.8
---------------------- ----------- ----------- ----------------- ------------ -------------------- -------------
Gross profit 339.6 299.3 (26.9) 272.4 825.8 1,098.2
---------------------- ----------- ----------- ----------------- ------------ -------------------- -------------
Contribution 240.8 212.3 (20.6) 191.7 717.2 908.9
---------------------- ----------- ----------- ----------------- ------------ -------------------- -------------
Underlying EBITDA 133.9 118.1 (17.4) 100.7 213.4 314.1
Share based payments (10.5) (9.2) 0.1 (9.1) (2.4) (11.5)
Underlying
depreciation
& amortisation(7) (14.6) (13.1) 0.1 (13.0) (54.6) (67.6)
Share of JV income - - - - 1.9 1.9
Underlying group
operating profit 108.8 95.8 (17.2) 78.6 158.3 `236.9
---------------------- ----------- ----------- ----------------- ------------ -------------------- -------------
Notes
(1) Excludes the impact of separately disclosed items
(2) Represents the trading results for the Ladbrokes Coral Group
plc for the period 1 January 2018 to 28 March 2018 pre separately
disclosed items
(3) Includes a gross profit figure not previously reported
(4) Translated at a rate of GBP1.00:EUR1.13
(5) Excludes the results of the Turkish business included in the
2017 reported figures but now classified as discontinued
(6) Represents the trading results for the Ladbrokes Coral Group
plc for the period 1 January 2017 to 30 June 2017 pre separately
disclosed items and excluding the 360 shops that the Ladbrokes
Coral Group was required to sell as part of the merger of Ladbrokes
PLC and the Coral Group.
(7) Depreciation and amortisation previously reported included
amortisation of acquired intangibles of EUR59.5m which are now
classified separately within the income statement
BUSINESS REVIEW
The Group operates through five segments; Online, UK Retail,
European Retail, Other and Corporate.
Group
Reported results(1) Proforma results(2)
Six months to 30 June Constant
2018 2017 Change 2018 2017 Change currency(3)
GBPm GBPm % GBPm GBPm % %
--------- ------- ------- --------- --------- -------- -------------
NGR 1,125.1) 386.6) 191%) 1,717.0) 1,591.0) 8%) 8%)
VAT/GST (19.2) (11.8) (63%) (22.7) (18.2) (25%) (30%)
--------- ------- ------- --------- --------- -------- -------------
Revenue 1,105.9) 374.8) 195%) 1,694.3) 1,572.8) 8%) 8%)
Gross profit 763.2) 272.4) 180%) 1,163.4) 1,098.2) 6%)
Contribution 582.0) 191.7) 204%) 923.0) 908.9) 2%)
Contribution margin 51.7% 49.6% 2.1pp) 53.8% 57.1%) (3.3pp)
Underlying EBITDA(4) 235.0) 100.7) 133%) 349.5) 314.1) 11%)
Share based payments (5.0) (9.1) 45%) (6.0) (11.5) 48%)
Underlying depreciation
and amortisation (42.1) (13.0) (224%) (66.1) (67.6) 2%)
Share of JV income 0.7) -) - 0.5) 1.9) (74%)
Underlying operating
profit(5) 188.6) 78.6) 140%) 277.9) 236.9) 17%)
------------------------- --------- ------- --------- --------- --------
Reported Results(1) :
Revenue increased by 195% to GBP1,105.9m and underlying
EBITDA(4) increased by 133% to GBP235.0m. This growth reflects both
the continued growth in the legacy GVC business and the impact of
the three months of trading for the Ladbrokes Coral business post
acquisition. Underlying operating profit of GBP188.6m was 140%
ahead of last year and operating profit post separately disclosed
items of GBP140.1m was GBP148.7m ahead of 2017.
Proforma Results(2) :
Group revenue increased 8% for the six months to 30 June 2018,
predominantly driven by Online and European Retail. During the
period, the World Cup contributed GBP35.2m of NGR pre-substitution
(total of GBP64.1m for the whole tournament), with 65% of the
marketing spend falling in H1. Front-ended World Cup marketing
spend, higher UK POCT, geographic mix and the disposal of Kalixa,
resulted in a contribution margin of 53.8% vs 57.1% for the same
period in 2017.
The benefits of synergies from the Ladbrokes Coral merger and to
a lesser extent the remaining synergies from the bwin.party
acquisition, helped underlying EBITDA(4) to improve 11% to
GBP349.5m. Meanwhile, underlying operating profit(5) increased 17%
to GBP277.9m, with lower share based payments, GBP6.0m (H1 2017:
GBP11.5m) being a factor. As a consequence, the Group's proforma
operating margin improved to 16.4% (H1 2017: 15.1%).
Online
Reported results(1) Proforma results(2)
Six months to 30 June Constant
2018 2017 Change 2018 2017 Change currency(3)
GBPm GBPm % GBPm GBPm % %
--------- --------- -------- --------- --------- -------- -------------
Sports wagers
Sports brands 3,477.0) 1,700.4) 104%) 4,875.4) 4,503.1) 8%) 10%)
Games brands 30.2) 30.7) (2%) 30.2) 30.7) (2%) 1%)
--------- --------- -------- --------- --------- -------- -------------
Total Sports wagers 3,507.2) 1,731.1) 103%) 4,905.6) 4,533.8) 8%) 10%)
Sports margin
Sports brands 10.6%) 9.5%) 1.1pp) 10.4%) 9.2%) 1.2pp) 1.2pp)
Games brands 9.9%) 6.8%) 3.1pp) 9.9%) 6.8%) 3.1pp) 3.1pp)
Sports brands NGR
Sports NGR 286.3) 128.4) 123%) 390.4) 315.5) 24%) 27%)
Games NGR 251.2) 142.6) 76%) 322.8) 283.2) 14%) 15%)
--------- --------- -------- --------- --------- -------- -------------
537.5) 271.0) 98%) 713.2) 598.7) 19%) 21%)
Games brands NGR
Sports NGR 2.7) 1.7) 59%) 2.7) 1.7) 59%) 68%)
Games NGR 140.9) 97.4) 45%) 166.9) 148.9) 12%) 14%)
--------- --------- -------- --------- --------- -------- -------------
143.6) 99.1) 45%) 169.6) 150.6) 13%) 15%)
B2B NGR 11.9) 6.7) 78%) 12.6) 9.4) 34%) 38%)
--------- --------- -------- --------- --------- -------- -------------
Total NGR 693.0) 376.8) 84%) 895.4) 758.7) 18%) 20%)
VAT/GST (19.2) (11.8) (63%) (22.7) (18.2) (25%) (30%)
--------- --------- -------- --------- --------- -------- -------------
Revenue 673.8) 365.0) 85%) 872.7) 740.5) 18%) 20%)
Gross profit 467.0) 271.3 72% 597.1 518.7 15%)
Contribution 290.6) 192.0) 51%) 364.2) 339.2) 7%)
Contribution margin 41.9%) 51.0%) (9.1pp) 40.7%) 44.7%) (4.0pp)
Underlying EBITDA(4) 168.6) 113.1) 49%) 210.9) 187.7) 12%)
Share based payments (1.7) (3.2) (47%) (2.1) (4.0) (48%)
Underlying depreciation
and amortisation (26.7) (13.0) (105%) (38.2) (33.7) (13%)
Share of JV income -) -) -) (0.3) (0.4) 25%)
Underlying operating
profit(5) 140.2) 96.9) 45%) 170.3) 149.6) 14%)
------------------------- --------- --------- --------- --------- --------
Reported Results(1) :
On a reported basis, revenue of GBP673.8m was GBP308.8m ahead of
last year and underlying EBITDA(4) of GBP168.6m was 49% ahead
reflecting continued growth in the legacy GVC business and the
reporting period containing three months of trading of Ladbrokes
Coral Group plc post acquisition. Underlying operating profit(5) of
GBP140.2m was 45% ahead of 2017, and operating profit post
separately disclosed items of GBP20.5m was GBP23.3m behind.
Proforma Results(2) :
Online growth was strong with NGR 18% ahead (cc +20%) driven by
good underlying growth in all material markets and also by a
positive World Cup. During the period marketing spend represented
26.0% of NGR (23.7% in H1 2017), largely reflecting the World Cup
(first half weighted) as well as continued investment in
partypoker. The contribution margin declined to 40.7% (44.7% H1
2017) due to a number of factors including front ended World Cup
marketing, the disposal of Kalixa (May 2017), UK POCT on gaming
free bets and geographic mix. We expect marketing spend as a
percentage of NGR to be lower in H2, however, where we see
opportunities to accelerate market share gains through targeted
investment we will do so. Underlying EBITDA(4) of GBP210.9m was 12%
ahead of last year and underlying operating profit(5) of GBP170.3m
was 14% ahead. Operating costs were 1% higher than last year
reflecting the growth in the business, increased regulatory and
compliance costs in the UK and also the inclusion of Crystalbet
costs, all partly offset by the delivery of synergies from the
Ladbrokes Coral merger.
Sports brands NGR was 19% ahead (cc +21%), with the legacy GVC
brands 23% ahead (cc +26%), continuing the momentum shown
throughout 2017. The bwin brand continued to benefit from high
profile marketing campaigns including the "Who stole the Cup" World
Cup campaign, featuring Diego Maradona, that ran across TV and
online platforms, helping drive the legacy GVC sports brands sports
NGR 27% ahead, while gaming NGR was 20% ahead. The acquired
Ladbrokes Coral sports brands NGR was 16% ahead (cc +17%).
Australia is a core market for the Group and with Ladbrokes.com.au
NGR increasing 24% (cc +31%) during the period, the business
continues to take share from competitors. Importantly, the scale of
the business means it will continue to be profitable after the full
implementation of POCT at the start of 2019 (Queensland 1/10/18).
Eurobet.it NGR was 36% ahead (cc +32%) with strong growth across
sports and gaming. In the UK, Coral.co.uk NGR grew ahead of the
market, with NGR 12% ahead, helped by innovative new products
including a range of build-a-bet player markets. Ladbrokes.com
returned to growth (NGR+7%) following corrective action taken by
management in 2017. Most encouragingly, Ladbrokes performance
accelerated materially in Q2, significantly ahead of the market.
Whilst it is only one quarter we take some confidence that the
Ladbrokes brand is finally becoming more relevant again in the UK
online market after years of underperformance. Meanwhile, the
acquisition of 51% of Crystalbet was completed on 11 April 2018 and
the performance of the business since acquisition has been very
strong. Within two months of acquisition we provided Crystalbet
customers with access to over 300 additional casino games, the most
comprehensive offering in the Georgian market.
Games brands NGR was 13% ahead, with partypoker.com NGR 36%
ahead driven in part by a very successful live events programme and
despite the impact of the withdrawal from Australia in 2017. In
June we launched shared liquidity across France and Spain. Ahead of
shared liquidity and post its implementation, France and Spain have
been amongst our fastest growing markets. Galabingo.com grew NGR by
5% in H1, a solid performance in a competitive market. New
products, together with greater personalisation were introduced
during the period, with further enhancements to come through in H2.
The legacy GVC casino brands also delivered 12% growth during the
first six months.
Outlook:
The positive momentum in the business leaves us well placed to
deliver our target of double-digit annual top line growth from
Online. This will not be straight-forward given the competitive and
slower growth of the UK market versus many of the international
markets we operate in. However, we still have many of the benefits
from the Ladbrokes Coral integration to harvest and the performance
of the business places us in a strong position. Furthermore, in
markets where we are taking share we will invest excess returns to
further strengthen our competitive position.
