TIDMFLTR
RNS Number : 7147I
Flutter Entertainment PLC
09 August 2023
9 August 2023
Flutter Entertainment plc - 2023 Interim Results
US business reached profitability inflection point driving Group
earnings transformation;
H1 pro forma EBITDA +37%
Flutter Entertainment plc (the "Group") announces interim
results for six months ended 30 June 2023.
Reported(1) Adjusted(2)
H1 H1 H1 H1
2023 2022 2023 2022 CC(3)
GBPm GBPm YoY % GBPm GBPm YoY % YoY %
--------------------------- ------- ------- ----- ------ ----- ----- -----
Average monthly players(4)
('000s) 12,285 9,635 +28%
-----
Group Revenue 4,809 3,388 +42% 4,809 3,388 +42% +38%
Group EBITDA(5) 765 434 +76% 823 476 +73% +72%
-----
Group pro forma EBITDA 823 596 +38% +37%
-----
Profit/ (loss) after
tax 128 (112) 420 177 +138%
-----
Earnings/ (loss) per
share (pence) 73.8p (64.7p) 237.5p 97.2p +144%
-----
Net Debt at period end(6) (4,634) (3,004)
--------------------------- ------- ------- ----- ------ ----- ----- -----
Pro forma references include Sisal for a full 6-month period in
both 2022 and 2023. See appendix 2 for a reconciliation of adjusted
pro forma to statutory numbers. Any differences due to
rounding.
Operational Highlights:
-- Group: Delivery of strategic goals drove Flutter's growth
engine; strong H1 player momentum with average monthly players
("AMPs") +28%, driven by US growth (+43%) and the addition of
Sisal, which has performed strongly since joining the Group (Group
pro forma AMPs +18%)
-- US: Reached profitability inflection point, FanDuel generated
$100m (GBP79m) Adjusted EBITDA in H1 (US division $63m (GBP49m)).
Scale advantage compounding with revenue +63%
- Consolidating clear #1 position in sportsbook, with 47% market share in Q2(7)
- Margin benefit over the market expanded to 410bps; new NBA
markets further evidence of sustainable product leadership
- Improved iGaming proposition drove market share gains to 23% in Q2
-- Group ex-US: Growth through regulatory headwinds with pro forma revenue +8% and EBITDA +4%
- UK & Ireland (revenue +13%) : Product enhancements and
efficient generosity underpinning recreational customer growth and
driving market share gains in both sports and gaming
- Australia (revenue -1%): Effective retention of enlarged
customer base (AMPs +7%), offset by Covid spend reversion and point
of consumption tax changes
- International (revenue +8%): Division at a growth inflection
point, 'Consolidate and Invest'(8) markets driving performance, now
comprise 77% of divisional revenue and growing at +19%
-- Sustainability: Positive Impact Plan progressing well; Play
Well(9) tool usage, +7 percentage points to 42% with 34% female
representation in leadership as we move closer to 2026 goal of
40%
-- US listing: Working towards a listing in late Q4 2023 or early Q1 2024
Financial Highlights:
-- Reported revenue growth of 38% for Group, benefiting from an
exceptionally strong US performance and strong momentum in UK&I
and International, along with the addition of Sisal in August 2022
(pro forma revenue +24%)
-- Group at earnings transformation point with Adjusted EBITDA +72% to GBP823m (pro forma +37%)
- US Adjusted EBITDA of GBP49m ($63m) versus a GBP132m loss in H1 2022
- Group ex-US Adjusted EBITDA +24% (pro forma +4%), strong top
line momentum and the addition of Sisal, which has performed
strongly in H1, partly offset by Australian tax changes
-- Reported profit after tax of GBP128m (H1 2022: Loss of
GBP112m) after GBP314m charge for amortisation of acquired
intangibles
-- Adjusted basic earnings per share ("EPS") of 237.5p, 144%
higher than H1 2022; Reported EPS of 73.8p from loss of 64.7p in H1
2022 reflected swing to profitability in current period
-- Net debt of GBP4.6bn at 30 June 2023 (31 December 2022
GBP4.6bn) and pro forma leverage ratio of 3.3 times (31 December
2022 3.9 times)(6)
Outlook:
-- H2 has started in line with expectations. Assuming normalised
sports results for H2, we anticipate full year Adjusted EBITDA to
be broadly in line with market expectations:
- US: Net revenue of between GBP3.6bn - GBP3.9bn ($4.5bn -
$4.9bn) and Adjusted EBITDA of between GBP90m - GBP190m ($120m -
$240m)
- Group ex-US Adjusted EBITDA of between GBP1.44bn - GBP1.6bn,
with strong momentum in the UK&I and International, offset by
softer than expected market conditions in Australia
Peter Jackson, Chief Executive, commented:
"The first half of 2023 marks a pivotal moment for the Group,
with our US business now at a profitability inflection point,
helping transform the earnings profile of the Group and
significantly enhance our financial flexibility.
With our divisions and their brands benefitting from the
competitive advantages provided by the Flutter Edge, Group
performance in the period was very strong, with delivery of our
strategic objectives resulting in pro forma EBITDA growth of 37%.
Our recreational player base increased to over 12 million monthly
players, and importantly, more players than ever interacting with
our safer gambling tools, aided by a GBP45m investment in our Play
Well strategy in H1.
The US delivered another exceptional performance. We acquired
over two million new players in the period, cemented our leadership
position in sports and grew our share in iGaming to 23%. The US
business was profitable in the first half with FanDuel generating
over $100m in EBITDA. This profit profile provides us with a clear
platform to invest materially in the second half, as we strive to
continuously improve our customer offering. Our player acquisition
strategy has consistently delivered, generating excellent returns
on investment, embedding even greater value into our customer base,
and increasing our future profitability.
In the UK, we took market share due to ongoing product
enhancements, while in International, Sisal continues its strong
trajectory since its acquisition in August 2022. This combined
momentum helped offset the reduction in Australian profitability,
due to more challenging COVID-related comparatives and a changing
tax environment.
The second half of the year has started well and we look forward
to adding a US listing for Flutter shares later this year or early
next year."
Analyst briefing:
The Group will host a questions and answers call for institutional
investors and analysts this morning at 9:30am (BST). Ahead of that
call, a presentation will be made available on the Group's corporate
website ( www.flutter.com/investors ) from 8:00am. To dial into the
conference call, participants need to register here where they will
be provided with the dial in details to access the call.
Contacts:
Investor Relations:
Paul Tymms, Investor Relations + 44 75 5715 5768
Ciara O'Mullane, Investor Relations + 353 87 947 7862
Liam Kealy, Investor Relations + 353 87 665 2014
Press:
Kate Delahunty, Corporate Communications + 44 78 1077 0165
Lindsay Dunford, Corporate Communications + 44 79 3197 2959
Rob Allen, Corporate Communications + 44 75 5444 1363
Billy Murphy, Drury Communications + 353 1 260 5000
James Murgatroyd, FGS Global + 44 20 7251 3801
-------------------------------------------------- --------------------
Business review (2-5)
Flutter is the world's number one sports betting and iGaming
operator with access to large and fast-growing market
opportunities. The US market is expected to be worth more than
$40bn by 2030, while outside of the US, the market is already worth
GBP263bn, growing at a projected 9% CAGR over the next five
years(10) . Flutter has an unparalleled portfolio of products,
diversified geographic footprint and the benefit of the combined
power of the Group, the Flutter Edge, which empowers Flutter's
brands to win in their respective markets. The Flutter Edge
encapsulates the Group's distinctive, unique, competitive advantage
by providing our brands with access to our talent, technology,
product and capital.
This is underpinned by a clear strategy to (i) invest to win in
the US, (ii) grow our gold medal positions in our core markets and
(iii) build on our network and invest for leadership across
international markets. This is achieved in conjunction with our
sustainability strategy, our Positive Impact Plan.
The Group is at an earnings transformation point, with our US
business now profitable following five years of player acquisition
investment. Our existing US player base is now of sufficient scale
to more than offset the ongoing cost of future player acquisition,
which will enable significant future profit growth. The Group ex-US
business has consistently delivered revenue growth of 5%-10% and
our International "Consolidate and Invest"(8) markets provide the
platform for continued high levels of future growth.
The execution against our clear and consistent strategy drives
the Group's financial growth engine:
-- Sustainable revenue growth: Expanding the Group's
recreational customer base and growing player value through product
innovation and generosity efficiency. As noted above, there are
significant revenue growth opportunities for both the US and ex-US
businesses.
-- Margin benefits : Increasing the efficiency of our marketing
investment and the operating leverage derived from the Group's
Flywheel combine to deliver high EBITDA margins. Our rapid US
growth will also drive accretion in the Group's profitability
margin.
-- Significant cashflow generation: Profits are converted into
cash at a high rate. Low levels of capital intensity due to the
scalable nature of our technology platforms, and positive working
capital from our expanding business, will in turn drive rapid
deleveraging.
-- Disciplined capital allocation: Significant scope to invest
capital at attractive returns across:
(i) Highly disciplined organic investment: The Group's
sophisticated customer acquisition cost (CAC), life time value
(LTV) and customer relationship management (CRM) models and
algorithms provide a highly disciplined evaluation framework to
drive very high returns from our investment in customer growth and
retention.
(ii) Value creative M&A: Clear criteria for acquiring
bolt-on, local-hero brands, with podium positions in high growth
markets, and complemented in the post acquisition period by the
benefits of the Flutter Edge. This approach has proved very
successful, as demonstrated by the acquisitions of FanDuel,
Adjarabet, Junglee, tombola and Sisal. There remains significant
further M&A potential to add market leading businesses in
regulated markets where the Group does not have a presence.
(iii) Returns to shareholders: The Group's projected profit
growth and significant cash generation will drive rapid
deleveraging and provide significant future balance sheet capacity.
Capital that cannot be effectively deployed in (i) and (ii) will be
returned to shareholders.
The combination of margin benefits, cashflow generation and
disciplined capital allocation is expected to drive earnings per
share growth and long term value creation.
Driving sustainable growth is central to our long term value
creation, and we made further progress during H1 through our
Positive Impact Plan. Under our Play Well pillar we increased safer
gambling tool usage year on year across the Group by 7 percentage
points to 42% (9) and we stepped up our investment in safer
gambling initiatives by 31% to GBP45m. We continue to strive for
increased diversity, equity and inclusion under our Work Better
pillar with 34% female representation in leadership roles in the
first half of the year, well on track to meet our 2026 goal of 40%.
Our efforts to Do More in our Communities continued to improve
lives with almost 460,000 lives improved since launch. We also
remain committed to reducing our impact on the environment and
climate, and during H1 we used our SBTi baselines established in
2022 to set a Net Zero date of 2035.
H1 2023 review
The Group delivered a strong performance in H1 with pro forma
AMP and revenue growth of 18% and 24% respectively, driving pro
forma Adjusted EBITDA 37% higher to GBP823m. Our US business grew
revenue by 63% in the half and generated GBP49m in Adjusted EBITDA.
In Group ex-US, pro forma revenue grew 8% driven by strong momentum
in our UK and Ireland (revenue +13%) and International (revenue
+8%, reported +74%) divisions partly offset by challenging
comparatives in Australia (revenue -1%). This resulted in a pro
forma Group ex-US Adjusted EBITDA increase of 4% (reported +24%),
with top line growth in UK and Ireland (Adjusted EBITDA +24%) and
International (Adjusted EBITDA +8%, reported +103%) being partly
offset in Australia (Adjusted EBITDA -27%) by point of consumption
("POC") tax changes.
Delivering on our strategy
(i) Invest to win in the US
FanDuel delivered another outstanding performance in the first
half. US revenue grew 63% from continued strong momentum in our
sportsbook and gaming businesses, along with favourable sports
results. This resulted in continued outperformance in the US market
with a 47% share in online sports betting for Q2 and 23% share of
online iGaming(7) .
We have a clear strategy for success in the US to (i) extend our
#1 US sportsbook position, (ii) grow our iGaming proposition and
(iii) strengthen and leverage the Flywheel. At our Capital Markets
Day ("CMD") in November 2022, the FanDuel team outlined how this
strategy is driving our market leadership.
The combination of the Flutter Edge with the FanDuel Advantage
of (i) acquiring customers more efficiently (ii) retaining
customers for longer and (iii) growing customer value better than
competitors is delivering results in sports.
-- Acquiring customers more efficiently: In H1, FanDuel acquired
over two million new players, a new record, and an 18% increase on
the volume acquired in the comparable prior year period. This
reflected significant acquisition in the 2023 launched states of
Ohio and Massachusetts, along with continued strong momentum in
more mature states. This has been achieved while keeping the
projected payback period on the acquisition investment below 18
months.
-- Retaining customers for longer by having the best sports
product and best customer experience framed around disciplined
promotions. In H1, leveraging our proprietary pricing and risk
management capabilities, we innovated further on our market leading
product by launching a number of new quick duration, simple, NBA
player prop markets (e.g. markets based on a player's performance
by quarter). During the NBA playoffs, approximately one-third of
our players engaged with this new offering. Further innovations are
being developed to maintain our product leadership.