UK Retail
Reported results(1) Proforma results(2)
Six months to 30 June Constant
2018 2017 Change 2018 2017 Change currency(3)
GBPm GBPm % GBPm GBPm % %
-------- ----- ------- --------- --------- -------- -------------
OTC wagers 850.6) - - 1,562.9) 1,702.9) (8%) n/a
OTC margin 17.5%) - - 17.9%) 17.9%) 0.0pp) n/a
Sports NGR/Revenue 147.5) - - 277.1) 299.7) (8%) n/a
Machines NGR/Revenue 204.0) - - 387.5) 397.5) (3%) n/a
-------- ----- ------- --------- --------- -------- -------------
Total NGR/Revenue 351.5) - - 664.6) 697.2) (5%) n/a
Gross profit 250.4) - - 476.9) 507.7) (6%)
Contribution 249.2) - - 474.4) 501.9) (5%)
Contribution margin 70.9%) - - 71.4%) 72.0%) (0.6pp)
Underlying EBITDA(4) 67.5) - - 125.8) 131.0) (4%)
Share based payments (0.2) - - (0.4) (0.7) 43%)
Underlying depreciation
and amortisation (10.7) - - (18.5) (27.6) 33%)
Share of JV income -) - - -) -) -)
Underlying operating
profit(5) 56.6) - - 106.9) 102.7) 4%)
------------------------- -------- ----- --------- --------- --------
Reported Results(1) :
On a reported basis, revenue was GBP351.5m and underlying
EBITDA(4) was GBP67.5m reflecting the results for the three months
of trading of Ladbrokes Coral Group plc post acquisition.
Underlying operating profit(5) was GBP56.6m, and GBP41.6m after
charging separately disclosed items.
Proforma Results(2) :
UK Retail NGR of GBP664.6m was 5% behind last year and 3% on a
like-for-like(6) basis. Underlying EBITDA(4) of GBP125.8m was 4%
behind and underlying operating profit(5) of GBP106.9m was 4%
ahead.
OTC wagers were 8% behind, but after adjusting for the impact of
shop closures and poor weather in Q1, and the positive impact of
having full live coverage of UK racing in the period this year, as
well as the World Cup, OTC wagering trends were 6% behind, broadly
in-line with the longer term average. SSBT stakes continue to grow
and were 14% ahead. In-house developed SSBTs were successfully
introduced at the start of the year and were being successfully
trialled in eight shops at the end of the period.
OTC gross win margin was flat year-on-year. Football gross win
margins were 2.0pp ahead of last year helped by a good World Cup,
while horse racing margin was broadly in line, with a positive
Cheltenham offset by Tiger Roll winning the Grand National, which
at the off was the worst result in the book.
Machines NGR was 3% behind last year and 1% behind on a
like-for-like(6) basis. After adjusting for the adverse impact of
reduced shop opening hours (an EBITDA positive action) and the poor
weather in Q1, machines NGR was broadly flat. Machines stakes were
undoubtedly impacted by the negative coverage of FOBTs leading up
to and after the announcement of the final Triennial Review
findings. During the period, the Group announced a new seven-year
deal with Scientific Games for the provision of next generation
FOBTS, the first part of which will be the roll out of new Equinox
terminals across the estate this year. An initial trial of these
new units in 100 shops demonstrated encouraging returns.
Multi-channel sign-ups remain a key part of the UK Retail
offering, delivering high value and loyal customers to the online
UK brands at minimum cost. During the period there were 184k new
multichannel sign-ups.
Contribution margin of 71.4% was 0.6pp lower than last year
reflecting the higher machines mix and the recognition of media rev
share costs in cost of sales. Operating costs were 6% lower
primarily driven by the synergies arising from the Ladbrokes Coral
merger and shop closures. At the end of the period there were 3,562
shops in the estate (2017:3,660).
Outlook:
The final Triennial Review decision will allow the business to
start planning for the transition to a smaller estate and a project
team has already been established to ensure that the shop closure
programme is optimised, central cost savings are identified and
that the impact on business-as-usual trading is minimised.
Alongside the new FOBT rollout, the implementation of the new shop
till system "EPOS2" will be completed in 2019. These initiatives
will help support revenue while continued tight cost control and
the delivery of the final Ladbrokes Coral merger cost synergies
will protect the operating cost base.
European Retail
Reported results(1) Proforma results(2)
Six months to 30 June Constant
2018 2017 Change 2018 2017 Change currency(3)
GBPm GBPm % GBPm GBPm % %
-------- ----- ------- ------- ------- ------- -------------
OTC wagers 398.1) - - 753.1) 703.5) 7%) 4%)
OTC margin 16.8%) - - 17.8%) 14.8%) 3.0pp) 3.0pp)
Sports NGR/Revenue 51.8) - - 103.4) 75.1) 38%) 34%)
Other OTC NGR/Revenue 14.6) - - 29.5) 27.2) 8%) 5%)
Machines NGR/Revenue 0.6) - - 1.2) 1.3) (8%) (9%)
-------- ----- ------- ------- ------- ------- -------------
Total NGR/Revenue 67.0) - - 134.1) 103.6) 29% 26%)
Gross profit 34.1) - - 69.9) 52.1) 34%)
Contribution 32.5) - - 67.1) 50.1) 34%)
Contribution margin 48.5%) - - 50.0% 48.4%) 1.6pp)
Underlying EBITDA(4) 12.5) - - 28.8) 15.7) 83%)
Share based payments (0.1) - - (0.1) (0.1) 0%)
Underlying depreciation
and amortisation (4.4) - - (8.7) (5.5) (58%)
Share of JV income 0.3) - - 0.2) 1.0) (80%)
Underlying operating
profit(5) 8.3) - - 20.2) 11.1) 82%)
------------------------- -------- ----- ------- ------- -------
Reported Results(1) :
On a reported basis, revenue was GBP67.0m and underlying
EBITDA(4) was GBP12.5m reflecting the results for the three months
of trading of Ladbrokes Coral Group plc post acquisition.
Underlying operating profit(5) was GBP8.3m and was GBP6.9m after
charging separately disclosed items.
Proforma Results(2) :
European Retail NGR of GBP134.1m was 29% ahead of last year
(+26% cc). Underlying EBITDA(4) of GBP28.8m was 83% ahead and
underlying operating profit(5) of GBP20.2m was 82% ahead.
OTC wagers were 7% ahead (+4% cc) primarily driven by growth in
Eurobet Retail and estate growth in Ladbrokes Belgium. An OTC
margin of 17.8% was 3.0pp ahead of last year as football gross win
margins in Italy returned to more normal levels compared to the
prior period. Other OTC growth of 8% (+5% cc) was driven by growth
in Eurobet Retail virtual which was partially offset by the
temporary suspension of the Ladbrokes Belgium virtual product for
five weeks during the first half in advance of the Belgian
Government finally approving the legal framework for virtual
betting in May.
Contribution margin of 50.0% improved by 1.6pp due to the impact
of a lower mix of payments to franchisees in Italy following the
stronger year-on-year results, partly offset by upfront World Cup
marketing costs. Operating costs were 11% higher primarily due to
an increase in Eurobet staff and technology costs to support the
growth in the business, and also due to the acquisition of 23
independent shops in Belgium.
As at 30 June 2018 there were a total of 1,602 outlets/shops.
Italy 836 (2017: 828), Belgium shops 320, outlets 307 (2017: shops
289; outlets 213) and Ireland 139 (2017: 141).
Outlook:
In Italy, we will leverage our leading multi-channel expertise
to ensure the business remains well-placed to support its online
offering post the marketing restrictions that will be implemented
in 2019. In Belgium, we will look to expand the estate through the
further acquisition of independent operators where the multiples
make sense, expand our footprint in newsagents and continue our
programme to optimise SSBT density and utilisation across the
estate.
Other
Reported results(1) Proforma results(2)
Six months to 30 June Constant
2018 2017 Change 2018 2017 Change currency(3)
GBPm GBPm % GBPm GBPm % %
------- ------ ------- ------ ------ ------- -------------
NGR/Revenue 15.3 9.8 56% 24.6 31.5 (22%) (21%)
Gross profit 11.7 1.1 964% 19.5 19.7 (1%)
Contribution 9.7 (0.3) 3333% 17.3 17.7 (2%)
Underlying EBITDA(4) 1.2 (5.8) 121% 2.0 (2.8) 170%
Share based payments - - - - - -
Underlying depreciation
and amortisation (0.1) - - (0.3) (0.4) 25%
Share of JV income 0.4 - - 0.6 1.3 (54%)
Underlying operating
profit(5) 1.5 (5.8) 126% 2.3 (1.9) 221%
------------------------- ------- ------ ------ ------ -------
Reported Results(1) :
On a reported basis, NGR of GBP15.3m was GBP5.5m ahead of last
year and underlying EBITDA(4) of GBP1.2m was 121% ahead reflecting
the impact of the sale of Kalixa in 2017 and the three months of
trading of Ladbrokes Coral post acquisition. Underlying operating
profit(5) of GBP1.5m was 126% ahead of 2017 and operating profit
after charging separately disclosed items of GBP1.5m was GBP9.8m
ahead.
Proforma Results(2) :
NGR of GBP24.6m was 22% behind last year due to the disposal of
Kalixa in May 2017. Excluding the sale of Kalixa, NGR was 6%
behind, primarily due to a very strong sports gross win margin in
the prior period in Telebet. Underlying EBITDA(4) of GBP2.0m was
GBP4.8m ahead of last year and underlying operating profit(5) of
GBP2.3m was GBP4.2m ahead.
Corporate
Reported results(1) Proforma results(2)
Six months to 30 June Constant
2018 2017 Change 2018 2017 Change currency(3)
GBPm GBPm % GBPm GBPm % %
------- ------- ------- ------- ------- -------- -------------
Underlying EBITDA(4) (14.8) (6.6) (124%) (18.0) (17.5) (3%)
Share based payments (3.0) (5.9) 49% (3.4) (6.7) 49%
Underlying depreciation
and amortisation (0.2) - - (0.4) (0.4) 0%
Share of JV income - - - - - -
Underlying operating
profit(5) (18.0) (12.5) (44%) (21.8) (24.6) 11%
------------------------- ------- ------- ------- ------- --------
Reported Results(1) :
On a reported basis, Corporate costs were GBP14.8m (2017:
GBP6.6m) and GBP18.0m (2017: GBP12.5m) after share based payments
and depreciation and amortisation with the year-on-year increase
reflecting the inclusion of Ladbrokes Coral results post
acquisition. After charging separately disclosed items operating
profit of GBP69.6m was GBP113.7m ahead of 2017.
Proforma Results(2) :
On a proforma basis Corporate costs of GBP18.0m increased by
GBP0.5m primarily driven by a one-off credit arising in the prior
year, partly offset by the synergies arising from the Ladbrokes
Coral merger. After the cost of share based payments and
depreciation and amortisation, total corporate costs were GBP21.8m,
a reduction of 11% driven by reduced share based payments following
the vesting of a number of legacy schemes in 2017.