-- Growing customer value by using the Flutter Edge to drive a
structural margin advantage. FanDuel's expected gross win margin
increased by 170 basis points year-on-year driven by higher
adoption of our Same Game Parlay products and improvements in
pricing accuracy. This extended our pricing advantage over the rest
of the industry to 410 basis points (i.e. 51% higher), a 60 basis
point expansion of our advantage versus 2022(11) .
In iGaming, delivery against our strategic priorities resulted
in an improved gaming performance. In H1, we have:
-- Grown FanDuel Casino as a brand that resonates with iGaming
customers: 38% increase in the number of new casino-first
players.
-- Improved the breadth of our product offering: Launched the
FanDuel Casino branded live casino in New Jersey along with adding
personalised game recommendations to overall game play.
-- Delivered engaging promotional tools: First in the US market to launch daily jackpots.
The combination of these items drove FanDuel iGaming AMPs 52%
higher in H1 and a three percentage point year on year increase in
our iGaming market share to 23% in Q2.
Future modelling framework
The uncertain timing, and associated cost, of new state launches
add complexity in forecasting short-term revenue and profit growth
in our US business. As the US market evolves, we expect the states
that have already regulated for sports betting and gaming to drive
significant profitability for the Group through a combination of
top line growth and operating leverage. Partly offsetting this will
be the significant short-term cost incurred in investing in
acquiring new players as we launch in additional states.
Existing states: At our CMD, we provided a view on the US
addressable market in 2030. We are now providing an estimate of
what we think market growth for regulated states could look like in
the medium-term. We estimate that for pre-2022 states(12) , the
market could increase at a compound annual growth rate ("CAGR") of
between 15-20% from 2022 to 2025. In the same period, we believe
that the combined market CAGR of 2022 and 2023 state launches(12)
could be between 60-70% off the 2022 base levels, aided by new
state launches in 2023.
If the market achieves these levels of growth, this could
potentially reduce our costs as a percentage of revenue, versus H1
2023 levels, in 2024 and 2025 by the following ranges:
Existing states
Potential 2024/25
reduction vs H1
As a % of revenue 2030 Target H1 2023 Actual 2023
-------------------- ------------- -------------- -----------------
Currently within
Cost of sales % 47.5% - 52.5% 50% range
Sales and marketing 5.5 - 6.5 ppts
% 12.5% 27% per annum
Other operating
costs % 10% 20% 1ppt per annum
-------------------- ------------- -------------- -----------------
Future state launches : New states are materially loss making in
the first twelve months of operation before turning contribution
positive in months 13-24. For example, Ohio, which accounts for
3.4% of the US population, launched on 1 January 2023 and the loss
incurred from the launch to 30 June 2023 was approximately $120m
after adjusting for positive sports results in the period. We do
not expect to incur significant losses in H2. Currently, we
estimate that states representing an additional 4% and 5% of the
population will regulate sports betting in 2024 and 2025
respectively. The Ohio template is a good framework for considering
the financial profile of these states in the period post
launch.
(ii) Grow our gold medal positions in our core markets
UK & Ireland
Strong online momentum continued in our UK & Ireland
division during the first half. Our portfolio of market leading
brands took significant share across both sports and gaming, with
AMPs +10% in H1 and reaching a record 4.1m in Q2. This drove H1
revenue growth of 13% and 24% higher Adjusted EBITDA. Delivering a
best-in-class product proposition by leveraging the Flutter Edge,
underpinned this excellent performance. We increased our emphasis
on personalised generosity including disciplined deployment of
value enhancing spend. This led to increases in customer
acquisition, retention and value.
Our leading Betbuilder products are powered by the broadest
depth of content, and this helped drive both new customer
acquisition up 11%, and strong retention levels, as evidenced by
90% of World Cup sportsbook customers from Q4 2022 still playing
with us in H1. Penetration of our Betbuilder products also
increased, driving structural margin improvements of 150 basis
points in H1.
Our accelerated focus on personalised generosity ensures we
deliver the right value to customers at the right time, with
efficiency improvements driving a 220 basis point reduction in
promotional spend as a % of normalised gross gaming revenue(13) in
Q2 . This was achieved while simultaneously driving record AMP
volumes.
Our gaming brands benefited from adding multiple new industry
leading games to our portfolio with expanded Live Casino content
for Sky Vegas, as well as branded online slots content for Paddy
Power. Conversion of sports customers to our gaming proposition
reached record levels with strong cross-sell rates benefiting from
excellent World Cup customer retention and an improved customer
journey for Sky Bet customers. We continued to focus on efficient
and segmented generosity across our gaming proposition which led to
growth in customer value and record AMP volumes, growing 13% in
H1.
We also took share across our retail estate with revenue growth
of 11% in H1 and EBITDA growth of 44%. This was despite the
industry-wide high levels of cost inflation impacting our retail
business. Our excellent performance was driven by a leading product
offering, with our estate benefiting from investment in our product
proposition in H2 2022 as well as a focus on efficient generosity
to grow customer value.
Australia
Sportsbet AMPs increased 7% with strong retention of our
enlarged player base from the Covid pandemic . Revenue was broadly
flat with growth of 3% in Q2 being offset by a 4% decline in Q1,
which was more impacted by the challenging Covid comparatives.
Adjusted EBITDA declined 27% due to (i) POC tax changes which cost
GBP33m and drove a 540 basis point increase in cost of sales as a
percentage of net revenue to 52.8%, (ii) additional marketing spend
of GBP10m to defend our leadership position and (iii) increased
other operating costs to expand our product teams to enable more
customer facing content and, inflationary cost pressures.
The Australian market is currently undergoing a period of
disruption due to POC tax increases and a post-COVID softening of
consumer demand, most notably in racing. Sportsbet was a
disproportionate beneficiary of the Covid tailwinds, and as such,
is also being disproportionally adversely impacted from the unwind.
The softer racing market is expected to continue into H2, resulting
in lower market growth expectations, which will impact Sportsbet
profitability.
However, the sports segment of the market has shown continued
growth, with Sportsbet's performance particularly strong helped in
part by the evolution of our product, e.g. Same Game Multi .
Sportsbet has a strong heritage in leveraging its scale and
superior product expertise to win in the market. This continued in
H1 with expansion of our Same Game Multi Tracker product to the NRL
and further evolution of social betting product, Bet With Mates, by
adding player statistics and chat functionality. Sportsbet's
significant scale advantage (clear #1 with a 48% market share in FY
2022)(14) , and superior product provides us with confidence around
the future trajectory of our Australian business as it navigates
this period of change.
(iii) Build on our network and invest for leadership across
international markets
International
We have built our International division to a growth inflection
point. We grew revenue 74% and Adjusted EBITDA by 103% to GBP284m,
reflecting strong growth in our customer base and the addition of
Sisal which has performed strongly since joining the Group in
August 2022 (pro forma revenue +8%, Adjusted EBITDA +8%).
Our International business is segmented into four market types:
(i) Consolidate existing #1 positions, (ii) Invest for leadership
in high growth markets, (iii) Optimise returns, and (iv) Maintain
an existing position. Consolidate and Invest markets, which are our
fastest growing opportunity, represent 77% of the division's
revenue, up five percentage points when compared with the prior
year, and represent 71% of the division's contribution. We have
built a sustainable foundation which positions us well to
capitalise on the future growth in these markets. Revenue from
regulated or regulating markets is 97% of Group revenue, with no
unregulated market representing more than 0.4% of Group
contribution. Our scale and geographic diversification means that
we are exceptionally well positioned to navigate industry and
regulatory changes across our markets such as the recent proposed
tax changes in India(15) .
We operate a diversified product portfolio across these markets
encompassing leading sports betting, casino and poker products.
Access to the Flutter Edge powers this product leadership, a key
driver of both customer acquisition and retention. With the
addition of Sisal we have now also added a market leading lottery
product to our portfolio. This has already proved an important
route to new markets with a lottery-led regulatory framework such
as Turkey, and will also act as a future path to additional
lottery-led markets for Flutter going forward.
Performance in H1 was underpinned by the above, driving strong
growth across our Consolidate and Invest markets. In Italy revenue
grew 17% as our gold medal brand, Sisal, delivered excellent online
cross-sell via a market leading product. In Georgia a refreshed
generosity proposition delivered revenue growth of 10% while
increased content and a localised generosity strategy grew revenue
by 15% in Spain. Turkey was our second largest market in H1 with
growth of 109% through market leading customer experience across
online and retail. In India, leveraging Flutter expertise and
access to capital, Junglee delivered strong growth with revenue 54%
higher.
There is a clear pathway to meaningful further growth with a
sizeable International addressable market(10) of GBP227bn in 2022,
of which over GBP120bn is currently regulated or regulating. Our
Consolidate and Invest markets are projected to benefit from 44%
GDP growth in the next 5 years(16) and our current presence here
represented approximately 20% of the total regulated opportunity
with a significant untapped, regulated market where Flutter
maintains a subscale share. This expansion potential, when combined
with International's stable of market-leading brands each empowered
by the Flutter Edge, presents a significant opportunity to build
and buy further podium positions in line with our strategy and
embed future value.
Capital structure(6)
The Group had gross debt of GBP5,321m(17) at 30 June 2023 and a
net debt position of GBP4,634m (31 December 2022: GBP4,644m), which
represents a pro forma leverage ratio of 3.3x (31 December 2022
3.9x). The Group typically generates significant free cash flow,
with H1 impacted by seasonality in working capital. This adverse
working capital movement is expected to unwind in H2. These
positive cash flows and the future profitability profile of the
Group, in particular US profit growth, will facilitate rapid
de-levering. The Group is committed to running an efficient balance
sheet. As the business both rapidly de-levers, and gains an
additional US listing, the Group will consider what is an
appropriate level of leverage, as well as the best mechanism for
returning any excess funds to shareholders.
Other updates
US listing
In H1, Flutter shareholders voted overwhelmingly in favour of
Flutter having an additional listing of shares on a US exchange. We
are working towards attaining this additional listing in late Q4
2023 or early Q1 2024. This will also provide the potential to
pursue, as a second phase, moving our primary listing from the
London Stock Exchange to the US, should shareholders deem this
appropriate. In connection with the additional listing, we expect
to prepare our full year 2023 financials in US GAAP and in US
dollars.
FOX Bet
On 31 July, we announced the closure of the sports betting
platform FOX Bet. FOX Bet was part of the The Stars Group US ("TSG
US") along with the US facing operations of PokerStars. Flutter
will retain ownership of PokerStars, while FOX will retain future
use of the FOX and FOX Bet brands including FOX Bet Super 6.
Approximately half of the losses associated with TSG US will no
longer be incurred following FOX Bet's closure.
Current trading/outlook
Trading for the Group in the first 5 weeks to 6 August has been
in line with expectations. Assuming normalised sports results for
the remainder of the year, the Group anticipates:
-- US revenue of between GBP3.6bn - GBP3.9bn ($4.5bn - $4.9bn)
and Adjusted EBITDA of between GBP90m - GBP190m ($120m - $240m).
This assumes we launch online in Kentucky ahead of the NFL season
and invest in line with more recent state launches.
-- Group ex-US Adjusted EBITDA in line with market expectations
of between GBP1.44bn - GBP1.6bn, with strong momentum in the
UK&I and International, offset by softer than expected market
conditions in Australia (Australia Adjusted EBITDA now expected in
the range GBP300m - GBP320m).
The Group also anticipates for 2023 :
-- Capital expenditure of approximately GBP500m
-- Group Adjusted depreciation and amortisation charge of approximately GBP495m
-- A weighted average cost of debt in H2 of 6.7%, resulting in
full year interest charge of approximately GBP285m
-- An effective tax rate of 25-27% for the Group ex-US. This
will be partly offset by a US tax credit of GBP166m on the
recognition of a deferred tax asset associated with previously
unrecognised US tax losses resulting in a total Group effective tax
rate of 6-8%
-- One-off cash items in H2 totalling GBP155m from acquiring an
additional interest in Junglee and purchase of Flutter shares for
future settlement of US employee incentive schemes
Operating and financial review(1-6)
Group(3)
H1 H1 CC
2023 2022 Change Change
Unaudited Adjusted GBPm GBPm % %
------------------------------------ ------- ------- ------- -------
Average monthly players ('000s) 12,285 9,635 +28%
Sports revenue 2,996 2,118 +41% +39%
Gaming revenue 1,813 1,270 +43% +37%
------- ------- ------- -------
Total revenue 4,809 3,388 +42% +38%
Cost of sales (2,008) (1,353) +48% +44%
Cost of sales as a % of net revenue 41.7% 39.9% +180bps +180bps
------- ------- ------- -------
Gross profit 2,801 2,036 +38% +34%
Sales and marketing (930) (819) +14% +9%
------- ------- ------- -------
Contribution 1,871 1,216 +54% +52%
Other operating costs (983) (686) +43% +40%
Corporate costs (64) (55) +18% +16%
------- ------- ------- -------
Adjusted EBITDA(2,5) 823 476 +73% +72%
Adjusted EBITDA margin % 17.1% 14.1% +310bps +330bps
Depreciation and amortisation (238) (143) +67% +63%
------- ------- ------- -------
Adjusted operating profit 585 334 +75% +76%
Net finance expense (131) (57) +131%
------- ------- ------- -------
Adjusted profit before tax 454 277 +64%
Taxation (34) (100) -66%
------- ------- ------- -------
Adjusted profit for the period 420 177 +138%
Adjusted basic earnings per share 237.5p 97.2p +144%
Net debt(6) at period end (4,634) (3,004) +54%
------------------------------------ ------- ------- ------- -------
Sisal (acquired August 2022) has been included on a reported
basis. Pro forma references within the commentary for a specified
period include Sisal as though part of the Group in both 2022 and
2023 for the entire period. A full analysis of the Group's reported
performance can be found at pages 19-20.