Notes
(1) 2018 and 2017 reported results are unaudited and reflect the
acquisition of the Ladbrokes Coral Group plc on 28 March 2018
(2) The Group's proforma results are unaudited and presented as
if the current Group, post the acquisition of Ladbrokes Coral Group
plc, had existed since 1 January 2017. As such, it excludes the
results of the Turkish business which was discontinued during 2017
and the 360 shops that the Ladbrokes Coral Group plc was required
to divest on the merger of Ladbrokes PLC and the Coral Group. The
results of Crystalbet are included from the date of acquisition (11
April 2018) and the results of Kalixa are excluded from the date of
disposal (31 May 2017)
(3) Growth on a constant currency basis is calculated by
translating both current and prior year performance at the 2018
exchange rates
(4) Stated pre separately disclosed items and shared based payments
(5) Stated pre separately disclosed items
(6) UK Retail numbers are quoted on a LFL basis. During H1 there
was an average of 3,563 shops in the estate, compared to an average
of 3,663 in the same period last year
CHIEF FINANCIAL OFFICER'S REVIEW
Reported results(1) Proforma results(2)
Six months to 30 June Constant
2018 2017 Change 2018 2017 Change currency(3)
GBPm GBPm % GBPm GBPm % %
-------- ------- ------- -------- -------- -------- -------------
NGR 1,125.1 386.6 191% 1,717.0 1,591.0 8% 8%
Revenue 1,105.9 374.8 195% 1,694.3 1,572.8 8% 8%
Gross profit 763.2 272.4 180% 1,163.4 1,098.2 6%
Contribution 582.0 191.7 204% 923.0 908.9 2%
Contribution Margin 51.7% 49.6% 2.1pp 53.8% 57.1% (3.3pp)
Underlying EBITDA(4) 235.0 100.7 133% 349.5 314.1 11%
Share based payments (5.0) (9.1) 45% (6.0) (11.5) 48%
Underlying depreciation
and amortisation (42.1) (13.0) (224%) (66.1) (67.6) 2%
Share of JV income 0.7 - - 0.5 1.9 (74%)
Underlying operating
profit(5) 188.6 78.6 140% 277.9 236.9 17%
Net finance costs (26.5) (14.2) (87%)
Profit before tax pre
separately disclosed
items 162.1 64.4 152%
Separately disclosed
items (48.5) (87.2) 44%
Profit / (loss) before
tax 113.6 (22.8) 598%
Tax 0.2 (0.6) 133%
Profit / (loss) after
tax from continuing
operations 113.8 (23.4) 586%
Discontinued operations - 17.0 (100%)
-------- ------- -------
Profit/(Loss) after
tax 113.8 (6.4) 1,878%
------------------------- -------- ------- ------- -------- -------- -------- -------------
NGR and Revenue
Group reported NGR was 191% ahead and revenue was 195% ahead due
to growth in the legacy GVC business and the inclusion of three
months of trading of Ladbrokes Coral Group in the current year
following the acquisition. On a proforma basis both NGR and revenue
were 8% ahead as detailed in the Business Review section.
Underlying operating profit(5)
Group reported underlying operating profit(5) was GBP188.6m
(2017: GBP78.6m) as a result of underlying EBITDA(4) of GBP235.0m
(2017: GBP100.7m), GBP5.0m of share based payments costs (2017:
GBP9.1m), GBP42.1m of depreciation and amortisation (2017:
GBP13.0m) as well as GBP0.7m of JV income (2017: GBPnil). This
represents growth of GBP110.0m driven by the ongoing growth in the
legacy GVC business as well as the impact of three months of
trading of the Ladbrokes Coral business which are consolidated into
the 2018 reported numbers.
On a proforma basis, underlying operating profit(5) of GBP277.9m
was GBP41.0m or 17% ahead of 2017 reflecting the GBP35.4m
year-on-year growth in underlying EBITDA(4) as well as savings in
share based payments charges of GBP5.5m and a reduction in
depreciation and amortisation of GBP1.5m, offset by a GBP1.4m
reduction in JV income.
Financing costs
Net financing costs during H1 of GBP26.5m (2017: GBP14.2m) were
GBP12.3m higher than in 2017 as a result of the interest on loans
taken out to complete the acquisition of the Ladbrokes Coral Group.
Current year finance costs also include a net GBP4.3m charge
associated with foreign exchange losses on debt facilities offset
by gains on currency swaps and associated derivative financial
instruments taken out to manage the Groups exposure to certain
currencies.
Separately disclosed items
Items separately disclosed in H1 amount to a GBP48.5m charge and
include:
-- The non-cash amortisation of acquired intangibles of GBP126.2m
-- GBP48.4m of deal costs primarily related to the acquisition of the Ladbrokes Coral Group
-- GBP12.8m of legal and onerous contract costs, largely
associated with onerous leases in UK Retail
-- GBP3.4m of integration costs associated with bringing the various businesses together
-- A GBP142.3m credit associated with the reduction in the fair
value of contingent consideration, a credit largely related to a
reduction in the market value of the CVR associated with the
acquisition of Ladbrokes Coral
Profit before tax
Profit before tax of GBP113.6m was GBP136.4m ahead of the
GBP22.8m loss recorded in 2017.
Taxation
The tax charge for H1 was a GBP0.2m credit reflecting a GBP19.5m
charge on underlying trading offset by a GBP19.7m credit on
separately disclosed items. The underlying tax charge reflects a
12% effective tax rate.
Dividends
An interim dividend of 16.0p per share was declared, an increase
of 1.4p on the previous year.
Dividend timetable
13 September 2018 Dividend declared
20 September 2018 Ex-dividend date
21 September 2018 Record date
4 October 2018 DRIP Election deadline
25 October 2018 Payment
Cashflow
Six months to 30 June 2018 2017
GBPm GBPm
-------- --------
Underlying EBITDA(4) 235.0 100.7
Underlying working capital (101.9) (14.4)
Capital expenditure/Investment in JVs (69.7) (18.4)
Finance lease repayments (0.8) -
Interest paid (6.9) (28.4)
Corporate taxes (10.4) (10.4)
-------- --------
Free cashflow 45.3 29.1
Separately disclosed items (60.6) (2.7)
Integration costs (7.7) (8.8)
Disposal proceeds - 25.6
Acquisitions (net of cash acquired) (470.5) -
Net movement on debt and costs of debt
issuance 704.8 (120.3)
Equity issue 10.8 22.6
Dividends paid (46.2) (75.3)
-------- --------
Net Cashflow 175.9 (129.8)
Foreign exchange (1.3) 2.8
-------- --------
Net cash generated 174.6 (127.0)
-------- --------
Cash and cash equivalents at beginning
of period 270.0 312.8
-------- --------
Cash and cash equivalents at the end of
period 444.6 185.8
----------------------------------------- -------- --------
The Group generated a net cash inflow for the first half of 2018
of GBP174.6m (2017: GBP127.0m outflow). During the period, which
contains the results and cashflows of Ladbrokes Coral post
acquisition, the Group generated underlying EBITDA(4) of GBP235.0m
(2017: GBP100.7m), incurred GBP69.7m (2017: GBP18.4m) of capital
investment costs and had a working capital outflow of GBP101.9m
(2017: GBP14.4m). The working capital outflow in the year to date
is primarily as a result of the payment of staff bonuses which
caused an outflow of GBP44.0m, a large proportion of which will
unwind in the year-to-go, and GBP46.6m in payments on account to
the Greek government in respect of the tax audit assessment which
was received during the prior year (see note 17). The Group also
paid GBP6.9m in interest (2017: GBP28.4m), GBP10.4m in corporate
taxes (2017: GBP10.4m) and GBP0.8m in finance lease repayments
(2017: GBPnil) resulting in a free cash inflow of GBP45.3m (2017:
GBP29.1m).
The Group paid GBP68.3m (2017: GBP11.5m) in relation to items
that have been separately disclosed in the period, GBP51.7m of
which related to fees associated with the acquisition of Ladbrokes
Coral and Mars LLC ("Crystalbet") and GBP7.7m relating to the
integration of the legacy businesses. The cash consideration
element of the two acquisitions was GBP665.0m, and was partially
offset by GBP194.5m of cash within those businesses at the date of
acquisition. The Group raised GBP1,398.0m of new debt to fund the
acquisitions and repaid GBP660.2m of the existing Ladbrokes Coral
debt. GBP31.5m of fees were incurred in raising the new debt and
GBP1.5m has been repaid since acquisition.
During the first half the Group also raised GBP10.8m from the
issue of share capital and paid GBP46.2m in dividends resulting in
a total cash inflow, pre foreign exchange, of GBP175.9m (2017:
GBP129.8m outflow).
Net debt and liquidity
In order to facilitate the acquisition of the Ladbrokes Coral
business the Group raised additional borrowings of GBP1,398.0m,
GBP660.2m of which was used to repay legacy Ladbrokes Coral debt
and GBP630.4m to fund the cash element of the acquisition
consideration with the balance used as liquidity to fund the
combined Group's working capital requirements and the acquisition
of Crystalbet. As at 30 June 2018, accounting net debt was
GBP1,770.6m and adjusted net debt GBP1,887.0m, representing a net
debt to proforma underlying EBITDA(4) ratio of 2.69x.
Par value Issue costs/ Total
Premium
---------- -------------
Bonds (500.0) (35.4) (535.4)
Term loans (1,698.0) 34.8) (1,663.2)
Interest accrual (16.2) -) (16.2)
---------- ------------- ----------
(2,214.2) (0.6) (2,214.8)
Lease liabilities (0.4)
Cash 444.6)
----------
Accounting net debt (1,770.6)
Cash held on behalf of customers (213.4)
Fair value of swaps held against
debt instruments 30.4)
Short term investments 4.4)
Balances held with payment service
providers 62.2)
----------
Adjusted net debt (1,887.0)
------------------------------------ ---------- ------------- ----------
Going Concern
Having assessed the financial forecasts of the business, the
principal risks and other matters discussed in connection with the
viability statement, the Directors consider it appropriate to adopt
the going concern basis of accounting in preparing the financial
statements as the Group will generate sufficient cash to meet its
ongoing obligations for at least 12 months from the date of signing
the financial statements.
Notes
(1) 2018 and 2017 reported results are unaudited and reflect the
acquisition of the Ladbrokes Coral Group plc on 28 March 2018
(2) The Group's proforma results are unaudited and presented as
if the current Group, post the acquisition of Ladbrokes Coral Group
plc, had existed since 1 January 2017. As such, it excludes the
results of the Turkish business which was discontinued during 2017
and the 360 shops that the Ladbrokes Coral Group plc was required
to divest on the merger of Ladbrokes PLC and the Coral Group. The
results of Crystalbet are included from the date of acquisition (11
April 2018) and the results of Kalixa are excluded from the date of
disposal (31 May 2017)
(3) Growth on a constant currency basis is calculated by
translating both current and prior year performance at the 2018
exchange rates
(4) Stated pre separately disclosed items and shared based payments
(5) Stated pre separately disclosed items
Principal risks
Key risks are reviewed by the Executive and Risk Committees
(made up of executive directors and senior management) and the
Board of GVC Holdings plc on a regular basis and where appropriate,
actions taken to mitigate the key risks that are identified. The
Board has overall responsibility for risk management.
The principal risks and uncertainties, which could affect the
Group, are set out on pages 34 to 37 of the Group's 2017 Annual
Report, a copy of which is available on the Group's corporate
website, www.gvc-plc.com. Following the acquisition of Ladbrokes
Coral, there are additional risks that the Group is now exposed to,
over and above those previously disclosed in the Group's Annual
Report.
The principal risks and uncertainties of the enlarged Group are
as follows:
Betting and gaming industry:
Taxes, 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 and additional costs might be incurred in order to
comply with any new laws or regulations in multiple
jurisdictions.
Increased cost of product
The Group is subject to certain financing arrangements intended
to support industries from which it profits. Examples are the
horseracing and the voluntary greyhound racing levies which
respectively support the British horseracing and greyhound
industries. In addition, the Group enters into contracts for the
distribution of television pictures, audio and other data that are
broadcast across the various routes to market. A number of these
are under negotiation at any one time.
Operational and bookmaking:
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 risk management
processes.
Information technology and communications:
Technology failure
The Groups 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.
Data breach 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 and the loss of the goodwill of its
customers.
Marketplace:
Impact of Brexit
The UK's departure from the EU because of the Brexit referendum
may impact the Group's operations in certain EU markets.
Health and Safety:
Failure to meet the requirements of the various domestic and
international rules and regulations could expose the company (and
individual employees and directors) to material civil/criminal
action with the associated financial and reputational
consequences
Statement of Directors' Responsibilities
The directors confirm that this condensed consolidated interim
financial information has been prepared in accordance with IAS 34
as adopted by the European Union and that the interim management
report includes a fair review of the information required by DTR
4.2.7R and DTR 4.2.8R, namely:
- an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year, and
- related party transactions in the first six months of the
current financial year and that have materially affected the
financial position or performance of the entity during the period;
and any material changes in the related party transactions
described in the last annual report.
A list of current directors is maintained on the GVC Holdings
PLC website www.gvc-plc.com.
On behalf of the Board
K Alexander P Bowtell
Chief Executive Chief Financial Officer
13 September 2018
Independent review report to GVC Holdings PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2018 which comprises the condensed
consolidated income statement, condensed consolidated statement of
comprehensive income, condensed consolidated balance sheet,
condensed consolidated statement of changes in equity, condensed
consolidated statement of cash flows and the related explanatory
notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2018 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Mike Harper
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
Canary Wharf
London
E14 5GL
13 September 2018
Unaudited financial statements
Interim condensed consolidated income statement
For the six months ended 30 June
---------------------------------------- ----- ---------- ---------- ------- ---------- ---------- -------
2018 2017
Notes Underlying Separately Total Underlying Separately Total
items disclosed items disclosed
items items
(note (note
4) 4)
GBPm GBPm GBPm GBPm GBPm GBPm
NGR 1,125.1 - 1,125.1 386.6 - 386.6
VAT/GST (19.2) - (19.2) (11.8) - (11.8)
---------------------------------------- ----- ---------- ---------- ------- ---------- ---------- -------
Revenue 1,105.9 - 1,105.9 374.8 - 374.8
Cost of sales (342.7) - (342.7) (102.4) - (102.4)
---------------------------------------- ----- ---------- ---------- ------- ---------- ---------- -------
Gross profit 763.2 - 763.2 272.4 - 272.4
Administrative costs (575.3) (48.5) (623.8) (193.8) (87.2) (281.0)
Contribution 582.0 - 582.0 191.7 - 191.7
Administrative costs excluding
marketing (394.1) (48.5) (442.6) (113.1) (87.2) (200.3)
---------------------------------------- ----- ---------- ---------- ------- ---------- ---------- -------
Group operating profit/(loss)
before share of results from joint
ventures and associates 187.9 (48.5) 139.4 78.6 (87.2) (8.6)
Share of results from joint venture
and associates 0.7 - 0.7 - - -
---------------------------------------- ----- ---------- ---------- ------- ---------- ---------- -------
Group operating profit/(loss) 188.6 (48.5) 140.1 78.6 (87.2) (8.6)
Finance expense (22.5) - (22.5) (14.7) - (14.7)
Finance income 0.3 - 0.3 0.5 - 0.5
Gain arising from financial derivatives 16 45.3 - 45.3 - - -
Losses arising from foreign exchange
on debt instruments 16 (49.6) - (49.6) - - -
Profit/(loss) before tax 162.1 (48.5) 113.6 64.4 (87.2) (22.8)
Income tax (expense)/income (19.5) 19.7 0.2 (6.9) 6.3 (0.6)
---------------------------------------- ----- ---------- ---------- ------- ---------- ---------- -------
Profit/(loss) from continuing
operations 142.6 (28.8) 113.8 57.5 (80.9) (23.4)
Profit for the period from discontinued
operations after tax - - - 17.0 - 17.0
---------------------------------------- ----- ---------- ---------- ------- ---------- ---------- -------
Profit/(loss) for the period 142.6 (28.8) 113.8 74.5 (80.9) (6.4)
---------------------------------------- ----- ---------- ---------- ------- ---------- ---------- -------
Attributable to:
Equity holders of the parent 140.9 (28.8) 112.1 74.6 (80.9) (6.3)
Non-controlling interests 1.7 - 1.7 (0.1) - (0.1)
---------------------------------------- ----- ------ ----- ----- ------ ------
Earnings per share on profit/(loss)
for the period from continuing
and discontinued operations 7
- from continuing operations 32.6p 25.1p 19.5p (7.8)p
From profit/(loss) for the period 32.6p 25.1p 25.2p (2.1)p
---------------------------------------- ----- ------ ----- ----- ------ ------
Diluted earnings per share on
profit/(loss) for the period from
continuing and discontinued operations
- from continuing operations 32.2p 24.9p 19.1p (7.8)p
From profit/(loss) for the period 32.2p 24.9p 24.7p (2.1)p
---------------------------------------- ----- ------ ----- ----- ------ ------
Proposed dividends 6 16.0p 14.6p
---------------------------------------- ----- ------ ----- ----- ------ ------
Memo
2018 2017
Underlying Separately Total Underlying Separately Total
items disclosed items disclosed
items items
GBPm GBPm GBPm GBPm GBPm GBPm
Underlying EBITDA 235.0 77.7 312.7 100.7 (34.8) 65.9
Share based payments (5.0) - (5.0) (9.1) - (9.1)
Depreciation, amortisation and
impairment (42.1) (126.2) (168.3) (13.0) (52.4) (65.4)
Share of results from joint ventures
and associates 0.7 - 0.7 - - -
-------------------------------------- ---------- ---------- ------- ---------- ---------- ------
Group operating profit/(loss) 188.6 (48.5) 140.1 78.6 (87.2) (8.6)
-------------------------------------- ---------- ---------- ------- ---------- ---------- ------
Interim condensed consolidated statement of comprehensive
income
Six months Six months
ended ended
30 June 2018 30 June
2017
GBPm GBPm
--------------------------------------------------
Profit/(loss) for the period 113.8 (6.4)
-------------------------------------------------- -------------- -----------
Other comprehensive income / (expense):
Items that may be reclassified to profit or
loss:
Currency translation gains 28.3 31.1
--------------------------------------------------
Total items that will be reclassified to profit
or loss 28.3 31.1
-------------------------------------------------- -------------- -----------
Items that will not be re-classified to profit
or loss:
Re-measurement of defined benefit pension 8.2 -
scheme
Tax on re-measurement of defined benefit pension - -
scheme
Re-measurement of available for sale investments (0.1) -
-------------------------------------------------- -------------- -----------
Total items that will not be reclassified 8.1 -
to profit or loss
-------------------------------------------------- -------------- -----------
Other comprehensive income for the period,
net of tax 36.4 31.1
-------------------------------------------------- -------------- -----------
Total comprehensive income for the period 150.2 24.7
-------------------------------------------------- -------------- -----------
Attributable to:
- equity holders of the parent 147.5 24.8
- non-controlling interests 2.7 (0.1)
-------------------------------------------------- -------------- -----------
Interim condensed consolidated balance sheet
30 June 31 December 30 June 31 December
2018 2017 2017 2016
Note GBPm GBPm GBPm GBPm
------------------------------------- ----- ---------- ------------ -------- ------------
ASSETS
Non-current assets
Goodwill 8 3,279.1 972.4 957.5 929.3
Intangible assets 8 2,945.5 388.6 410.2 442.5
Property, plant and equipment 9 196.5 14.4 15.9 16.8
Interest in joint venture 23.1 - - -
Interest in associates and
other investments 30.5 1.1 1.0 3.2
Other financial assets 3.2 4.6 5.9 4.2
Deferred tax assets 100.0 - 1.1 -
Retirement benefit assets 189.1 - - -
------------------------------------- ----- ---------- ------------ -------- ------------
6,767.0 1,381.1 1,391.6 1,396.0
------------------------------------- ----- ---------- ------------ -------- ------------
Current assets
Trade and other receivables 333.2 102.7 96.3 89.6
Inventory 1.1 - - -
Income and other taxes recoverable 30.6 1.6 7.5 5.7
Derivative financial assets 30.4 - 3.2 22.3
Short term investments 4.4 4.4 4.3 4.6
Cash and short-term deposits 444.6 270.0 185.8 302.4
844.3 378.7 297.1 424.6
------------------------------------- ----- ---------- ------------ -------- ------------
Assets in disposal group classified
as held for sale - - 1.8 50.9
TOTAL ASSETS 7,611.3 1,759.8 1,690.5 1,871.5
------------------------------------- ----- ---------- ------------ -------- ------------
LIABILITIES
Current liabilities
Trade and other payables (606.8) (164.7) (124.8) (139.7)
Balances with customers (213.4) (101.7) (97.3) (93.3)
Lease liabilities (0.4) - - -
Interest bearing loans and
borrowings 10 (23.1) (0.2) (1.6) (343.9)
Corporate tax liabilities (40.4) (10.5) (13.1) (15.5)
Provisions 11 (35.1) (1.1) (1.0) (1.0)
Other financial liabilities (91.8) (11.1) (1.2) (2.2)
Liabilities in disposal group
classified as held for sale - - (1.0) (19.3)
------------------------------------- ----- ---------- ------------ -------- ------------
(1,011.0) (289.3) (240.0) (614.9)
------------------------------------- ----- ---------- ------------ -------- ------------
Non-current liabilities
Interest bearing loans and
borrowings 10 (2,191.7) (262.3) (216.5) -
Deferred tax liabilities (480.9) (46.4) (52.0) (55.9)
Provisions 11 (71.8) (5.1) (5.7) (5.9)
Other financial liabilities (117.4) (20.4) (3.8) (3.8)
------------------------------------- ----- ---------- ------------ -------- ------------
(2,861.8) (334.2) (278.0) (65.6)
------------------------------------- ----- ---------- ------------ -------- ------------
TOTAL LIABILITIES (3,872.8) (623.5) (518.0) (680.5)
------------------------------------- ----- ---------- ------------ -------- ------------
NET ASSETS 3,738.5 1,136.3 1,172.5 1,191.0
------------------------------------- ----- ---------- ------------ -------- ------------
EQUITY
Issued share capital 4.8 2.3 2.2 2.2
Share premium 1,181.1 1,170.4 1,151.5 1,129.0
Merger reserve 2,527.4 34.5 34.5 34.5
Available for sale reserve 0.2 0.3 - -
Translation reserve 195.2 167.9 153.6 122.5
Retained earnings (206.3) (237.5) (167.9) (95.9)
Equity shareholders' funds 3,702.4 1,137.9 1,173.9 1,192.3
------------------------------------- ----- ---------- ------------ -------- ------------
Non-controlling interests 36.1 (1.6) (1.4) (1.3)
TOTAL SHAREHOLDERS' EQUITY 3,738.5 1,136.3 1,172.5 1,191.0
------------------------------------- ----- ---------- ------------ -------- ------------
Interim condensed consolidated statement of changes in
equity
Issued Share Merger Retained Available Foreign Attributable Non-controlling Total
share premium Reserve earnings for currency to the interest shareholders
capital sale translation equity equity
reserve reserve(1) shareholders
of the
Company
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- -------- -------- -------- --------- ---------- ------------ ------------- ---------------- -------------
At 1 January
2017 2.2 1,129.0 34.5 (95.9) - 122.5 1,192.3 (1.3) 1,191.0
---------------- -------- -------- -------- --------- ---------- ------------ ------------- ---------------- -------------
Loss for the
period - - - (6.3) - - (6.3) (0.1) (6.4)
Other
comprehensive
income - - - - - 31.1 31.1 - 31.1
---------------- -------- -------- -------- --------- ---------- ------------ ------------- ---------------- -------------
Total
comprehensive
income - - - (6.3) - 31.1 24.8 (0.1) 24.7
Share options
exercised - 22.5 - - - - 22.5 - 22.5
Share-based
payments
charge - - - 9.6 - - 9.6 - 9.6
Equity
dividends - - - (75.3) - - (75.3) - (75.3)
At 30 June 2017 2.2 1,151.5 34.5 (167.9) - 153.6 1,173.9 (1.4) 1,172.5
---------------- -------- -------- -------- --------- ---------- ------------ ------------- ---------------- -------------
At 1 January
2018 2.3 1,170.4 34.5 (237.5) 0.3 167.9 1,137.9 (1.6) 1,136.3
---------------- -------- -------- -------- --------- ---------- ------------ ------------- ---------------- -------------
Profit for the
period - - - 112.1 - - 112.1 1.7 113.8
Other
comprehensive
income - - - 8.2 (0.1) 27.3 35.4 1.0 36.4
---------------- -------- -------- -------- --------- ---------- ------------ ------------- ---------------- -------------
Total
comprehensive
income - - - 120.3 (0.1) 27.3 147.5 2.7 150.2
Issue of shares
on
acquisition(2) 2.4 - 2,492.9 - - - 2,495.3 - 2,495.3
Share options
exercised 0.1 10.7 - - - - 10.8 - 10.8
Share-based
payments
charge - - - 1.7 - - 1.7 - 1.7
Acquisition of
investment(3) - - - (44.6) - - (44.6) 35.0 (9.6)
Equity
dividends - - - (46.2) - - (46.2) - (46.2)
At 30 June 2018 4.8 1,181.1 2,527.4 (206.3) 0.2 195.2 3,702.4 36.1 3,738.5
---------------- -------- -------- -------- --------- ---------- ------------ ------------- ---------------- -------------
(1) The foreign currency translation reserve is used to record
exchange differences arising from the translation of the financial
statements of foreign subsidiaries.