Flutter grew H1 revenue by 38% (Q1 +46%, Q2: +32%) driven by (i)
recreational player momentum across all of our businesses with AMPs
up 28% to 12.3m, (ii) further US expansion where revenues increased
63% compared with the prior year and (iii) the benefit of Sisal,
acquired in August 2022, which has also delivered strong growth
since acquisition and drove Group ex-US revenue +27%. Adjusted
EBITDA grew 72% as our US business became profitable in H1 with
EBITDA of GBP49m, and the delivery of growth through regulation in
our ex-US business.
Adjusting for the acquisition of Sisal, pro forma Group revenue
(+24%) and AMPs growth (+18%) were also strong. Outside of the US,
pro forma revenue grew 8% as our UK & Ireland division took
market share and our Consolidate and Invest markets drove growth in
our International division. This more than offset a more
challenging environment in Australia as softer market conditions
combined with a normalisation of Covid player engagement exceeded
the benefit of strong customer retention.
Cost of sales as a percentage of net revenue increased by 180
basis points to 41.7%, primarily driven by an increase in
Australian POC taxes and the increased proportion of US revenues,
where direct costs are higher.
Sales and marketing costs were 9% higher year on year, driven
primarily by increased US spend. As a proportion of revenue,
investment reduced by 510 basis points to 19.3% and by 280 basis
points on a pro forma basis to GBP930m primarily reflecting the (i)
greater marketing leverage in the US and (ii) lower marketing
levels in Sisal than the rest of the Group, as a result of
advertising restrictions in the Italian market.
Other operating costs increased 40% or 16% on a pro forma basis
reflecting further scaling of our US business as well as continued
investment in our talent, technology resources and product
innovation in our business outside of the US.
Group Adjusted EBITDA of GBP823m was up 72%. On a pro forma
basis, Adjusted EBITDA was 37% higher reflecting an increase in
Group pro forma EBITDA margin from 15.7% to 17.1% driven by the US
turning profitable. Group ex-US grew 24% (pro forma +4%), despite
previously guided Australian tax changes (GBP33m) and regulatory
changes in International markets (GBP10m).
Group Adjusted depreciation and amortisation increased,
primarily due to growth in our US division. Interest increased
GBP74m to GBP131m reflecting the acquisition of Sisal and higher
debt costs. The increase in interest costs was partly offset by a
reduction in the Group's Adjusted tax charge to GBP34m. This
reflects the Group's effective tax rate in the period of 7.6%
compared with 36.2% in H1 2022. The Group effective tax rate
benefits from the recognition of a deferred tax asset of GBP92m in
respect of US losses which were previously unrecognised. Our Group
ex-US effective tax rate was 26% (H1 2022: 22%). The increase
compared with the prior year reflects a greater proportion of
profits earned in high tax jurisdictions.
Adjusted basic earnings grew 144% to 237.5p driven by the
addition of Sisal and strong underlying EBITDA.
Net debt at 30 June 2023 was GBP4,634m. This was GBP1.6bn higher
than 30 June 2022, due to the acquisition of Sisal, which offset
the free cash flow generated by the operating activities of the
Group during the year.
A full analysis of the Group's reported performance can be found
at pages 19-20.
US(3)
H1 H1 CC
2023 2022 Change Change
Unaudited Adjusted GBPm GBPm % US$
------------------------------------ ------ ------- --------- ---------
Average monthly players ('000s) 3,119 2,188 +43%
Sportsbook stakes 15,547 10,911 +42% +35%
Sportsbook net revenue margin 8.1% 6.0% +210bps +210bps
Sports revenue 1,371 770 +78% +70%
Gaming revenue 425 281 +52% +44%
------ ------- --------- ---------
Total revenue 1,797 1,051 +71% +63%
Cost of sales (899) (544) +65% +57%
Cost of sales as a % of net revenue 50.0% 51.8% -170bps -180bps
------ ------- --------- ---------
Gross profit 897 507 +77% +69%
Sales and marketing (484) (399) +21% +15%
------ ------- --------- ---------
Contribution 413 108 +282% +284%
Other operating costs (364) (240) +52% +45%
------ ------- --------- ---------
Adjusted EBITDA(2,5) 49 (132)
Adjusted EBITDA margin 2.7% (12.5%) +1,530bps +1,570bps
Depreciation and amortisation (53) (31) +74% +66%
------ ------- --------- ---------
Adjusted operating loss (4) (162) +97% +98%
------------------------------------ ------ ------- --------- ---------
The US division includes FanDuel, FOX Bet, TVG and PokerStars
brands, offering regulated real money and free-to-play sports
betting, casino, poker, daily fantasy sports and online racing
wagering products to customers across various states in the US and
in Canada.
Revenue grew 63% (Q1 +92%; Q2 +41%) to GBP1.8bn ($2.2bn), and
Adjusted EBITDA increased GBP181m from a loss of GBP132m in the
prior year to a profit of GBP49m in H1 2023. FanDuel Group
represented 98% of US revenue and made an Adjusted EBITDA profit of
GBP79m ($100m), more than offsetting losses coming from the FOX Bet
and PokerStars businesses. The increase in FanDuel's profits was
driven by:
-- Strong top line growth in existing sportsbook and iGaming states
-- Significant operating leverage with our Adjusted EBITDA
margin improving 15 percentage points year on year to 2.7%
Sports revenue grew 70% (Q1 +116%; Q2 +40%) with sportsbook up
84%, while DFS and TVG (7% of total revenue) declined 7%. The
sportsbook performance was due to:
-- Delivering excellent growth in existing states with revenue
in pre-2022 states 51% higher, aided in part by favourable sports
results
-- The launch in four additional sportsbook states (Kansas, Maryland, Ohio and Massachusetts)
-- Sportsbook net revenue margin 210 basis points higher to 8.1% (Q2 9.5%) as a result of:
- A structural win margin improvement of 170 basis points driven
by our market leading pricing and risk management capabilities and
superior product proposition
- Favourable sports results adding 180 basis points to our
margin when compared to unfavourable results in the prior
period
- An increase in customer acquisition related generosity, which generated strong returns
We increased iGaming revenue by 44% (Q1 +43%; Q2 +45%), in line
with strong iGaming player growth of 48%. As stated in the business
review section, the strong delivery against our iGaming strategic
objectives has seen FanDuel Casino take market share.
Cost of sales as a percentage of revenue declined 180 basis
points to 50.0% as contribution from New York, where the gaming tax
rate is unusually high, becomes a smaller proportion of the US
business as new states launch.
Sales and marketing costs grew 15% to GBP484m, but reduced as a
percentage of revenue by 11 percentage points to 26.9%. This is
driven by the operating leverage in existing states, where the
proportionate levels of marketing spend are lower than new
states.
Operating costs increased by 45% reflecting ongoing investment
in the business to support the strong revenue growth, and delivery
of good operating leverage when compared with revenue growth of
63%.
UK & Ireland(3)
UK & Ireland UK & Ireland UK & Ireland Retail
Total Online
--------------------- ---------------------
H1 H1 CC H1 H1 CC H1 H1 CC
2023 2022 Change 2023 2022 Change 2023 2022 Change
------------------------------
Unaudited Adjusted GBPm GBPm % GBPm GBPm% GBPm GBPm %
------------------------------ ----- ----- ------- ----- ----- ------ ------ ------ -------
Average monthly players
('000s) 4,066 3,704 +10%
Sportsbook stakes 5,279 5,185 +1% 4,581 4,494 +2% 698 691 -1%
Sportsbook net revenue
margin 12.0% 10.9% +110bps 11.6% 10.6% +100bps 15.3% 13.2% +210bps
Sports revenue 709 630 +12% 602 538 +11% 106 92 +14%
Gaming revenue 533 462 +15% 487 418 +16% 47 44 +6%
----- ----- ------- ----- ----- ------- ------ ------ -------
Total revenue 1,242 1,092 +13% 1,089 956 +14% 153 136 +11%
Cost of sales (374) (335) +11% (340) (304) +11% (34) (31) +8%
Cost of sales as
a % of net revenue 30.1% 30.7% -60bps 31.2% 31.8% -60bps 22.1% 22.8% -70bps
----- ----- ------- ----- ----- ------- ------ ------ -------
Gross profit 868 757 +14% 749 652 +15% 119 105 +12%
Sales and marketing (206) (197) +4% (203) (194) +4% (3) (3) -5%
----- ----- ------- ----- ----- ------- ------ ------ -------
Contribution 662 559 +18% 546 458 +19% 116 101 +13%
Other operating costs (266) (239) +10% (177) (155) +12% (89) (83) +6%
----- ----- ------- ----- ----- ------- ------ ------ -------
Adjusted EBITDA(2,5) 396 321 +24% 369 303 +22% 27 18 +44%
Adjusted EBITDA margin 31.9% 29.4% +260bps 33.9% 31.6% +240bps 17.7% 13.5% +400bps
Depreciation and amortisation (59) (63) -7% (39) (44) -10% (20) (19) +1%
----- ----- ------- ----- ----- ------- ------ ------ -------
Adjusted operating
profit 337 258 +31% 329 259 +28% 8 (1)
------------------------------ ----- ----- ------- ----- ----- ------- ------ ------ -------
The UK & Ireland division operates Paddy Power, Betfair, Sky
Betting & Gaming and tombola brands online, as well as retail
operations in the UK & Ireland.
We grew our total UK & Ireland revenue by 13% and Adjusted
EBITDA by 24% to GBP396m as our market leading brands took market
share across sports, gaming and in both online and retail
channels.
UK & Ireland Online
Strong customer acquisition and retention of World Cup customers
from Q4 2022 drove AMP growth 10% higher, reaching a record 4.1m
customers during Q2. This strong recreational player momentum,
together with our ongoing focus on growing customer value drove
revenue +14% in H1 (Q1: +17%, Q2 +11%).
We grew sports revenue 11% (Q1 +16%, Q2 +7%). This was driven by
(i) an expanding recreational customer base with an increased skew
toward lower staking, higher margin products and (ii) acceleration
of our generosity strategy to deploy spend more efficiently. Stakes
of GBP4.6bn were 2% higher while we delivered a net revenue margin
of 11.6% which was 100 basis points ahead of last year. This
primarily reflects structural gains driven by the launch of
Betbuilder products for SBG in Q1 2022 as well as a reduction in
generosity spend. H1 actual margin was 40 basis points ahead of
expectations, all arising in Q2, and resulting in an overall sports
results' headwind year on year of 60 basis points for H1.
We increased gaming revenue by 16% (Q1 +17%, Q2 +15%). Our
gaming brands benefited from strong cross-sell from our enlarged
sports customer base as well as new and refreshed content which
helped drive direct gaming customer acquisition.
Cost of sales as a percentage of revenue reduced by 60 basis
points to 31.2%, reflecting product mix changes.
Sales and marketing increased by 4% but reduced as a percentage
of revenue by 160 basis points to 18.7% reflecting marketing
efficiencies implemented in H2 2022. Other operating costs were in
line year on year as a percentage of revenue at 16.2% despite the
high levels of cost inflation which we expect to have a greater
impact on pay costs in H2.
Our strong revenue performance and focus on cost efficiency
resulted in Online Adjusted EBITDA growth of 22% year on year to
GBP369m.
UK & Ireland Retail
We grew retail revenue 11% (Q1: +15%, Q2 +8%) and Adjusted
EBITDA of GBP27m up 44% during the year. This performance reflects
share gains across our estate in both the UK and Ireland. Product
investment in H2 2022 and a focus on value enhancing generosity has
driven structural margin gains and reductions in promotional spend
similar to our online business. This focus on delivering a
best-in-class customer proposition and experience has underpinned
our outperformance.
Other operating costs increased by 6% year on year, despite
higher pay and utility cost inflation, reflecting a disciplined
approach to cost mitigation.
At 30 June 2023, we had 607 (30 June 2022: 614) retail outlets
with 356 in the UK and 251 in Ireland.
Australia (3)
H1 H1 CC
2023 2022 Change Change
Unaudited Adjusted GBPm GBPm % A$
------------------------------------ ----- ----- ------- -------
Average monthly players ('000s) 1,066 993 +7%
Sportsbook stakes 4,953 5,209 -5% -4%
Sportsbook net revenue margin 12.1% 11.8% +30bps +30bps
Total revenue 601 612 -2% -1%
Cost of sales (317) (290) +10% +11%
Cost of sales as a % of net revenue 52.8% 47.3% +550bps +540bps
----- ----- ------- -------
Gross profit 284 322 -12% -11%
Sales and marketing (64) (54) +20% +23%
----- ----- ------- -------
Contribution 219 269 -18% -18%
Other operating costs (61) (50) +23% +23%
----- ----- ------- -------
Adjusted EBITDA(2,5) 158 219 -28% -27%
Adjusted EBITDA margin 26.4% 35.8% -950bps -950bps
Depreciation and amortisation (16) (14) +20% +22%
----- ----- ------- -------
Adjusted operating profit 142 206 -31% -30%
------------------------------------ ----- ----- ------- -------
The Australian division encompasses Sportsbet, which offers
online sports betting in the Australian market.
Sportsbet AMPs were 7% higher following effective retention of
our Covid enlarged player base. Revenue declined slightly against
challenging comparatives, with Adjusted EBITDA GBP61m lower at
GBP158m due to increased POC taxes and strategic investments in
marketing and product capabilities.
Revenue decline of 1% (Q1 -4%; Q2 +3%) reflected the higher AMPs
and positive sports results of 80 basis points versus expectations,
mostly in Q2, offset by 7% lower revenue per customer. Lower
customer revenue levels were most notable in racing when compared
to the Covid-related peaks when options for other discretionary
leisure spend were significantly restricted.
Cost of sales as a % of revenue increased 540 basis points to
52.8% from the previously guided impact of POC tax changes in H1 of
GBP33m (annualised GBP73m) across several Australian states. In H1
2023, the state of Victoria announced it would increase the POC
rate to 15% from July 2024, which will add an incremental GBP27m
annualised cost for Sportsbet.
Sales and marketing increased by 23% to defend our leadership
position in the market and form key strategic partnerships with a
number of local sports and racing organisations.
Other operating costs increased GBP11m or 23%, from expansion of
our product teams to enable more customer facing content and
inflationary cost pressures.
International(3)
Reported Pro forma
------------------------------
H1 H1 CC H1 H1 CC
2023 2022 Change Change 2023 2022 Change Change
Unaudited Adjusted GBPm GBPm %% GBPm GBPm %%
------------------------------ ----- ----- ------- ------ ----- ----- ------- ------
Average monthly players
('000s) 4,035 2,750 +47% 4,035 3,515 +15%
Sportsbook stakes 1,979 710 +179% +167% 1,979 1,722 +15% +10%
Sportsbook net revenue
margin 13.6% 9.0% +460bps +460bps 13.6% 12.4% +120bps +120bps
Sports revenue 315 106 +197% +183% 315 255 +23% +18%
Gaming revenue 854 527 +62% +52% 854 780 +9% +5%
----- ----- ------- ------- ----- ----- ------- -------
Total revenue 1,169 633 +85% +74% 1,169 1,035 +13% +8%
Cost of sales (417) (184) +127% +114% (417) (363) +15% +11%
Cost of sales as a
% of net revenue 35.7% 29.1% +660bps +660bps 35.7% 35.1% +60bps +90bps
----- ----- ------- ------- ----- ----- ------- -------
Gross profit 752 449 +67% +58% 752 672 +12% +7%
Sales and marketing (175) (169) +3% -2% (175) (180) -3% -7%
----- ----- ------- ------- ----- ----- ------- -------
Contribution 577 280 +106% +93% 577 492 +17% +12%
Other operating costs (292) (158) +85% +84% (292) (250) +17% +15%
----- ----- ------- ------- ----- ----- ------- -------
Adjusted EBITDA(2,5) 284 122 +133% +103% 284 242 +17% +8%
Adjusted EBITDA margin 24.3% 19.3% +500bps +350bps 24.3% 23.4% +90bps 0bps
Depreciation and amortisation (107) (33) +226% +207% (107) (87) +23% +17%
----- ----- ------- ------- ----- ----- ------- -------
Adjusted operating
profit 177 89 +98% +69% 177 155 +15% +3%
------------------------------ ----- ----- ------- ------- ----- ----- ------- -------
The International division includes Sisal, PokerStars,
Adjarabet, Betfair and Junglee brands but excludes PokerStars' US
business and Betfair UK & Ireland operations. Sisal was
acquired in August 2022. Pro forma references within the commentary
include Sisal as though part of the division in both 2022 and 2023
for the entire period. A reconciliation of the division's reported
and pro forma income statement is included in Appendix 2.
Pro forma
Our Consolidate and Invest markets continued to drive a strong
performance in our International division, and we grew AMPs 15% and
revenue 8% to GBP1.2bn in H1. We delivered Adjusted EBITDA of
GBP284m which was 8% higher as we continued to invest in our key
markets.
We grew revenue in our Consolidate and Invest markets by 19% in
H1, representing 77% of the total division, up 5 percentage points
from H1 2022. In Italy, which was 47% of divisional revenue,
Sisal's online business drove 17% growth as a market leading
product proposition continued to deliver strong player acquisition
and retention, combined with higher multi-product player rates.
Turkey was our second largest market in H1, doubling revenues year
on year driven by a strong performance across both retail and
online. In India we continue to leverage the Flutter Edge to drive
player momentum, in turn driving revenue 54% higher. Optimise and
Maintain markets declined 17% in H1 and 9% in Q2, when the final
known major regulatory headwinds relating to disruption in Russia
and Ukraine were fully lapped.
Cost of sales grew 90 basis points as a percentage of revenue as
we continued to drive sustainable growth in our regulated markets
which have a greater associated direct cost.
Sales and marketing reduced by 7% and 240 basis points as a
percentage of revenue with the benefits of a more targeted approach
in our Optimise and Maintain markets which was partly offset by
increased investment in higher growth opportunities such as Turkey
and India. This delivered contribution growth of 12%, with our
Consolidate and Invest markets which represented 71% of H1 2023
contribution, up 19%.
Other operating costs were 15% higher due to continued
investment in product and technology as well as our ongoing
expansion in our Invest markets with depreciation growth of 17%
reflecting this investment.
We grew EBITDA by 8%, while EBITDA margin was in line when
compared with the prior year as strong contribution growth in our
Consolidate markets offset spend to drive our Invest expansion.
Reported
Reported performance includes a six-month contribution from
Sisal (revenue: +GBP516m, EBITDA +GBP146m) in H1 2023 only.
We grew revenue by 74% reflecting the above, as well as strong
growth in our Consolidate and Invest markets. Sports represents a
higher proportion of Sisal revenue compared with the existing
International businesses, driving sports 183% higher while gaming
grew 52%.
The addition of Sisal also had the following impacts:
-- Cost of sales as a % of net revenue increased by 660 basis
points to 35.7% as Sisal is a higher direct cost business,
reflecting the largely franchise model operated in the retail
estate
-- Sales and marketing as a % of net revenue reduced by 11.5
percentage points reflecting lower marketing costs due to
advertising restrictions in Italy
-- Other operating costs increased by 84%
Separately disclosed items
H1 H1
2023 2022
GBPm GBPm
-------------------------------------------------------- ----- -----
Transaction fees and associated costs (16) (10)
Restructuring and integration initiatives (42) (32)
----- -----
EBITDA impact of separately disclosed items (58) (42)
Amortisation of acquisition related intangible assets (314) (286)
----- -----
Operating profit impact of separately disclosed items (372) (328)
Tax credit on separately disclosed items 80 39
-------------------------------------------------------- ----- -----
Profit/ (loss) after tax impact of separately disclosed
items (292) (289)
-------------------------------------------------------- ----- -----
Separately disclosed items do not relate to business-as-usual
activity of the Group, but are items that are volatile in nature or
acquisition related amortisation, and therefore are excluded from
Adjusted profits.
Transaction fees and associated costs incurred of GBP16m related
primarily to the proposed listing of Flutter shares in the US.
Restructuring and integration costs primarily relate to
technology-driven efficiency projects and Sisal integration costs
.
Amortisation of acquisition related intangible assets increased
by GBP28m to GBP314m reflecting the acquisition of Sisal in August
2022.
The tax credit of GBP80m primarily relates to the tax effect of
the amortisation of acquisition-related intangibles and other
SDIs.
Statutory review(1)
Group
H1 H1
------------------------------------ ------- -------
2023 2022 Change
------------------------------------ ------- ------- ---------
Unaudited GBPm GBPm %
------------------------------------ ------- ------- ---------
Sports revenue 2,996 2,118 +41%
Gaming revenue 1,813 1,270 +43%
------- ------- ---------
Total revenue 4,809 3,388 +42%
Cost of sales (2,008) (1,353) +48%
Cost of sales as a % of net revenue 41.7% 39.9% +180 bps
Gross profit 2,801 2,036 +38%
Operating costs (2,036) (1,602) +27%
------- ------- ---------
EBITDA 765 434 +76%
EBITDA margin % 15.9% 12.8% +310 bps
Amortisation of acquisition related
intangibles (314) (286) +10%
Depreciation and amortisation (238) (145) +64%
Gain on disposal - 2
------- ------- ---------
Operating profit 214 5 +3,865%
Net finance expense (131) (57) +131%
------- ------- ---------
Profit/ (loss) before tax 83 (51)
Taxation 45 (61)
------- ------- ---------
Profit/ (loss) after tax 128 (112)
------- ------- ---------
Basic loss per share 73.8p (64.7p)
Diluted loss per share 72.8p (64.7p)
Net current liabilities (516) (416)
Net assets 10,153 10,337
Net cash from operating activities 71 308 -77%
------------------------------------ ------- ------- ---------
Note: Comparative figures for net current liabilities and net
assets are as at 31 December 2022. A full analysis of the Group's
adjusted performance can be found at pages 9-17.
Flutter delivered strong revenue growth of 42%, driven by an
expanded recreational customer base with AMPs up 28% to 12.3m. This
performance was underpinned by further expansion of our US business
which generated positive EBITDA for the first time. The Group
outside of the US also delivered a strong performance. The
acquisition of Sisal in August 2022 contributed to strong organic
growth in key International markets and we delivered market share
gains within UK & Ireland which more than offset softer market
conditions in Australia, coinciding with a normalisation of Covid
player engagement when compared with the prior year.
Cost of sales as a percentage of net revenue increased by 180
basis points to 41.7% primarily driven by an increase in Australian
POC taxes.
Operating costs increased by 27% driven by continued investment
in marketing and product across the Group, particularly in the US,
as well as the inclusion of Sisal. Reported EBITDA grew 76%,
significantly ahead of revenue growth as the US becomes profitable
and we leverage our scale advantage.
Net current liabilities increased from GBP416m at 31 December
2022 to GBP516m at 30 June 2023. The main driver of this was a
reduction in the value of hedging derivatives as a result of
foreign exchange movements. As in previous years, the Group
regularly operates in a net current liability position due to the
Group's operating model, whereby it receives payments for nearly
all revenues in advance, with material cost items paid in
arrears.
Net assets of GBP10.2bn at 30 June 2023 were further reduced
versus 31 December 2022 due to the lower carrying amount of
intangible assets and goodwill, partially offset by reduced
borrowings, with the reduction in each driven by foreign exchange
movements.
Net cash flow from operating activities decreased to GBP71m from
GBP308m due to a reduction in cash and cash equivalents - customer
balances and the unwind of the year-end working capital position,
partially offset by increased profitability.
A full analysis of the Group's Adjusted performance can be found
at pages 9-17.
Cash flow and financial position
H1 H1
2023 2022
Unaudited GBPm GBPm
--------------------------------------------------------- -------------------- -------------------
Adjusted EBITDA 823 476
Capex (237) (156)
Working capital (144) (41)
Corporation tax (138) (132)
Lease liabilities paid (52) (21)
-------------------- -------------------
Adjusted free cash flow 253 127
Cash flow from separately disclosed items (60) (39)
-------------------- -------------------
Free cash flow 193 87
Interest cost (116) (46)
Other borrowing costs (1) (2)
Purchase of shares by the Employee Benefit Trust ("EBT") (131) -
Acquisitions and disposals - (410)
Cash transferred in acquisitions/ disposals - 15
Other (4) (3)
-------------------- -------------------
Net decrease in cash (59) (360)
-------------------- -------------------
Net debt(6) at start of year (4,644) (2,647)
Foreign currency exchange translation 162 (241)
Change in fair value of hedging derivatives (93) 244
-------------------- -------------------
Net debt as at 30 June (4,634) (3,004)
--------------------------------------------------------- -------------------- -------------------
Note: Prepared on a net cash/debt basis including borrowings,
debt related derivatives and cash and cash equivalents - available
for corporate use, but excluding cash and cash equivalents -
customer balances. A reconciliation to the Group's consolidated
statement of cash flows is included in Appendix 4.