(2) On 28 March 2018 GVC Holdings PLC acquired the entire share
capital of Ladbrokes Coral Group plc as described in note 13.The
issue of new shares in the Company has attracted merger relief
under section 612 of the Companies Act 2006. GBP2.4m of ordinary
shares has been credited to share capital and the remaining
GBP2,492.9m has been credited to the merger reserve within
equity.
(3) On 11 April 2018 GVC Holdings PLC acquired 51% of the share
capital of Crystalbet Limited for a total consideration of
GBP36.4m. For further details see note 13.
Interim condensed consolidated statement of cash flows
Six months Six months
ended ended
30 June 30 June
2018 2017
Notes GBPm GBPm
------------------------------------------------------- ------ ------------- -----------
Cash generated by operations 14 64.8 74.8
Income taxes paid (10.4) (10.4)
Net finance expense paid (6.9) (28.4)
------------------------------------------------------- ------
Net cash generated from operating activities 47.5 36.0
Cash flows from investing activities:
Acquisitions (665.0) -
Cash acquired on acquisition of businesses 194.5 -
Purchase of intangible assets (38.3) (12.5)
Purchase of property, plant and equipment (31.7) (6.3)
Proceeds from sales of plant, property and
equipment including disposal of shops - 25.6
Additional investment in joint venture (0.7) 0.4
Deferred proceeds from disposal of available-for-sale 1.0 -
financial assets
Net cash used in investing activities (540.2) 7.2
------------------------------------------------------- ------ ------------- -----------
Cash flows from financing activities:
Proceeds from issue of ordinary shares 10.8 22.6
Net proceeds from borrowings 1,366.5 440.7
Finance lease payments (0.8) -
Repayment of borrowings (661.7) (561.0)
Equity dividends paid 6 (46.2) (75.3)
------------------------------------------------------- ------ ------------- -----------
Net cash used in financing activities 668.6 (173.0)
------------------------------------------------------- ------ ------------- -----------
Net increase/(decrease) in cash and cash
equivalents 175.9 (129.8)
Effect of changes in foreign exchange rates (1.3) 2.8
Cash and cash equivalents (inc. overdraft)
at beginning of the period (1) 270.0 312.8
Cash and cash equivalents (inc. overdraft)
at end of the period 444.6 185.8
------------------------------------------------------- ------ ------------- -----------
(1) The cash and cash equivalents balance at the end of 2016 of
GBP312.8m above consisted of GBP302.4m cash and cash equivalents as
shown on the face of the consolidated statement of financial
position and GBP10.4m of cash and cash equivalents held within
assets held for sale.
Notes to financial information
1. Corporate information
GVC Holdings PLC ("the Company") is a limited company
incorporated and domiciled in the Isle of Man whose shares are
publicly traded. The principal activities of the Company and its
subsidiaries ("the Group") are described in Note 3.
2. Basis of preparation
(a) The directors consider that the Group has adequate resources
to continue in operational existence for the foreseeable future and
that it is therefore appropriate to adopt the going concern basis
in preparing its financial statements.
(b) The Group's annual financial statements for the year ended
31 December 2017 were prepared in accordance with International
Financial Reporting Standards ("IFRS") and IFRS Interpretations
Committee (IFRS IC) pronouncements as adopted for use in the
European Union. The interim condensed consolidated financial
statements for the six months ended 30 June 2018 have been prepared
in accordance with IAS 34 Interim Financial Reporting as endorsed
and adopted for use in the European Union and the Disclosure Rules
and Transparency Rules of the UK Financial Conduct Authority.
The financial statements are presented in Pounds Sterling,
rounded to the nearest million Pounds. They are prepared on the
historical cost basis except for the valuation to fair value of
certain financial instruments. Non-current assets and disposal
groups held for sale are stated at the lower of previous carrying
amounts and fair value less costs to sell.
The accounting policies adopted in the preparation of the
interim financial statements are consistent with those followed in
the preparation of the Group's annual financial statements for the
year ended 31 December 2017 other than those listed in 2(d), and
taxes on income in the interim periods being accrued using the tax
rate that would be applicable to expected total annual profit and
loss.
The interim financial information was approved by a duly
appointed and authorised committee of the Board of Directors on 13
September 2018 and is unaudited.
The financial information does not amount to full statutory
accounts within the meaning of the Companies Act 2006 and does not
include all of the information and disclosures required for full
annual financial statements. It should be read in conjunction with
the Annual Report and Accounts of GVC Holdings PLC for the year
ended 31 December 2017 which was prepared in accordance with IFRS
as adopted by the European Union and was filed with the Registrar
of Companies in the Isle of Man. This report is available either on
request from the Company's registered office or to download from
www.gvc-plc.com. The auditors' report on these accounts was
unqualified, did not include a reference to any matters to which
the auditors drew attention by way of emphasis without qualifying
their report, and did not contain a statement under section 498(2)
or (3) of the Companies Act 2006.
(c) To assist in understanding the underlying performance, the
Group has separately disclosed the following items of pre-tax
income and expense:
- profits or losses on disposal, closure or impairment of non-current assets or businesses;
- amortisation of acquired intangibles resulting from IFRS 3
"Business Combinations" fair value exercises
- corporate transaction costs;
- changes in the fair value of contingent consideration; and
- the related tax impact effect on these items.
Any other items are considered individually by virtue of their
nature or size. The separate disclosure of these items allows a
clearer understanding of the trading performance on a consistent
and comparable basis, together with an understanding of the effect
of non-recurring or large individual transactions upon the overall
profitability of the Group.
The items disclosed separately have been included within the
appropriate classifications in the consolidated income statement
and are detailed in note 4. The directors have also presented Net
Gaming Revenue, Contribution and Underlying EBITDA as these are
measures used frequently within the industry. All of these items
are reconciled within the Income Statement.
Notes to financial information (continued)
2. Basis of preparation (continued)
(d) Accounting policies
Following the acquisition of Ladbrokes Coral Group plc, a number
of accounting policies have either been newly adopted or enhanced
to reflect the operations of the enlarged group. A summary of the
more significant amendments have been expanded below:
Depreciation
Depreciation is applied using the straight line method to
specific classes of asset to reduce them to their residual value
over their estimated useful economic lives.
The estimated useful lives are as follows:
Land and buildings Lower of 50 years, or estimated useful
life of the building, or lease. Indefinite
lives are attached to any land held
and therefore it is not depreciated
Property, plant and equipment 3 - 5 years
Fixtures, fittings and equipment 3 -10 years as considered appropriate
--------------------------------- --------------------------------------------
Amortisation
Amortisation is charged to the income statement on a
straight-line basis over the estimated useful lives of intangible
assets, unless such lives are indefinite. All indefinite lived
assets are subject to an annual impairment review from the year of
acquisition. Other intangible assets are amortised from the date
they are available for use.
The estimated useful lives are as follows:
Retail licences Lower of 15 years, or duration of
licence
Software 2-15 years
Capitalised development expenditure 3 -5 years
Trademarks and brand names 10-15 years, or indefinite life
Customer relationships 3-15 years
------------------------------------ ----------------------------------
For the avoidance of doubt, the useful economic lives of the
assets relating to the legacy GVC Holdings PLC business have not
changed.
Impairment
An impairment review is performed for indefinite life assets on
at least an annual basis. For all other non-current assets an
impairment review is performed where there are indicators of
impairment. This requires an estimation of the recoverable amount
which is the higher of an asset's fair value less costs to sell and
its value in use. Estimating a value in use amount requires
management to make an estimate of the expected future cash flows
from each cash generating unit and to discount cash flows by a
suitable discount rate in order to calculate the present value of
those cash flows. Estimating an asset's fair value less costs to
sell is determined using future cashflow and profit projections as
well as industry observed multiples and publicly observed share
prices for similar gambling companies.
Within UK and European Retail the cash generating units are
generally an individual LBO and therefore, impairment is first
assessed at this level for licences and property, plant and
equipment, with any impairment arising booked first to licences and
then to property, plant and equipment.
Pensions and other post-employment benefits
The Group's defined benefit pension plans, the Ladbrokes Pension
Plan and the Gala Coral Pension Plan hold assets separately from
the Group. The pension cost relating to this plan is assessed in
accordance with the advice of independent qualified actuaries using
the projected unit credit method.
Notes to financial information (continued)
2. Basis of preparation (continued)
(d) Accounting policies (continued)
Pensions and other post-employment benefits (continued)
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 plans, 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.
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
it does not consider there to be substantive restrictions on the
return of residual plan assets in the event of a winding up of the
plans after all member obligations have been met.
The Group's contributions to defined contribution schemes are
charged to the consolidated income statement in the period to which
the contributions relate.
Separately Disclosed Items
For a full explanation of what is defined as a separately
disclosed item and how they are disclosed, please refer to note
2(c).
Inventory
Inventories are valued at the lower of cost and net realisable
value.
(e) Updates to IFRS
A number of amendments to IFRSs became effective for the
financial year beginning 1 January 2018 the most significant of
which is detailed below:
IFRS 15, 'Revenue from contracts with customers' deals with
revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature,
amount, timing and uncertainty of revenue and cash flows arising
from an entity's contracts with customers.
The Group's gaming activities involve the receiving and settling
of bets, which are deemed to fall under the scope of IFRS 9
Financial Instruments (previously IAS 39) as the transactions
involve the issuing of financial instruments. IFRS 15 will only
therefore impact revenue that is it not governed by IFRS 9. Revenue
is recognised when a customer obtains control of a good or service
and thus has the ability to direct the use and obtain the benefits
from the good or service. The standard replaces IAS 18 'Revenue'
and IAS 11 'Construction contracts' and related interpretations.
The standard is effective for annual periods beginning on or after
1 January 2018. The Group has determined that there is no material
impact as a result of adopting IFRS 15.
The remaining amendments to IFRSs which became effective for the
financial year beginning 1 January 2018 have been determined to
have no material impact on the financial statements.
Notes to financial information (continued)
2. Basis of preparation (continued)
(e) Update to IFRS (continued)
The standards and interpretations that are issued, but not
effective, 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.
IFRS 16, 'Leases' sets out the principles for the recognition,
measurement, presentation and disclosure of leases. The objective
is to ensure that lessees and lessors provide relevant information
in a manner that faithfully represents those transactions. IFRS 16
requires lessees to recognise a lease liability reflecting future
lease payments and a 'right-of-use asset' for virtually all lease
contracts (other than those of less than one year duration, or
having a right of use asset initially valued at less than
GBP3,000). This information gives a basis for users of financial
statements to assess the effect that leases have on the financial
position, financial performance and cash flows of the entity. The
standard replaces IAS 17 'Leases' and related interpretations. The
standard is effective for annual periods beginning on or after 1
January 2019 and earlier adoption is permitted. The Group is
assessing the impact of IFRS 16, and the transitional reliefs
within that standard. These permit the adoption of the standard at
1 January 2019 without the restatement of comparative information.
At this stage management are still assessing the full impact of
IFRS 16 which is expected to materially impact operating lease
costs within underlying EBITDA, depreciation, finance costs, the
carrying value of property, plant and equipment and financial
indebtedness. As the impact is dependent on the leases extant at 1
January 2019 and the Group's marginal costs of borrowing at that
date it is not yet possible to fully estimate the effects.
Other IFRSs or IFRS IC interpretations that are not yet
effective that would not be expected to have a material impact on
the Group are shown below:
IFRS 9 Amendments regarding prepayment Effective for annual
features with negative compensation periods beginning on
and modifications of financial or after 1 January 2019
liabilities
IFRS 17 Insurance Contracts Effective for annual
periods beginning on
or after 1 January 2021
IAS 28 Amendments regarding long-term Effective for annual
interests in associates and periods beginning on
joint ventures or after 1 January 2019
IFRS 3 Amendments resulting from Annual Effective for annual
IFRS 11 Improvements 2015-2017 Cycle periods beginning on
IAS 12 or after 1 January 2019
--------- ------------------------------------- -------------------------
Notes to financial information (continued)
2. Basis of preparation (continued)
(f) Following the acquisition of Ladbrokes Coral Group plc the
Group has changed its presentational currency to GBP from the
previous reporting currency which was Euros (EURm). The financial
statements have been presented in millions GBP (GBPm). In line with
the requirements of IAS 21 and to assist users of the financial
statements following this change, the comparative 2017 information
has been re-presented in GBPm.
The exchange rates used to perform the translation were as
follows:
Euro/sterling exchange Dec-17 Jun-17 Dec-16
rate
------------------------- ------- ------- -------
Closing
rate 1.125 1.139 1.173
Average
rate 1.135 1.135 n/a
-------------------------- ------- ------- -------
Following the acquisition of Ladbrokes Coral Group plc, a number
of presentational changes have been made to the financial
statements. These changes have also been reflected in the
comparative information. A summary of the amendments made are as
follows:
- Goodwill of GBP957.5m as at 30 June 2017 (31 December 2017:
GBP972.4m) has been separately disclosed from intangible assets on
the face of the Balance Sheet.
- Progressive prize pools of GBP13.4m as at 30 June 2017 (31
December 2017: GBP16.0m) have been included within trade and other
payables rather than disclosed on the face of the balance
sheet.
- Amortisation of acquired intangibles resulting from IFRS 3
fair value exercise of GBP52.4m as at 30 June 2017 is disclosed
separately from underlying amortisation (31 December 2017:
GBP106.7m).
- Ante-post liabilities of GBP1.2m as at 30 June 2017 (31
December 2017: GBP2.7m) have been recognised within other financial
liabilities rather than within balances with customers.
3. Segment information
The Group's operating segments are based on the reports reviewed
by the Executive management team (who are collectively considered
to be the Chief Operating Decision Maker (CODM)) to make strategic
decisions, and allocate resources.
IFRS 8 requires segment information to be presented on the same
basis as that used by the CODM for assessing performance and
allocating resources, and the Group's operating segments are now
aggregated into the five reportable segments as detailed below:
- Online: comprises betting and gaming activities from online
and mobile operations, Sports Brands include bwin, Coral,
Crystalbet, Eurobet, Ladbrokes and Sportingbet; Gaming Brands
include CasinoClub, Foxy Bingo, Gala, Gioco Digitale, partypoker
and PartyCasino;
- UK Retail: comprises betting activities in the shop estate in
Great Britain, Northern Ireland and Jersey;
- European Retail: comprises all retail activities connected
with the Republic of Ireland, Belgium, Italy and Spain (JV) shop
estates;
- Corporate: includes costs associated with Group functions
including Group executive, legal, Group finance, tax and treasury;
and
- Other segments: includes activities primarily related to
telephone betting, Stadia, Betdaq and on course pitches.
The Executive management team of the new Group have chosen to
assess the performance of operating segments based on a measure of
net revenue, EBITDA and operating profit with finance costs and
taxation considered for the Group as a whole. Transfer prices
between operating segments are on an arm's-length basis in a manner
similar to transactions with third parties.
Notes to financial information (continued)
3. Segment information (continued)
The segment results for the six months ended 30 June 2018 were
as follows:
2018 Online UK Retail European All Other Corporate Elimination Total Group
Retail Segments of internal
revenue
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
NGR 693.0 351.5 67.0 15.3 - (1.7) 1,125.1
VAT/GST (19.2) - - - - - (19.2)
Revenue 673.8 351.5 67.0 15.3 - (1.7) 1,105.9
Gross Profit 467.0 250.4 34.1 11.7 - - 763.2
Contribution 290.6 249.2 32.5 9.7 - - 582.0
------------------------------------- ------- --------- -------- --------- --------- ------------ -----------
Operating costs excluding marketing
costs (122.0) (181.7) (20.0) (8.5) (14.8) - (347.0)
Underlying EBITDA before separately
disclosed items 168.6 67.5 12.5 1.2 (14.8) - 235.0
------------------------------------- ------- --------- -------- --------- --------- ------------ -----------
Share based payments (1.7) (0.2) (0.1) - (3.0) - (5.0)
Depreciation and Amortisation (26.7) (10.7) (4.4) (0.1) (0.2) - (42.1)
Share of joint ventures and
associates - - 0.3 0.4 - - 0.7
------------------------------------- ------- --------- -------- --------- --------- ------------ -----------
Operating profit/(loss) before
separately disclosed items 140.2 56.6 8.3 1.5 (18.0) - 188.6
Separately disclosed items (119.7) (15.0) (1.4) - 87.6 - (48.5)
------------------------------------- ------- --------- -------- --------- --------- ------------ -----------
Group operating profit 20.5 41.6 6.9 1.5 69.6 - 140.1
------------------------------------- ------- --------- -------- --------- --------- ------------ -----------
Net finance expenses (26.5)
------------------------------------- ------- --------- -------- --------- --------- ------------ -----------
Profit before tax 113.6
Income tax 0.2
------------------------------------- ------- --------- -------- --------- --------- ------------ -----------
Profit for the period from
continuing operations 113.8
------------------------------------- ------- --------- -------- --------- --------- ------------ -----------
Profit for the period from discontinued -
operations after tax
---------------------------------------------- --------- -------- --------- --------- ------------ -----------
Profit for the period after
discontinued operations 113.8
------------------------------------- ------- --------- -------- --------- --------- ------------ -----------
The segment results for the six months ended 30 June 2017 were
as follows:
2017 Online UK Retail European All Other Corporate Elimination Total Group
Retail Segments of internal
revenue
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
NGR 376.8 - - 9.8 - 386.6
VAT/ GST (11.8) - - - - (11.8)
Revenue 365.0 - - 9.8 - 374.8
Gross Profit 271.3 - - 1.1 - 272.4
Contribution 192.0 - - (0.3) - 191.7
-------------------------------------- ------ --------- -------- --------- --------- ------------ -----------
Operating costs excluding
marketing costs (78.9) - - (5.5) (6.6) (91.0)
Underlying EBITDA before separately
disclosed items 113.1 - - (5.8) (6.6) 100.7
-------------------------------------- ------ --------- -------- --------- --------- ------------ -----------
Share based payments (3.2) - - - (5.9) (9.1)
Depreciation and Amortisation (13.0) - - - - (13.0)
Share of joint ventures and -
associates - - - - -
-------------------------------------- ------ --------- -------- --------- --------- ------------ -----------
Operating profit/(loss) before
separately disclosed items 96.9 - - (5.8) (12.5) 78.6
Separately disclosed items (53.1) - - (2.5) (31.6) (87.2)
-------------------------------------- ------ --------- -------- --------- --------- ------------ -----------
Group operating profit/(loss) 43.8 - - (8.3) (44.1) (8.6)
-------------------------------------- ------ --------- -------- --------- --------- ------------ -----------
Net finance expenses (14.2)
-------------------------------------- ------ --------- -------- --------- --------- ------------ -----------
Loss before tax (22.8)
Income tax (0.6)
-------------------------------------- ------ --------- -------- --------- --------- ------------ -----------
Loss for the period from continuing
operations (23.4)
-------------------------------------- ------ --------- -------- --------- --------- ------------ -----------
Profit for the period from
discontinued
operations after tax 17.0
-------------------------------------- ------ --------- -------- --------- --------- ------------ -----------
Loss for the period after
discontinued operations (6.4)
-------------------------------------- ------ --------- -------- --------- --------- ------------ -----------
Notes to financial information (continued)
3. Segment information (continued)
Assets and liabilities information is reported internally in
total and not by reportable segment and, accordingly, no
information is provided in this note on assets and liabilities
split by reportable segment.
Geographical information
Revenue by destination for the Group, is as follows:
Six months ended Six months ended
30 June 2018 30 June 2017
GBPm GBPm
----------------------------------------------------- ---------------- ----------------
United Kingdom 542.5 43.1
Rest of the World 563.4 331.7
----------------------------------------------------- ---------------- ----------------
Total 1,105.9 374.8
----------------------------------------------------- ---------------- ----------------
4. Separately disclosed items
Six months Six months
ended ended
30 June 2018 30 June 2017
GBPm GBPm
-------------------------------------- ------------- -------------
Amortisation of acquired intangibles
(1) 126.2 52.4
Corporate transaction costs (2) 48.4 2.0
Legal and onerous contract costs
(3) 12.8 0.7
Integration costs (4) 3.4 9.8
Impairment loss - 1.4
Profit on disposal of assets - 1.1
Movement in fair value of contingent
consideration (5) (142.3) 19.8
Total before tax 48.5 87.2
Exceptional tax credit (19.7) (6.3)
--------------------------------------- ------------- -------------
Total after tax 28.8 80.9
--------------------------------------- ------------- -------------
(1) The Group has incurred GBP126.2m of amortisation charges on
acquired intangible assets primarily arising from the acquisition
of the Ladbrokes Coral Group plc and Bwin in the prior year (2017:
GBP52.4m in relation to assets arising from the acquisition of
Bwin).