Adjusted free cash flow doubled in H1 2023 to GBP253m and
reflected the following:
-- Material increase in Adjusted EBITDA from GBP476m to GBP823m.
-- An increase in capital expenditure of GBP81m, with GBP41m
relating to the addition of Sisal and the remaining increase
reflecting investment in our global tech platforms along with
pricing and risk capabilities. Pro forma capital expenditure
increased by 15%.
-- Net working capital outflow of GBP144m driven by a reduction
in payables relating to the seasonal unwind associated with the
quieter summer period, which, in line with the prior year, is
expected to reverse in H2.
Cash outflow from separately disclosed items was GBP60m. This
relates to technology-driven efficiency projects, the proposed
listing of Flutter shares in the US and Sisal integration
costs.
Interest cost rose GBP70m to GBP116m mainly due to the
debt-funded acquisition of Sisal and higher interest rates.
The Employee Benefit Trust purchased GBP131m in Flutter shares
for future settlement of US employee incentive schemes that were
put in place at the time of the original FanDuel acquisition to
incentivise value creation in FanDuel.
As at 30 June 2023, the Group had net debt of GBP4,634m,
excluding customer balances, representing a leverage ratio of 3.3x
times(6) pro forma Adjusted EBITDA. The Group continues to hedge
the impact of currency fluctuations on its leverage ratio through
cross currency swap agreements. Changes in the fair value of these
hedging derivatives are reflected in net debt.
Notes:
(1) Reported figures represent the IFRS reported statutory
numbers. Where amounts have been normalised for separately
disclosed items they are noted as Adjusted.
(2) "Adjusted" measures exclude items that are separately
disclosed as they are: (i) not part of the usual business activity
of the Group (ii) items that are volatile in nature and (iii)
purchase price accounting amortisation of acquired intangibles
(non-cash). Therefore, they have been reported as "separately
disclosed items (SDIs)" (see note 5 to the financial
statements).
(3) Growth rates in the commentary are in local or constant
currency(18) except reported numbers which are in nominal
currency.
(4) Average Monthly Players represent the average number of
players who have placed and/or wagered a stake and/or contributed
to rake or tournament fees during the month in the reporting
period. Average Monthly Player numbers now include Junglee players,
and comparative figures have been adjusted to show a like for like
comparison.
(5) EBITDA is defined as profit for the period before
depreciation, amortisation, impairment, gain on disposal, financial
income, financial expense and taxation and is a non-GAAP measure.
This measure is used internally to evaluate performance, to
establish strategic goals and to allocate resources. The directors
also consider the measure to be commonly reported and widely used
by investors as an indicator of operating performance and ability
to incur and service debt, and as a valuation metric. It is a
non-GAAP financial measure and is not prepared in accordance with
IFRS and, not being a uniformly defined term, it may not be
comparable with measures used by other companies to the extent they
do not follow the same methodology used by the Group. Non-GAAP
measures should not be viewed in isolation, nor considered as a
substitute for measures reported in accordance with IFRS. All of
the adjustments shown have been taken from the financial
statements.
(6) Net debt is the principal amount of borrowings plus
associated accrued interest, minus available cash & cash
equivalents plus/minus carrying value of debt related derivatives.
Leverage is calculated using pro forma Adjusted EBITDA for the
appropriate 12-month period.
(7) Online sportsbook market share is the GGR market share of
FanDuel and FOX Bet for H1 2023 in the states in which FanDuel was
live based on published gaming regulator reports in those states.
During H1 2023 FanDuel was live in 19 states; Arizona (AZ),
Colorado (CO), Connecticut (CT), Illinois (IL), Indiana (IN), Iowa
(IA), Kansas (KS), Louisiana (LA), Maryland (MD), Massachusetts
(MA), Michigan (MI), New Jersey (NJ), New York (NY), Ohio (OH),
Pennsylvania (PA), Tennessee (TN), Virginia (VA), West Virginia
(WV) and Wyoming (WY). During H1 2023 FOX Bet was live in 4 states;
CO, NJ, MI and PA. Market share does not include AZ, CO, IL, OH and
VA for June as the data has yet to be released. Online gaming
market share is the GGR share in CT, MI, NJ, PA and WV.
(8) Consolidate and Invest markets in International are Italy,
Spain, Georgia, Armenia, Brazil, India, Turkey and Virtual
Reality.
(9) Global Play Well goal is measured as the 12-month rolling
average % of AMPs who use a safer gambling (Play Well) tool in the
specified reporting period. A safer gambling tool is any tool that
a customer has used (or Flutter has applied to a customer) in the
reporting period that helps to promote safer gambling.
(10) US total addressable market based on internal estimates and
excluding Canada (estimated mature total addressable market of
$3bn). Total addressable market outside US based on H2GC data and
internal estimates. Total addressable regulated market of GBP120bn
based on total addressable market outside US above excluding the
UK, Ireland, Australia and various markets that are unregulated or
operating under monopoly conditions.
(11) US gross win margin comparison is based on published gaming
regulatory reports in US states.
(12) US pre-2022 states include AZ, CO, CT, IL, IN, IA, MI, NJ,
PA, TN, VA and WV for sportsbook and CT, MI, NJ, PA and WV for
iGaming along with Canada. State launches in 2022 and 2023 includes
KS, LA, NY, OH, MA, MD, WY and Kentucky which is expected to launch
in September 2023.
(13) Normalised gross gaming revenue refers to gross gaming
revenue adjusted to remove the gross impact of sports results in
the relevant period being the variance between expected gross
revenue margin and actual gross revenue margin.
(14) Australian gross gaming revenue market share for 2022 based
on competitor filings and internal estimates.
(15) Indian tax changes refer to proposal to amend tax base for
Goods and Services Tax from 28% of gross gaming revenue to deposits
which may represent deposits or stakes.
(16) International Monetary Fund
(https://www.imf.org/external/datamapper/NGDPD@WEO/OEMDC/ADVEC/WEOWORLD),
2022-2027 for Consolidate and Invest markets(8) .
(17) Includes the gross value of derivatives.
(18) Constant currency ("CC") growth is calculated by
retranslating the non-sterling denominated component of 2022 at
2023 exchange rates (see Appendix 3).
Appendix 1: Reconciliation of Adjusted to statutory results
In the operating and financial review the Group's financial
performance has been presented on an Adjusted and reported basis.
The difference between the Adjusted and reported information
relates to the inclusion of separately disclosed items. The impact
on the income statement and earnings per share is set out
below.
Adjusted Separately Statutory
results disclosed results
items(1)
---------------- ------------
H1 H1 H1 H1 H1 H1
GBPm unaudited 2023 2022 2023 2022 2023 2022
---------------------------------- ------- ------- ----- ----- ------- -------
Sports revenue 2,996 2,118 2,996 2,118
Gaming revenue 1,813 1,270 1,813 1,270
------- ------- ----- ----- ------- -------
Total revenue 4,809 3,388 - - 4,809 3,388
Cost of sales (2,008) (1,353) - - (2,008) (1,353)
Cost of sales as a % of net
revenue 41.7% 39.9% 41.7% 39.9%
------- ------- ----- ----- ------- -------
Gross profit 2,801 2,036 - - 2,801 2,036
Sales and marketing (930) (819) (930) (819)
------- ------- ----- ----- ------- -------
Contribution 1,871 1,216 - - 1,871 1,216
Other operating costs (983) (686) - - (983) (686)
Corporate costs (64) (55) (58) (42) (122) (97)
------- ------- ----- ----- ------- -------
EBITDA 823 476 (58) (42) 765 434
EBITDA margin 17.1% 14.1% 15.9% 12.8%
Depreciation and amortisation (238) (143) (314) (286) (552) (429)
------- ------- ----- ----- ------- -------
Operating profit 585 334 (372) (328) 214 5
Net finance expense (131) (57) - - (131) (57)
------- ------- ----- ----- ------- -------
Profit/ (loss) before tax 454 277 (372) (328) 83 (51)
Taxation (34) (100) 80 39 45 (61)
------- ------- ----- ----- ------- -------
Profit/ (loss) for the period 420 177 (292) (289) 128 (112)
Profit/ (loss) attributable
to non controlling interest 1 (5) 1 3 3 (2)
------- ------- ----- ----- ------- -------
Profit/ (loss) attributable
to equity holders 422 172 (291) (286) 131 (114)
Weighted average number of shares
('000s) 177,502 176,658 177,502 176,658
Adjusted basic EPS (pence) 237.5p 97.2p 73.8p (64.7p)
(1) See note 5 of the financial statements.
Appendix 2: Reconciliation of pro forma to statutory results
Sisal, acquired in August 2022, has been included in this
statement on a reported basis unless stated otherwise. Pro forma
measures for the International division have been included in these
interim results where they best represent underlying
performance.
The difference between the reported and pro forma results is the
inclusion separately disclosed items and exclusion of the results
of Sisal in the period prior to completion in reported figures, as
per the table below.
International
Adjusted Separately
Adjusted results disclosed Statutory
pro forma pre-completion items(1) reported
------------ ----------------- ------------
H1 H1 H1 H1 H1 H1 H1 H1
2023 2022 2023 2022 2023 2022 2023 2022
Unaudited Adjusted GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ----- ----- ------- -------- ----- ----- ----- -----
Sports revenue 315 255 - (149) 315 106
Gaming revenue 854 780 - (253) 854 527
----- ----- ------- -------- ----- ----- ----- -----
Total revenue 1,169 1,035 - (402) - - 1,169 633
Cost of sales (417) (363) - 179 (417) (184)
Cost of sales as
a % of net revenue 35.7% 35.1% 35.7% 29.1%
----- ----- ------- -------- ----- ----- ----- -----
Gross profit 752 672 - (223) - - 752 449
Sales and marketing (175) (180) - 10 (175) (169)
----- ----- ------- -------- ----- ----- ----- -----
Contribution 577 492 - (212) - - 577 280
Other operating costs (292) (250) - 92 - - (292) (158)
----- ----- ------- -------- ----- ----- ----- -----
EBITDA 284 242 - (120) - - 284 122
EBITDA margin 24.3% 23.4% 24.3% 19.3%
Depreciation and amortisation (107) (87) - 54 (171) (130) (278) (163)
----- ----- ------- -------- ----- ----- ----- -----
Operating profit/(loss) 177 155 - (66) (171) (130) 6 (41)
------------------------------ ----- ----- ------- -------- ----- ----- ----- -----
Adjusted pro forma revenue and EBITDA measures have also been
referenced within these interim results. This has been reconciled
in the table below.
Group
Adjusted Separately
Adjusted results disclosed Statutory
pro forma pre-completion items(1) reported
------------ ----------------- ------------
H1 H1 H1 H1 H1 H1 H1 H1
2023 2022 2023 2022 2023 2022 2023 2022
Unaudited Adjusted GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ----- ----- ------- -------- ----- ----- ----- -----
Total revenue 4,809 3,790 - (402) - 4,809 3,388
EBITDA 823 596 - (120) (58) (42) 765 434
(1) See note 5 of the financial statements.
Appendix 3: Reconciliation to constant currency growth rates
Constant currency ("CC") growth is calculated by retranslating
non-sterling denominated component of H1 2022 at H1 2023 exchange
rates as per the table below.
H1 H1
H1 H1 % 2022 2022 CC %
GBPm unaudited 2023 2022 Change FX impact CC Change
------------------------------ ------- ------- ------- --------- ------- -------
Sports revenue 2,996 2,118 +41% 39 2,158 +39%
Gaming revenue 1,813 1,270 +43% 49 1,319 +37%
------- ------- ------- --------- ------- -------
Total revenue 4,809 3,388 +42% 89 3,477 +38%
Cost of sales (2,008) (1,353) +48% (38) (1,391) +44%
Cost of sales as
a % of net revenue 41.7% 39.9% +180bps 40.0% +180bps
Gross profit 2,801 2,036 +38% 51 2,086 +34%
Sales and marketing (930) (819) +14% (32) (851) +9%
Contribution 1,871 1,216 +54% 19 1,235 +52%
Other operating costs (983) (686) +43% (15) (701) +40%
Corporate costs (64) (55) +18% (1) (55) +16%
------- ------- ------- --------- ------- -------
Adjusted EBITDA 823 476 +73% 3 479 +72%
Adjusted EBITDA margin 17.1% 14.1% +310bps 13.8% +330bps
Depreciation and amortisation (238) (143) +67% (4) (146) +63%
Adjusted operating
profit 585 334 +75% (1) 333 +76%
Revenue by division
UK & Ireland 1,242 1,092 +14% 5 1,096 +13%
Australia 601 612 -2% (6) 606 -1%
International 1,169 633 +85% 39 672 +74%
US 1,797 1,051 +71% 52 1,102 +63%
Adjusted EBITDA by
division
UK & Ireland 396 321 +23% 0 321 +24%
Australia 158 219 -28% (2) 217 -27%
International 284 122 +133% 18 140 +103%
US 49 (132) -137% (11) (143) -134%
Corporate costs (64) (55) +18% (1) (55) +16%
------------------------------ ------- ------- ------- --------- ------- -------
Appendix 4: Reconciliation of Adjusted cash flow to reported
statutory cash flow
In the operating and financial review the cash flow has been
presented on a net cash basis. The difference between the net cash
basis and the reported cash flow is the inclusion of borrowings,
debt related derivatives and cash and cash equivalents - available
for corporate use but excluding cash and cash equivalents -
customer balances to determine a net cash position.