(2) The Group incurred GBP48.4m of corporate transaction costs
primarily in relation to the acquisition of Ladbrokes Coral Group
plc (2017: GBP2.0m).
(3) Legal and onerous contract costs include onerous contracts
that have arisen as a result of shop closures and other legal costs
outside the ordinary course of business.
(4) Costs associated with the integration of Ladbrokes Coral
Group plc and GVC businesses (2017: GBP9.8m associated primarily
with the integration of Bwin).
(5) The movement in the fair value of contingent consideration
primarily relates to the change in the market value of the CVR
between the date of acquisition and 30 June 2018, partially offset
by movements in the fair value of the contingent consideration on
other M&A activity from prior years.
5. Taxation
The tax credit for the six months ended 30 June 2018 was GBP0.2m
(30 June 2017: expense of GBP0.6m) of which a credit of GBP19.7m
(30 June 2017: GBP6.3m) related to separately disclosed items. The
effective tax rate before separately disclosed items is 12.0% (six
months ended 30 June 2017: 10.7%).
The current period's charge was lower than the UK statutory rate
of 19% due to lower effective tax rates on overseas profits.
In the Budget on 16 March 2016, the Chancellor announced that
the standard rate of UK Corporation Tax would be reduced from 20%
to 17%. The rate reduced from 20% to 19% on 1 April 2017. A further
reduction to 17% will take effect from 1 April 2020.
The deferred tax assets and liabilities are measured at the tax
rates of the respective territories which are expected to apply to
the year in which the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted
or substantively enacted at the balance sheet date.
Notes to financial information (continued)
6. Dividends
Six months Six months
ended ended
30 June 2018 30 June 2017
GBPm GBPm
------------------------------ -------------- --------------
Final dividend paid 46.2 -
First special dividend paid - 37.2
Second special dividend paid - 38.1
46.2 75.3
------------------------------ -------------- --------------
An interim dividend of 16.0 pence per share was declared by the
directors at their meeting on 13 September 2018. These financial
statements do not reflect this dividend payable. The 2017 final
dividend of 15.2 pence per share (GBP46.2m) was paid in the six
months ended 30 June 2018.
7. Earnings per share
Basic earnings per share has been calculated by dividing the
profit attributable to shareholders of the Company of GBP112.1m (30
June 2017: loss of GBP6.3m) by the weighted average number of
shares in issue during the six months of 446.0m (30 June 2017:
296.1m).
The calculation of adjusted earnings per share before;
separately identified items, foreign exchange movements on
financial indebtedness and gains on derivative financial
instruments, is included as it provides a better understanding of
the underlying performance of the Group. Separately disclosed items
are defined in note 2 and disclosed in note 4.
Six months ended Six months ended
30 June 2018 30 June 2017
GBPm GBPm
---------------------------------------------- --------------------- ----------------------
Profit / (loss) attributable to shareholders 112.1 (6.3)
- from continuing operations 112.1 (23.3)
- from discontinued operations - 17.0
----------------------------------------------- --------------------- ----------------------
Gain arising from financial instruments (45.3) -
Loss arising from foreign exchange debt
instruments 49.6 -
Separately disclosed items after tax (note
4) 28.8 80.9
----------------------------------------------- --------------------- ----------------------
Adjusted profit attributable to shareholders 145.2 74.6
----------------------------------------------- --------------------- ----------------------
- from continuing operations 145.2 57.6
- from discontinued operations - 17.0
Weighted average number of shares (million):
---------------------------------------------- --------------------- ----------------------
Shares for basic earnings per share 446.0 296.1
Potentially dilutive share options and
contingently issuable shares 4.9 6.2
----------------------------------------------- --------------------- ----------------------
Shares for diluted earnings per share 450.9 302.3
----------------------------------------------- --------------------- ----------------------
Six months
Six months ended ended
30 June 2018 30 June 2018
Standard earnings Adjusted earnings
per share per share
Stated in pence 2018 2017 2018 2017
----------------------------------------------- --------- ---------- ------------ --------
Basic earnings per share
- from continuing operations 25.1 (7.8) 32.6 19.5
- from discontinued operations - 5.7 - 5.7
----------------------------------------------- --------- ---------- ------------ --------
From profit/(loss) for the period 25.1 (2.1) 32.6 25.2
----------------------------------------------- --------- ---------- ------------ --------
Diluted earnings per share
- from continuing operations 24.9 (7.8) 32.2 19.1
- from discontinued operations - 5.7 - 5.6
----------------------------------------------- --------- ---------- ------------ --------
From profit/(loss) for the period 24.9 (2.1) 32.2 24.7
----------------------------------------------- --------- ---------- ------------ --------
Notes to financial information (continued)
7. Earnings per share (continued)
On an adjusted basis the potentially dilutive shares have been
included in the calculation of diluted earnings per share despite
the fact that there is a reported statutory loss during the prior
year. The dilutive impact of these shares has been ignored for
statutory earnings per share during the prior year as the
potentially dilutive shares are deemed to be anti-dilutive.
8. Intangible Assets
Goodwill Licences Software Customer Consulting Trade-marks Total
relationships & magazine & brand
names
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---------------- --------------- -------------------- -------------------- ----------------------- ------------
Cost
At 1 January
2017 957.7 - 233.0 169.1 4.2 164.5 1,528.5
Additions - - 22.6 - - - 22.6
Acquisition
of
subsidiaries 31.2 - 2.1 21.2 - 2.0 56.5
Disposed in
the
period (27.2) - (1.2) - - - (28.4)
Exchange
adjustment 40.3 - 10.0 6.9 0.2 7.0 64.4
At 31 December
2017 1,002.0 - 266.5 197.2 4.4 173.5 1,643.6
Additions - - 38.3 - - - 38.3
Disposals - - (0.8) - - - (0.8)
Acquisition of
subsidiaries 2,286.2 15.9 152.1 729.7 - 1,761.8 4,945.7
Exchange
adjustment 20.5 - (1.3) 3.9 - 7.6 30.7
At 30 June
2018 3,308.7 15.9 454.8 930.8 4.4 1,942.9 6,657.5
Accumulated amortisation and
impairment
At 1 January
2017 28.4 - 74.8 36.4 4.2 12.9 156.7
Amortisation - - 65.8 40.3 - 13.2 119.3
Reclassified
as held for
sale - - (1.2) - - - (1.2)
Exchange
adjustment 1.2 - 3.8 1.9 0.2 0.7 7.8
At 31
December
2017 29.6 - 143.2 78.6 4.4 26.8 282.6
Amortisation - 0.5 52.4 85.3 - 13.7 151.9
Disposals - - (0.8) - - - (0.8)
Exchange
adjustment - - (0.4) (0.3) - (0.1) (0.8)
At 30 June
2018 29.6 0.5 194.4 163.6 4.4 40.4 432.9
Net book value
At 31 December
2017 972.4 - 123.3 118.6 - 146.7 1,361.0
At 30 June 2018 3,279.1 15.4 260.4 767.2 - 1,902.5 6,224.6
Management have considered the need for impairment and are
comfortable that, based on the latest business forecasts, no
impairment is required as at 30 June 2018.
Notes to financial information (continued)
9. Property, plant and equipment
Land and Plant and Fixtures
Buildings equipment and fittings Total
GBPm GBPm GBPm GBPm
----------------------------- ----------- ----------- -------------- ------
Cost
At 1 January 2017 4.0 3.4 44.1 51.5
Additions 0.4 1.1 9.4 10.9
Acquisition of subsidiaries - - 0.2 0.2
Disposals - - (0.6) (0.6)
Foreign Exchange 0.2 0.2 1.8 2.2
----------------------------- ----------- ----------- -------------- ------
At 31 December 2017 4.6 4.7 54.9 64.2
Additions 0.5 4.0 27.2 31.7
Acquisition of subsidiaries 14.3 53.2 99.1 166.6
Disposals - - (1.4) (1.4)
Foreign exchange - 0.2 0.8 1.0
----------------------------- ----------- ----------- -------------- ------
At 30 June 2018 19.4 62.1 180.6 262.1
----------------------------- ----------- ----------- -------------- ------
Accumulated depreciation
At 1 January 2017 0.9 2.5 31.4 34.8
Depreciation charge 0.3 1.6 11.9 13.8
Disposals - - (0.4) (0.4)
Foreign Exchange - 0.1 1.5 1.6
----------------------------- ----------- ----------- -------------- ------
At 31 December 2017 1.2 4.2 44.4 49.8
Depreciation charge 0.3 3.3 12.8 16.4
Disposals - - (1.4) (1.4)
Foreign Exchange - 0.2 0.6 0.8
----------------------------- ----------- ----------- -------------- ------
At 30 June 2018 1.5 7.7 56.4 65.6
----------------------------- ----------- ----------- -------------- ------
Net book value
----------------------------- ----------- ----------- -------------- ------
At 31 December 2017 3.4 0.5 10.5 14.4
----------------------------- ----------- ----------- -------------- ------
At 30 June 2018 17.9 54.4 124.2 196.5
----------------------------- ----------- ----------- -------------- ------
Notes to financial information (continued)
10. Loans and borrowings
Six months ended Year ended Six months
30 June 2018 30 Dec 2017 ended
GBPm GBPm 30 June 2017
GBPm
Current
Euro denominated loans 4.0 0.2 1.6
USD denominated loans 7.1 - -
Sterling denominated loans 12.0 - -
23.1 0.2 1.6
Non-current
Euro denominated loans 808.5 262.3 216.5
USD denominated loans 592.1 - -
Sterling denominated loans 791.1 - -
2,191.7 262.3 216.5
Upon completion of the Ladbrokes Coral Group plc acquisition the
Group repaid existing Ladbrokes Coral Group plc debt of GBP660.2m,
being the amount drawn on the existing revolving credit facility
and GBP200.0m of existing bank loans. As part of the Group's
refinancing three new term loans were drawn, in addition to the
existing EUR300m term loan and the new Group revolving credit
facility of GBP550.0m which allowed up to GBP495.0m to be drawn as
a loan and GBP55.0m as letters of credit. All three new term loans
have a 6 year term, with expiry at the end of March 2024. The
GBP275m new term loan attracts interest of LIBOR +3.5%, the EUR625m
new term loan attracts interest of EURIBOR +2.75% (with 0% floor on
EURIBOR) and the $800m new term loan attracts interest of US$ LIBOR
+2.50%.
In addition to the existing EUR300m term loan present in Group
pre acquisition, two Ladbrokes Coral Group plc bonds of GBP100m and
GBP400m acquired remain outstanding. These two loans attract
interest of 5.125% and the loans expire in September 2022 and
September 2023 respectively.
As at 30 June 2018 GBP550.0m of committed bank facilities were
undrawn (31 December 2017: GBP62.2m).
11. Provisions
Onerous Restructuring Litigation Total
lease provision (2) and regulation
(1) (3) GBPm
GBPm GBPm GBPm
At 1 January 2017 3.8 - 3.1 6.9
Provided - - -
Utilised (1.1) - (1.1)
Foreign exchange 0.2 - 0.2 0.4
At 31 December 2017 2.9 - 3.3 6.2
On acquisition 70.7 2.7 22.7 96.1
Provided 11.0 - 0.3 11.3
Utilised (3.2) (1.4) (0.4) (5.0)
Released (2.4) - - (2.4)
Discount unwind 0.9 - - 0.9
Foreign Exchange (0.1) - (0.1) (0.2)
At 30 June 2018 79.8 1.3 25.8 106.9
Of the total provisions at 30 June 2018, GBP35.1m (31 December
2017: GBP1.1m) is current and GBP71.8m (31 December 2017: GBP5.1m)
is non-current.
(1) The Group is party to a number of leasehold property
contracts. Provision has been made against those leases where the
contract is onerous. Provisions have been based on management's
best estimate of the minimum future cash flows to settle the
Group's obligations, taking into account the risks associated with
each obligation, discounted at a risk free interest rate.
(2) Restructuring provisions relate to redundancy costs.
(3) Other provisions include legal, insurance and regulatory
provisions associated with certain claims.
Notes to financial information (continued)
12. Net debt
The components of the Group's net debt are as follows:
30 June 31 December
2018 2017
GBPm GBPm
Current assets
Cash and short-term deposits 444.6 270.0
Current liabilities
Current obligations under finance leases (0.4) -
Interest bearing loans and borrowings (23.1) (0.2)
Non-current liabilities
Interest bearing loans and borrowings (2,191.7) (262.3)
Accounting net debt (1,770.6) 7.5
Cash held on behalf of customers (213.4) (101.7)
Fair value swaps held against debt instruments (derivative
financial assets) 30.4 -
Short term investments 4.4 4.4
Balances held with payment service providers 62.2 48.1
Adjusted Net debt (1,887.0) (41.7)
13. Business combinations
Business combinations are accounted for using the acquisition
method. Identifiable assets and liabilities acquired and contingent
liabilities assumed in a business combination are measured at their
fair values at the acquisition date. The identification and
valuation of intangible assets arising on business combinations is
subject to a degree of judgement. We engaged independent third
parties, including Duff and Phelps Limited to assist with the
identification and valuation process. This was performed in
accordance with the Group's policies. The excess of the cost of
acquisition over the fair value of the Group's share of the
identifiable assets acquired is recorded as goodwill. Costs related
to the acquisition are expensed as incurred.
Summary of acquisitions
On 28 March 2018 GVC Holdings Plc acquired the entire share
capital of Ladbrokes Coral Group plc which was effected by means of
a Court-sanctioned scheme of arrangement of Ladbrokes Coral Group
plc under Part 26 of the Companies Act 2006. Following
considerations of IFRS 3 'Business combinations' the directors have
determined that for accounting purposes GVC Holdings Plc acquired
Ladbrokes Coral Group plc.
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 have been presented on
a provisions basis. Fair values were determined on the basis of an
initial assessment performed by an independent professional
expert.
Notes to financial information (continued)
13. Business combinations (continued)
Details of the purchase consideration, the net assets acquired
and goodwill are as follows:
Provisional
Fair value
GBPm
Intangible assets 2,622.0
Property, plant and equipment 165.5
180.0
Retirement benefit asset -
Investments 49.2
Inventories 1.2
Trade and other receivables 130.8
Cash and cash equivalents 191.8
Interest bearing loans and borrowings (1,197.3)
Deferred tax asset 163.1
Deferred tax liability (502.4)
Trade and other payables (611.9)
Provisions for liabilities and charges (96.1)
Total 1,095.9
Net assets acquired 1,095.9
Goodwill 2,248.8
Cash 630.4
Contingent value right (CVR) 219.0
Equity instruments 2,495.3
Total consideration 3,344.7
The goodwill recognised relates predominantly to the synergies
anticipated from combining the businesses post the acquisition of
Ladbrokes Coral and intangible assets that do not qualify for
separate recognition, notably workforce.
The fair value of the contingent value right consideration was
based on observable market prices as at the date of the
acquisition. Further details of the terms of the contingent value
right can be found on the Group's website www.gvc-plc.com.
The acquired Ladbrokes Coral Group plc business contributed
revenues of GBP656.6m and net profit of GBP42.9m pre the effect of
any fair value adjustments to the Group for the period post
acquisition up to 30 June 2018 (net profit of GBP66.2m excluding
amortisation of acquired intangibles). If the acquisition had
occurred on 1 January 2018, consolidated proforma revenue and net
profit for the period ended 30 June 2018 would have been
GBP1,694.3m and GBP54.5m respectively before the effect of fair
value adjustments, deal related costs and the release of the
contingent value rights consideration (GBP204.5m pre separately
disclosed items).
On 11th April 2018 the Group acquired a 51% holding in Mars LLC
(hereon referred to as Crystalbet). The acquisition of the share
capital resulted in control being obtained and as a result
Crystalbet is consolidated as a subsidiary from this point
forward.
Crystalbet operates predominantly via an online platform across
the sports betting and gaming markets and provides the GVC group
with access into the Georgian market.
Consideration consisted of GBP36.4m for its 51% share in
Crystalbet with GBP35.0m recognised as a non-controlling interest
for the 49% remaining holding not acquired by the Group. In
accordance with IFRS 3 'Business Combinations', the Group has fair
valued the separately identifiable assets and liabilities and
recognised resulting goodwill of GBP37.4m.
The share purchase agreement further provides an opportunity for
the group to purchase the remaining 49% of share capital, based on
the satisfaction of certain second completion requirements. Based
on the expectation that the second completion requirements will be
met, contingent consideration has been recorded at GBP44.6m. The
estimate of contingent consideration has been based on forecast
results for Crystalbet and the likely payment due under the second
completion conditions.
Notes to financial information (continued)
14. Note to the statement of cash flows
Six months Six months
ended ended
30 June 30 June
2018 2017
GBPm GBPm
Profit before tax and net finance expense including
discontinued operations 140.1 8.6
Impairment - 1.4
Non-cash movement in fair value of contingent consideration (142.3) 19.8
Profit on disposal of assets - (1.1)
Depreciation of property, plant and equipment 16.4 7.7
Amortisation of intangible assets 151.9 57.7
Share-based payments charge 5.0 9.1
(Increase)/decrease in trade and other receivables (99.4) (3.1)
(Decrease)/increase in trade and other payables (10.1) (24.9)
Increase/(decrease) in provisions 3.9 (0.4)
Share of results from joint venture (0.7) -
Cash generated by operations 64.8 74.8
Profit before tax and net finance expense including discontinued
operations includes GBPnil (six months ended 30 June 2017:
GBP17.2m) associated with discontinued operations.
15. Related party transactions
During the period, Group companies entered into the following
transactions with related parties who are not members of the
Group:
Six months Six months
ended ended
30 June 30 June
2018 2017
GBPm GBPm
----------
Equity investment
- Joint venture (1) 1.2 -
Sundry expenditures
- Associates (2) 34.2 0.9
----------
(1) Equity investment in Sportium Apuestas Deportivas SA.
(2) Payments in the normal course of business made to Satellite
Information Services (Holdings) Limited.
The following table provides related party outstanding
balances.
30 June 31 December
2018 2017
GBPm GBPm
Loan balances outstanding
- Joint venture 1.8 -
Other receivables/(payables) outstanding
- Associates (1.3) 0.2
- Joint venture 0.6 -
Notes to financial information (continued)
16. Financial instruments
Detail of the Group's borrowing and currency denomination is set
out in note 10.
Fair value of financial instruments
30 June 30 June
2018 31 June 2017 31 June
Carrying 2018 Carrying 2017
value Fair value value Fair value
GBPm GBPm GBPm GBPm
----------
GBP100.0m 5.1% bond 106.7 103.3 - -
GBP400.0m 5.1% bond 428.7 414.5 - -
----------
The fair value of the bonds are classified as a level 1 fair
value measurement for disclosure purposes, as the fair value is
determined based on quoted prices in active markets for identical
liabilities. There are no other financial instruments where there
is a material difference between their carrying value and fair
value.
The major component of the Groups financial assets measured at
fair value consist of currency swaps held against debt instruments
GBP30.4m (30 June 2017: GBPnil, 31 December 2017: GBPnil).
The major components of the Groups financial liabilities
measured at fair value consist of; deferred and contingent
consideration GBP150.8m (30 June 2017: GBP3.8m, 31 December 2017:
GBP18.2m), Ante post liabilities GBP13.8m (30 June 2017: GBP1.2m,
31 December 2017: GBP2.7m), and financial guarantee contracts
GBP2.9m (30 June 2017: GBPnil, 31 December 2017: GBPnil).
Financial assets and financial liabilities measured at fair
value in the Statement of Financial Position are grouped into three
levels of a fair value hierarchy. The three levels are defined on
the observability of significant inputs to the measurement, as
follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
- Level 2: inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
or indirectly; and
- Level 3: inputs for the asset or liability that are not based on observable market data
The Group's financial assets and liabilities that are measured
at fair value after initial recognition fall under the 3 levels of
the fair value hierarchy as follows:
- Level 1 - GBP30.4m assets (30 June 2017: GBPnil, 31 December
2017: GBPnil), and GBP58.4m liabilities (30 June 2017: GBPnil, 31
December 2017: GBPnil).
- Level 2 - GBPnil assets (30 June 2017: GBP3.2m, 31 December
2017: GBPnil), and GBPnil liabilities (30 June 2017: GBPnil, 31
December 2017: GBP10.7m).
- Level 3 - GBP3.2m assets (30 June 2017: GBP2.5m, 31 December
2017: GBP2.9m), and GBP150.8m liabilities (30 June 2017: GBP5.0m,
31 December 2017: GBP31.6m).
Measurement of fair value of financial instruments:
The Group's finance team performs valuations of financial items
for financial reporting purposes, including Level 3 fair values, in
consultation with third-party valuation specialists for complex
valuations. Valuation techniques are selected based on the
characteristics of each instrument, with the overall objective of
maximising the use of market-based information.
The valuation technique for the available for sale assets and
contingent and deferred consideration assets were based on
discounted cashflow forecasts using the weighted average cost of
capital and expected cashflows.
Notes to financial information (continued)
17. Contingent liabilities
During the prior year, the Group received a tax audit assessment
from the Greek Audit Centre for Large Enterprises in respect of
2010 and 2011 (the "Assessment"). During this period the business
was owned by Sportingbet plc, prior to its acquisition by GVC in
2013. The total amount of the Assessment is EUR186.77m,
substantially higher than total Greek revenues generated by the
subsidiary during the relevant periods.
Whilst the directors, based on tax and legal advice received,
believe that there are strong grounds for appeal, on 28 February
2018 , in order to enable the Group's subsidiary to continue to
trade normally, the Group entered into a payment scheme where
payments are held on account by the relevant authority. As at 30
June, GBP46.6m has been paid by the Group under this
arrangement.
Whilst there have been very few developments on this matter
since entering into the payment scheme, the Directors continue to
be of the view that, based on legal and tax advice received, the
Group has strong grounds for appeal and it is not probable that a
liability will arise. As such, following the resolution of this
matter, the Directors believe that the Group will recover the
amounts paid through either a repayment or deduction from future
tax liabilities. The Group has therefore recognised a receivable of
GBP46.6m in relation to the payments made as at 30 June 2018. This
receivable is recorded within trade and other receivables on the
Balance Sheet.
18. Subsequent events
On 30 July, the Group announced the establishment of a 50/50
joint venture with MGM Resorts International ("MGM Resorts") to
create a world-class sports betting and online gaming platform in
the United States. This joint venture is well-positioned to engage
in the new opportunities created by the recent U.S. Supreme Court
decision overturning the U.S. federal Professional and Amateur
Sports Protection Act, or PASPA. The Group will invest $100m in the
joint venture under the agreement with MGM Resorts. Further details
of the agreement with MGM Resorts are provided on the Group's
website www.gvc-plc.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FKBDQCBKDKCD
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