Adjusted Debt and customer Statutory
cash flow balances adjustments cash flow
---------------- -----------------------
GBPm unaudited 2023 2022 2023 2022 2023 2022
------------------------------------------ ------- ------- ----------- ---------- -----
Adjusted EBITDA(1) 823 476 823 476
Capex(2) (237) (156) (237) (156)
Working capital(3) (144) (41) (144) (41)
Corporation tax (138) (132) (138) (132)
Lease liabilities paid (52) (21) (52) (21)
------- ------- ----------- ---------- ----- -----
Adjusted free cash flow 253 127 - - 253 127
Cash flow from separately disclosed
items(4) (60) (39) (60) (39)
------- ------- ----------- ---------- ----- -----
Free cash flow 193 87 - - 193 87
Interest cost(5) (116) (46) (116) (46)
Other borrowing costs(5) (1) (2) (1) (2)
Settlement of swaps - - 170 - 170 -
Purchase of shares by the EBT (131) - (131) -
Acquisitions and disposals(6) - (410) - (410)
Cash acquired in business combinations(6) - 15 - 15
Other(7) (4) (3) (4) (3)
Movement in cash and cash equivalents
- customer balances - - (411) 44 (411) 44
Net amounts repaid on borrowings(8) - - (80) 178 (80) 178
------- ------- ----------- ---------- ----- -----
Net (decrease)/increase in cash (59) (360) (320) 222 (379) (137)
------- ------- ----------- ---------- ----- -----
Net (debt)/cash at start of year(9) (4,644) (2,647) 6,735 4,276 2,091 1,629
Foreign currency exchange translation 162 (241) (187) 252 (24) 11
Change in fair value of hedging
derivatives (93) 244 93 (244) - -
Net (debt)/cash as at 30 June(9) (4,634) (3,004) 6,322 4,507 1,688 1,503
------------------------------------------ ------- ------- ----------- ---------- ----- -----
(1) Adjusted EBITDA includes the following line items in the
statutory cash flow: Profit for the period, separately disclosed
items, tax expense, financial income, financial expense and
depreciation and amortisation.
(2) Capex includes purchase of property, plant and equipment,
purchase of intangible assets, capitalised internal development
expenditure, lease incentive received and payment of contingent
deferred consideration.
(3) Working capital includes movements in trade and other
receivables, trade and other payables and provisions, employee
equity-settled share-based payments expense before separately
disclosed items and investments and foreign currency exchange
loss/(gain).
(4) Cash flow from separately disclosed items relates to
transaction fees, along with restructuring and integration
costs.
(5) Interest and other borrowing costs includes interest paid,
interest received and fees in respect of borrowing facilities.
(6) The combination of acquisition and disposals of (GBP410m)
and cash acquired in business combinations (GBP15m) in H1 2022
reconcile to the statutory cash flow amounts for purchase of
businesses net of cash acquired (GBP395m).
(7) Other includes proceeds from the disposal of assets,
proceeds from the issue of shares on exercise of employee options,
dividends paid to non-controlling interest, lease interest paid and
other.
(8) Net amounts repaid on borrowings includes principle
repayments on USD First Lien Term Loan B and additional draw downs
and repayments on the GBP Revolving Credit Facilities.
(9) Net (debt)/cash comprises principal outstanding balance of
borrowings, accrued interest on those borrowings, derivatives held
for hedging debt instruments, cash and cash equivalents - available
for corporate use and cash and cash equivalents - customer
balances.
STATEMENT OF DIRECTORS RESPONSIBILITIES
For the half year ended 30 June 2023
The directors are responsible for preparing the half-yearly
financial report in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007 ("Transparency Directive"), and the
Transparency Rules of the Central Bank of Ireland.
In preparing the condensed set of consolidated financial
statements included within the half-yearly financial report, the
directors are required to:
-- prepare and present the condensed set of consolidated
financial statements in accordance with IAS 34 Interim Financial
Reporting as adopted by the EU, and the Transparency Directive and
the Transparency Rules of the Central Bank of Ireland;
-- ensure the condensed set of consolidated financial statements has adequate disclosures;
-- select and apply appropriate accounting policies; and
-- make accounting estimates that are reasonable in the circumstances.
-- assess the Entity's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the Entity or to cease operations, or
have no realistic alternative but to do so.
The directors are responsible for designing, implementing and
maintaining such internal controls as they determine is necessary
to enable the preparation of the condensed set of consolidated
financial statements that is free from material misstatement
whether due to fraud or error.
We confirm that to the best of our knowledge:
1) the condensed set of consolidated financial statements
included within the half-yearly financial report of Flutter
Entertainment PLC for the six months ended 30 June 2023 ("the
interim financial information") which comprises the Condensed
Consolidated Interim Income Statement, the Condensed Consolidated
Interim Statement of Other Comprehensive Income, the Condensed
Consolidated Interim Statement of Financial Position, the Condensed
Consolidated Interim Statement of Cash Flows, the Condensed
Consolidated Interim Statement of Changes in Equity and the related
explanatory notes, have been presented and prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU, the
Transparency Directive and Transparency Rules of the Central Bank
of Ireland.
2) The interim financial information presented, as required by
the Transparency Directive, includes:
1. an indication of important events that have occurred during
the first 6 months of the financial year, and their impact on the
condensed set of consolidated financial statements;
2. a description of the principal risks and uncertainties for
the remaining 6 months of the financial year
3. related parties' transactions that have taken place in the
first 6 months of the current financial year and that have
materially affected the financial position or the performance of
the enterprise during that period; and
4. any changes in the related parties' transactions described in
the last annual report that could have a material effect on the
financial position or performance of the enterprise in the first 6
months of the current financial year.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Entity's
website. Legislation in the Republic of Ireland governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
On behalf of the board
Peter Jackson Paul Edgecliffe-Johnson
Chief Executive Officer Chief Financial Officer
8 August 2023
Principal risks
The principal risks and uncertainties which are considered to
have a material impact on the Group's future performance and
strategic objectives are set out on the following pages. The
principal risks and uncertainties are consistent with those defined
in the Group's Annual Report & Accounts 2022, available at
www.flutter.com.
This is not intended to be an exhaustive and extensive analysis
of all risks which may affect the Group. Additional risks and
uncertainties currently deemed to be less material, or not
presently known to Management, may also have an adverse effect on
the performance and strategic objectives of the Group.
Changing legal and regulatory landscape
Why we need to manage How we manage and mitigate the risk
this
The complex and constantly
changing regulatory environments * We have dedicated internal and external Legal,
in which we operate, Regulatory, Compliance and Tax teams covering all
in terms of multiple regions with responsibility for working with, and
jurisdictions, tax regimes advising management on any upcoming regulatory
and licensing obligations, changes, to set appropriate policies, processes and
can make it commercially controls to adapt and ensure compliance.
challenging for us to
operate, or impact our
ability to grow at pace. * Our regulatory profile continues to improve with an
increased proportion of revenues coming from
regulated markets and a continuous focus on reducing
exposure to higher risk jurisdictions.
* For material markets, we engage external counsel to
complement our in-house ongoing monitoring activity
and to guide and support strategic decision making
and planning associated with these markets.
* We invest continuously in the flexibility of our
in-house technology which is key for entering or
remaining in markets, and allowing for adaptability
and flexibility of our products as market conditions
change.
* Flutter and its divisions have dedicated Corporate
Affairs teams and hold memberships with associations
and industry groups working with regulators and
governments to drive proportionate, transparent and
reasonable regulation and taxation in the industry.
US growth execution and competition
Why we need to manage How we manage and mitigate the risk
this
The successful execution
of the growth strategy * We continue to establish and maintain strong
for the US business across commercial relationships with our market access
its brands and partnerships partners and strategic media partners to secure
is critical to our long--term access to new markets and maintain growth.
ambitions.
* We invest in people, product and brands to acquire
further market share and to maintain the agility,
scalability and leading market positions.
* We continue to develop our in-house technology stack,
including our proprietary global betting platform for
the provision of sports betting, to continuously
improve our offering and meet evolving stakeholder
needs.
* We have dedicated external advisers, internal
expertise and resources to support with the
monitoring and assessment of the US competitive
landscape to take appropriate actions.
* Our dedicated US Legal, Risk and Compliance teams
work closely with the business teams to monitor
ongoing compliance across multiple jurisdictions to
continuously improve our processes and controls to
ensure compliance with our federal and state
obligations.
Cyber resilience
Why we need to manage How we manage and mitigate the risk
this
We are dependent on technology
to support our products, * We invest significantly in cyber security resources,
business activities and capabilities and technologies, and work with a
customer operations. variety of external security specialists to ensure
Cyber maturity and capabilities security arrangements and systems are appropriate for
across our expanding our evolving threats and continue to follow leading
Group vary and may increase practice.
the number of potential
attack vectors or internal
threats, which could * The Group Chief Information Security Officer works
lead to financial loss, with the Group and divisional information security
data breaches, regulatory teams to devise and advance our strategy for cyber
action and reputational security, enhance our control assurance capabilities
damage. and governance.
* The Flutter cyber security team owns and reports on
the Group-wide cyber policy detailing our key cyber
topics and control standards, with periodic review
and approval, in addition to internal and external
annual assessment of security maturity.
* Flutter cyber assurance reviews provide ongoing
assessment of security controls implemented to
protect against key risk topics.
* We have defined and rehearsed cross divisional cyber
incident management processes to mitigate the impact
of Group-wide major cyber incidents.
Third parties and key suppliers
Why we need to manage How we manage and mitigate the risk
this
Across our divisions
and Group, we place reliance * Strategic and critical suppliers are subject to
upon certain critical regular business and quality reviews to ensure
suppliers and key third ongoing relationship and performance management.
parties in technology,
sports associations,
marketing, sports content * The Group Procurement and Third Party Assurance
and media which are fundamental functions maintain a Risk Heatmap to monitor
to our business and product strategic and critical suppliers and ensure
offerings. The effective continuity of critical services.
management of critical
third party relationships,
performance and regulatory * As part of our procurement processes, we employ
expectations is key to dedicated resources supplemented by subject matter
our strategic objectives. expertise within risk, compliance, legal and
technology assurance to protect and enhance value,
demonstrate our high standards of corporate integrity,
and reinforce organisational resilience.
* Where possible, we limit reliance on a single
supplier to reduce potential single point of failure.
Leadership and talent pipeline
Why we need to manage How we manage and mitigate the risk
this
To ensure that those
in our most critical * A common talent framework to develop top senior
roles are developed to talent which enables targeted development of
their full potential, individuals and effective succession planning.
and succession is being
built. To ensure we become
the natural home for * We proactively manage executive plans, succession and
the world's best talent search, securing candidates with the capability and
in the skills we deem calibre to lead Flutter as it continues to grow and
most critical. transform.
* As a global company, we need to leverage our diverse
talent to win in our local markets, and ensure
colleagues bring their whole selves to work.
* We provide opportunities for high potential diverse
talent to develop and flourish, including through a
Board Apprenticeship scheme or co-leading on one of
our four Global Advocacy Programmes
International technology transformation
Why we need to manage How we manage and mitigate the risk
this
Challenges to transform,
expand and scale our * Fully restructured CTO leadership team; key new roles
capabilities, given reliance have been introduced in the International Technology
on legacy technologies function, through recruiting externally and
and variances across leveraging internal talent from other brands and
entities, which may lead divisions.
to lower than desired
resilience, reliability
and product agility. * Full review of the International division's
technology risk profile with clear plans and
structures in place to improve, using a risk-based
approach.
* Our revised technology strategy has been defined to
support significant market growth and expansion.
* We continue to invest in resources, software and
hardware to address themed strategic initiatives,
which address stability, process, people and
technology.
* Focused support from external advisers, strategic
partners and experts to support with technology
transformation delivery.
Compliance with existing legal and regulatory landscape
Why we need to manage How we manage and mitigate the risk
this
The interpretation and
ongoing compliance with * For the jurisdictions in which we hold a licence,
complex and multiple dedicated Divisional Compliance teams work closely
regulatory and legislative with the business teams to monitor ongoing compliance
requirements applicable and continuously enhance our processes and controls
to the Group's activities to ensure compliance with regulatory frameworks and
in the markets in which licence requirements.
it operates underpins
the sustainability and
reputation of our business. * We have a number of Group-led overarching policies
and compliance programmes to govern processes across
divisions and thereby ensure compliance with
applicable laws and regulations.
* Detailed policy and procedures across each division
ensure local regulatory requirements are documented,
monitored and reviewed periodically.
* Annual compliance training is mandatory for all staff,
as well as regular, targeted training and awareness
sessions.
* Divisional and Group management provide periodic
legal and regulatory updates through established
governance forums at both divisional and Group level
Committees.
Technology resilience
Why we need to manage How we manage and mitigate the risk
this
We have a critical dependency
on our technology, and * We invest in our proprietary technology and resources
on certain material third to improve IT resilience, eliminate single points of
parties, to maintain failure and drive better performance.
the stability and availability
of our customer-facing
products, as well as -- We have established a standard scale to
the ability to recover better compare the IT disaster recovery resilience
in a timely manner from levels in each division and ensure adequate
severe disruption with improvement plans are developed and tracked
minimal impact on our to mitigate any material risks.
customers and products. * We have dedicated resources to develop, enhance and
test our disaster recovery capability for our key
products across all our brands of the Group.
* Key global metrics on critical systems and platforms
which are regularly monitored and reported on
identify any potential emerging issues on our brands
or customer-facing technologies.
* We have a defined formal incident management process
in place for identifying, escalating and resolving
issues and a post-incident process to ensure we
continuously improve our proprietary technology stack
and incident response processes.
Safer gambling/performance against Play Well strategy
Why we need to manage How we manage and mitigate the risk
this
Safer gambling underpins
every element of our * Our safer gambling strategy informs everything from
strategy. We want to how we identify and interact with at-risk customers
demonstrate consistency through to how we communicate to our broad group of
and global alignment stakeholders and how we encourage safer gambling tool
with our safer gambling usage.
strategy to protect our
customers who are at
risk of the potential * We leverage and share policies, processes and
negative effects of gambling practices across the ever expanding Group to enhance
and ensure we grow our the strategic approach to safer gambling and
business sustainably. demonstrate our commitment to ESG.
* A leading range of tools are provided on all our
brand sites to support customers in managing their
spend and play, and we are continually working to
improve and enhance our tools and site content to
enable us to identify and interact with at-risk
customers.
* We work closely with leading external third parties
to facilitate internal teams to enhance our
understanding, and capabilities in relation to
identification of problem gambling through the use of
artificial intelligence.
* We invest significantly in improvements for tackling
the problem through donations to research, treatment
and education initiatives, as well as through driving
collaboration across the industry with other
operators, charities and regulatory bodies.
Global talent management
Why we need to manage How we manage and mitigate the risk
this
The people who work within
Flutter are key to our * Our brands across the world are setting the pace when
the success. Insufficient it comes to attracting and retaining the best people,
management and retention enhanced by local insights, plans and processes.
of key individuals may
impact our ability to
deliver on our strategic * Our Global People Strategy and plan focuses on five
and operational objectives. key priorities (e.g. nurturing critical skills) that
enable us to build on our scale as a leader, go
beyond our industry and gain a reputation as the best
company in the world to work for.
* We listen to colleagues through surveys and listening
groups to ensure the colleague experience we build is
engaging and attractive. Our Flutter Workforce
Engagement Committee operates to provide oversight of
the Group People Strategy and provide a forum for the
voice of our colleagues at Board level.
* We launched a Global Advocacy Programme, led by our
executives, and use data and measurement so that
equity and equality remain at the forefront of our
decision making.
* Operate communities of practice for our most critical
skills that brings our collective capability together
to achieve shared outcomes with greater connection,
collaboration, and open-source innovation, as well as
elevate our best talent.
Consolidated Interim Income Statement
For the six months ended 30 June 2023
2023 2022
Unaudited Note GBPm GBPm
----------------------------------- ---- ------------------------------------- ------------------------------------
Revenue 4 4,808.6 3,388.2
Cost of sales (2,007.6) (1,352.6)
----------------------------------- ---- ------------------------------------- ------------------------------------
Gross profit 2,801.0 2,035.6
Operating costs excluding
depreciation,
amortisation and (loss)/gain on
disposal (2,035.7) (1,601.5)
----------------------------------- ---- ------------------------------------- ------------------------------------
EBITDA(1) 765.3 434.1
Amortisation of acquisition-related
intangible assets 5 (313.9) (286.1)
Depreciation and amortisation of
other assets (237.6) (144.6)
(Loss)/gain on disposal (0.2) 1.9
----------------------------------- ---- ------------------------------------- ------------------------------------
Operating profit 213.6 5.3
Financial income 6 15.2 0.7
Financial expense 6 (146.1) (57.4)
----------------------------------- ---- ------------------------------------- ------------------------------------
Profit/(loss) before tax 82.7 (51.4)
Tax credit/(expense) 45.4 (60.8)
----------------------------------- ---- ------------------------------------- ------------------------------------
Profit/(loss) for the period 128.1 (112.2)
----------------------------------- ---- ------------------------------------- ------------------------------------
Attributable to:
Equity holders of the Company 131.0 (114.3)
Non-controlling interest (2.9) 2.1
----------------------------------- ---- ------------------------------------- ------------------------------------
128.1 (112.2)
----------------------------------- ---- ------------------------------------- ------------------------------------
Earnings per share
Basic 8 GBP0.738 (GBP0.647)
Diluted 8 GBP0.728 (GBP0.647)
----------------------------------- ---- ------------------------------------- ------------------------------------
1 EBITDA is defined as profit for the period before
depreciation, amortisation, impairment, loss/gain on disposal,
financial income, financial expense and tax expense. It is
considered by the Directors to be a key measure of the Group's
financial performance.
Notes 1 to 20 on pages 38 to 61 form an integral part of these
condensed consolidated financial statements.
Consolidated Interim Statement of Other Comprehensive Income
For the six months ended 30 June 2023
2023 2022
Unaudited Note GBPm GBPm
------------------------------------------- ---- --------------------------------- --------------------------------
Profit/(loss) for the period 128.1 (112.2)
------------------------------------------- ---- --------------------------------- --------------------------------
Other comprehensive income/(loss):
Items that are or may be reclassified
subsequently to profit or loss:
Effective portion of changes in fair
value of cash flow hedges(2) 6 (141.3) 269.7
Fair value of cash flow hedges transferred
to the income statement(2) 6 126.2 (244.2)
Foreign exchange gain/(loss) on net
investment hedges, net of tax(1) 6 19.9 (41.0)
Foreign exchange (loss)/gain on translation
of the net assets of foreign currency
denominated entities(2) 6 (187.3) 222.4
Debt instruments at FVOCI(2) 6 0.4 (2.3)
------------------------------------------- ---- --------------------------------- --------------------------------
Other comprehensive (loss)/income (182.1) 204.6
------------------------------------------- ---- --------------------------------- --------------------------------
Total comprehensive (loss)/income
for the period (54.0) 92.4
------------------------------------------- ---- --------------------------------- --------------------------------
Attributable to:
Equity holders of the Company (50.4) 86.2
Non-controlling interest (3.6) 6.2
------------------------------------------- ---- --------------------------------- --------------------------------
Total comprehensive (loss)/income
for the period (54.0) 92.4
------------------------------------------- ---- --------------------------------- --------------------------------
1 Foreign exchange gain/(loss) on net investment hedges is
presented including an income tax charge of GBP17.6m (six months
ended 30 June 2022 : GBP4.7m) which relates to the tax effect of
the Group's hedging activities.
2 There is no tax impact associated with these items
Notes 1 to 20 on pages 38 to 61 form an integral part of these
condensed consolidated financial statements.
Consolidated Interim Statement of Financial Position
As at 30 June 2023
30 June 2023 31 December
2022
Unaudited Audited
Note GBPm GBPm
-------------------------------------- ---- ------------------------------------ ----------------------------------
Assets
Property, plant and equipment 659.1 702.2
Intangible assets 5,540.7 5,879.9
Goodwill 9 10,677.4 10,860.0
Deferred tax assets 159.2 67.2
Non-current tax receivable 18.9 13.0
Investments at FVTPL 11 9.1 9.2
Derivative financial assets 15 5.7 -
Financial assets - restricted cash 11.9 13.0
Other receivables 11 60.9 38.5
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total non-current assets 17,142.9 17,583.0
Trade and other receivables 11 309.1 345.0
Derivative financial assets 15 - 279.6
Cash and cash equivalents - customer
balances 882.6 1,293.2
Cash and cash equivalents - available
for corporate use 805.2 797.9
Current investments at FVOCI -
customer
deposits 141.8 138.0
Current tax receivable 39.2 45.5
Total current assets 2,177.9 2,899.2
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total assets 19,320.8 20,482.2
-------------------------------------- ---- ------------------------------------ ----------------------------------
Equity
Issued share capital and share premium 16 488.4 484.6
Shares held by Employee Benefit
Trust 16 (131.5) (0.2)
Cash flow hedge reserve 16 35.6 50.7
Other reserves 16 169.8 300.2
Retained earnings 16 9,475.5 9,373.3
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total equity attributable to equity
holders of the Parent 10,037.8 10,208.6
Non-controlling interest 16 115.7 128.3
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total equity 10,153.5 10,336.9
Liabilities
Trade and other payables 12 1,444.5 1,533.1
Customer balances 951.2 1,394.6
Derivative financial liabilities 15 66.4 144.7
Provisions 13 41.1 46.7
Current tax payable 74.3 75.4
Lease liability 83.4 85.4
Borrowings 14 33.1 35.6
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total current liabilities 2,694.0 3,315.5
Trade and other payables 12 60.8 50.8
Derivative financial liabilities 15 101.3 73.7
Provisions 13 44.4 67.5
Deferred tax liabilities 677.7 760.1
Non-current tax payable 7.1 15.0
Lease liability 299.1 320.8
Borrowings 14 5,282.9 5,541.9
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total non-current liabilities 6,473.3 6,829.8
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total liabilities 9,167.3 10,145.3
-------------------------------------- ---- ------------------------------------ ----------------------------------
Total equity and liabilities 19,320.8 20,482.2
-------------------------------------- ---- ------------------------------------ ----------------------------------
Notes 1 to 20 on pages 38 to 61 form an integral part of these
condensed consolidated financial statements.
On behalf of the Board
Peter Jackson Paul Edgecliffe-Johnson
Chief Executive Officer Chief Financial Officer
8 August 2023
Consolidated Interim Statement of Cash Flows
For the six months ended 30 June 2023
2023 2022
Unaudited Note GBPm GBPm
------------------------------------------------ ----- --------------------------- ---------------------------
Cash flows from operating activities
Profit/(loss) for the period 128.1 (112.2)
Tax expense 7 (45.4) 60.8
Financial income 6 (15.2) (0.7)
Financial expense 6 146.1 57.4
Amortisation of acquisition related intangible
assets 5 313.9 286.1
Depreciation and amortisation of other
assets 237.6 144.6
Loss/(gain) on disposal 0.2 (1.9)
Separately disclosed items included within
EBITDA 5 57.8 42.2
Employee equity-settled share-based payments
expense 71.4 50.1
Foreign currency exchange gain (18.4) (16.1)
Cash from operations before changes in
working capital 876.1 510.3
Increase in trade and other receivables (5.2) (38.6)
Decrease in trade, other payables and
provisions (191.8) (36.6)
Movement in cash and cash equivalents
- customer balances (410.6) 44.1
------------------------------------------------ ----- --------------------------- ---------------------------
Cash generated from operating activities 268.5 479.2
Taxes paid (137.5) (131.7)
------------------------------------------------ ----- --------------------------- ---------------------------
Cash generated from operations, net of
taxes paid 131.0 347.5
Transaction fees, restructuring and integration
costs paid 5 (59.6) (39.3)
Net cash from operating activities 71.4 308.2
------------------------------------------------ ----- --------------------------- ---------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (39.1) (26.6)
Purchase of intangible assets (64.2) (20.8)
Capitalised internal development expenditure (133.9) (93.1)
Purchase of businesses net of cash acquired 10 - (395.2)
Payment of contingent deferred consideration 10 - (15.3)
Proceeds from disposal of assets - 3.8
Interest received 6 13.5 0.7
Other 0.2 (0.3)
------------------------------------------------ ----- --------------------------- ---------------------------
Net cash used in investing activities (223.5) (546.8)
------------------------------------------------ ----- --------------------------- ---------------------------
Cash flows from financing activities:
Proceeds from the issue of shares on exercise
of employee options 16 3.8 3.1
Dividend paid to non-controlling interest 16 - (5.4)
Payment of lease liabilities (51.7) (20.9)
Payment of lease interest (7.6) (4.7)
Proceeds from borrowings 14 501.0 275.0
Repayment of borrowings 14 (580.8) (96.6)
Interest paid 14 (129.3) (46.8)
Settlement of derivatives 15 170.2 -
Financing fees paid in respect of borrowing
facilities 14 (1.3) (2.3)
Ordinary shares of the Company acquired
by the Employee Benefit Trust (131.3) -
------------------------------------------------ ----- --------------------------- ---------------------------
Net cash (used in)/from financing activities (227.0) 101.4
------------------------------------------------ ----- --------------------------- ---------------------------
Net decrease in cash and cash equivalents (379.1) (137.2)
Cash and cash equivalents at start of
period 2,091.1 1,629.3
Foreign currency exchange (loss)/gain
on cash and cash equivalents (24.2) 10.8
------------------------------------------------ ----- --------------------------- ---------------------------
Cash and cash equivalents at end of period 1,687.8 1,502.9
------------------------------------------------ ----- --------------------------- ---------------------------
Presented on the Statement of Financial
Position within:
Cash and cash equivalents - customer balances 882.6 721.7
Cash and cash equivalents - available
for corporate use 805.2 781.2
1,687.8 1,502.9
------------------------------------------------ ----- --------------------------- ---------------------------
Notes 1 to 20 on pages 38 to 61 form an integral part of these
consolidated financial statements.
Consolidated Interim Statement of Changes in Equity
For the six months ended 30 June 2023
Issued Shares
Number share held by Foreign Total equity
of ordinary capital Employee Cash Fair exchange Share-based attributable
shares and share Benefit flow hedge value translation Other payment Retained to shareholders Non-controlling
in issue premium Trust reserve reserve(1) reserve(1) reserves(1) reserve(1) earnings of the Company interest Total equity
Unaudited m GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
Balance at 1
January
2023 176.1 484.6 (0.2) 50.7 (4.3) 60.3 2.5 241.7 9,373.3 10,208.6 128.3 10,336.9
Total comprehensive income for the
period
Profit for the
period - - - - - - - - 131.0 131.0 (2.9) 128.1
Foreign exchange
translation
including net
investment
hedges - - - - - (149.1) - - - (149.1) (0.7) (149.8)
Effective portion
of
changes in fair
value
of cash flow
hedges
(Note 6) - - - (141.3) - - - - - (141.3) - (141.3)
Fair value of cash
flow
hedges
transferred to
the income
statement
(Note 6) - - - 126.2 - - - - - 126.2 - 126.2
Financial assets
at
FVOCI (Note 6) - - - - 0.4 - - - - 0.4 - 0.4
Tax on foreign
exchange
hedging (Note 7) - - - - - (17.6) - - - (17.6) - (17.6)
------------------ ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
Total
comprehensive
income for the
period - - - (15.1) 0.4 (166.7) - - 131.0 (50.4) (3.6) (54.0)
------------------ ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
Transactions with owners of the Company,
recognised directly in equity
Shares issued on
exercise
of employee share
options
(Note 16) 0.5 3.8 - - - - - - - 3.8 - 3.8
Put/call fair
value
adjustment (Note
12) - - - - - - - - (12.1) (12.1) - (12.1)
Liability
recognised
on put option
(Note
12) - - - - - - - - (64.9) (64.9) (10.4) (75.3)
Ordinary shares of
the
Company acquired
by
the Employee
Benefit
Trust (Note 16) - - (131.3) - - - - - - (131.3) - (131.3)
Equity-settled
transactions
- expense
recorded in
the income
statement
(Note 16) - - - - - - - 74.0 - 74.0 - 74.0
Tax on share-based
payments
(Note 16) - - - - - - - - 8.9 8.9 - 8.9
Transfer to
retained
earnings on
exercise
of share options
and
vesting of share
awards - - - - - - - (39.3) 39.3 - - -
Translation of
hyperinflationary
results - - - - - - 1.2 - - 1.2 1.4 2.6
Total
contributions
by and
distributions
to owners of the
Company 0.5 3.8 (131.3) - - - 1.2 34.7 (28.8) (120.4) (9.0) (129.4)
------------------ ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
Balance at 30 June
2023 176.6 488.4 (131.5) 35.6 (3.9) (106.4) 3.7 276.4 9,475.5 10,037.8 115.7 10,153.5
------------------ ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------- ------------------------- --------------------------
1 Included in other reserves in the Statement of Financial
Position.
Notes 1 to 20 on pages 38 to 61 form an integral part of these
consolidated financial statements.
Consolidated Interim Statement of Changes in Equity
For the six months ended 30 June 2022
Issued Shares
Number share held by Foreign Total equity
of ordinary capital Employee Cash flow Fair exchange Share-based attributable
shares and share Benefit hedge value translation Other payment Retained to shareholders Non-controlling Total
in issue premium Trust reserve reserve(1) reserve(1) reserves(1) reserve(1) earnings of the Company interest equity
Unaudited m GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------
Balance at 1
January
2022 175.6 477.6 (4.0) 22.7 (1.7) (194.2) 2.5 131.7 9,816.3 10,250.9 37.5 10,288.4
Total comprehensive income
/ (loss) for the period
Profit/(loss)
for
the period - - - - - - - - (114.3) (114.3) 2.1 (112.2)
Foreign exchange
translation
including net
investment
hedges - - - - - 182.0 - - - 182.0 4.1 186.1
Effective
portion
of changes in
fair
value of cash
flow
hedges - - - 269.7 - - - - - 269.7 - 269.7
Fair value of
cash
flow hedges
transferred
to the income
statement - - - (244.2) - - - - - (244.2) - (244.2)
Financial assets
at
FVOCI - - - - (2.3) - - - - (2.3) - (2.3)
Tax on foreign
exchange
hedging - - - - - (4.7) - - - (4.7) - (4.7)
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------
Total
comprehensive
income / (loss)
for
the period - - - 25.5 (2.3) 177.3 - - (114.3) 86.2 6.2 92.4
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------
Transactions with owners of the
Company, recognised directly in
equity
Shares issued on
exercise
of employee
share
options (Note
16) 0.2 3.1 - - - - - - - 3.1 - 3.1
Liability
recognised
on put option - - - - - - - - (169.8) (169.8) (34.2) (204.0)
Equity-settled
transactions
- expense
recorded
in income
statement - - - - - - - 50.1 - 50.1 - 50.1
Tax on
share-based
payments - - - - - - - - 1.0 1.0 - 1.0
Transfer to
retained
earnings on
exercise
of share
options and
vesting of
share awards - - - - - - - (11.7) 11.7 - - -
Dividend paid to
non-controlling
interest (Note
16) - - - - - - - - - - (5.4) (5.4)
Total
contributions
by and
distributions
to owners of
the Company 0.2 3.1 - - - - - 38.4 (157.1) (115.6) (39.6) (155.2)
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------
Balance at 30
June
2022 175.8 480.7 (4.0) 48.2 (4.0) (16.9) 2.5 170.1 9,544.9 10,221.5 4.1 10,225.6
---------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------
1 Included in other reserves in the Statement of Financial
Position.
Notes 1 to 20 on pages 38 to 61 form an integral part of these
consolidated financial statements.
Notes to the Condensed Consolidated Financial Statements
1. General information
Flutter Entertainment plc (the "Company") is a company
incorporated in the Republic of Ireland. The Condensed Consolidated
Financial Statements of the Company for the six months ended 30
June 2023 comprise the Company and its subsidiaries (together
referred to as the "Group"). These Condensed Consolidated Interim
Financial Statements are unaudited but have been reviewed by KPMG,
the Group's auditor, whose report is set out on the last page of
this document.
The financial information presented herein does not comprise
full statutory financial statements and therefore does not include
all of the information required for full annual financial
statements. Full statutory financial statements for the year ended
31 December 2022, prepared in accordance with International
Financial Reporting Standards ("IFRSs") as adopted by the EU
together with an unqualified audit report thereon under Section 391
of the Irish Companies Act 2014, will be annexed to the annual
return and filed with the Registrar of Companies in Ireland.
These Condensed Consolidated Interim Financial Statements were
approved for issue by the Board of Directors of Flutter
Entertainment plc on 8 August 2023.
2. Basis of preparation and accounting policies
The Condensed Consolidated Interim Financial Statements have
been prepared in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007, the Transparency Rules of the
Central Bank of Ireland and with IAS 34 'Interim Financial
Reporting' as adopted by the EU.
The Condensed Consolidated Interim Financial Statements are
prepared on the historical cost basis except for derivative
financial instruments (which include betting transactions), equity
securities, certain financial assets which have been designated as
FVOCI, contingent deferred consideration and share-based payments,
all of which are stated at fair value (grant date fair value in the
case of equity-settled share-based payments). The Condensed
Consolidated Interim Financial Statements are presented in pounds
sterling and are rounded to the nearest GBP0.1 million.
Going concern
The Group reported EBITDA of GBP765.3m (six months ended 30 June
2022: GBP434.1m) and a profit after tax of GBP128.1m for the six
months ended 30 June 2023 (six months ended 30 June 2022: a loss of
GBP112.2m). This includes GBP551.5m of depreciation and
amortisation charged against profit in the period (six months ended
30 June 2022: GBP430.7m). The net cash generated from operating
activities during the period ended 30 June 2023 was GBP71.4m (six
months ended 30 June 2022: GBP308.2m). The balance sheet at 30 June
2023 reported a net current liability position of GBP516.1m (31
December 2022: GBP416.3m). During the six months ended 30 June
2023, the Group is in compliance with all covenants related to its
lending arrangements.
The Directors have considered the available financial resources
which include, at 30 June 2023, GBP1,687.8m (31 December 2022:
GBP2,091.1m) of cash and cash equivalents and a GBP749m Revolving
Credit Facility with undrawn capacity of GBP738m. Whilst there are
certain loan repayments due within the next 12 months of GBP33.1m,
the Group's lending facilities primarily fall due in 2025 and 2026
as set out in more detail in Note 14. As a consequence, the
Directors believe that the Group is well placed to manage its
business risks successfully. See 'Principal Risks and
Uncertainties' in this report for more detail.
The Group's forecasts to the next 12 months indicate that it
will continue to have significant financial resources, continue to
settle its debts as they fall due and operate well within its
banking covenants as outlined in Note 14 for at least a period of
12 months from the date of the approval of these condensed
consolidated financial statements. 12 months from the date of the
approval of these condensed consolidated financial statements was
selected as the going concern period as it represents the period in
which the Group has prepared detailed forecasts for a proportion of
the period and it also reduces the degree of judgement and
estimation uncertainty involved in both the forecasts and the
downside scenarios.
Various downside scenarios over and above those already included
in the base case model on the potential impact of further
reductions to cash flows due to reduced customer discretionary
income, changes in the legal, regulatory and licencing landscape
and the Group's cyber and IT resilience have been considered in
respect of these forecasts. The impact of these items involves
significant judgement and estimation uncertainty.
In the event that it was necessary to draw down additional debt
funding, the Directors have a reasonable expectation that this
could be achieved within the confines of its existing debt
facilities and financial covenant requirements.
Having given regard to the above, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for a period of at least 12
months from the date of approval of these financial statements and
therefore they continue to operate the going concern basis in its
financial statements.
Accounting policies
The financial information contained in these Condensed
Consolidated Interim Financial Statements has been prepared in
accordance with the accounting policies set out in the Group's last
annual financial statements in respect of the year ended 31
December 2022 except as set out below.
2. Basis of preparation and accounting policies (continued)
Turkey has met the requirements to be designated as a
hyper-inflationary economy under IAS 29 'Financial Reporting in
Hyper-Inflationary Economies' and that the Group's financial
reporting relating to Turkey during the period ending 30 June 2023
will be in accordance with IAS 29. Under IAS 29, Turkish Lira
results and non-monetary asset and liability balances are revalued
to present value equivalent local currency amounts (adjusted based
on an inflation index) before translation to euros at
reporting-date exchange rates.
3. Judgements and estimates
The preparation of interim financial statements in conformity
with IFRS requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an on-going
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
Judgements
In preparing these condensed Consolidated Financial Statements,
the significant judgements in applying the Group's accounting
policies and the key sources of estimation uncertainty were
consistent with those that applied to the Consolidated Financial
Statements as at and for the year ended 31 December 2022 and are
detailed below:
Valuation of tax assets and liabilities
Whilst we maintain good communication with key tax authorities,
given the global nature of our business and the complex
international tax landscape, there remain areas of tax uncertainty
and therefore there is a level of uncertainty with regards to the
measurement of our tax assets and liabilities. Uncertainties have
been measured using the best estimate of the likely outcome. This
assessment relies on estimates and assumptions and may involve a
series of judgements about future events.
Where uncertain tax treatments exist, the Group assesses whether
it is probable that a tax authority will accept the uncertain tax
treatment applied or proposed to be applied in its tax filings. The
Group assesses each uncertain tax treatment as to whether it should
be considered independently or whether some tax treatments should
be considered collectively based on what the Group believes
provides a better estimate of the resolution of the uncertainty.
The Group considers whether it is probable that the relevant
authority will accept each uncertain tax treatment, or group of
uncertain tax treatments, assuming that the taxation authority will
have full knowledge of all relevant information when doing so.
The key areas of judgement are in relation to intercompany
transactions, including internally generated intangible asset
transfers, and the recognition of deferred tax, particularly in
respect to the US segment.
Recognition of deferred tax assets requires consideration of the
value of those assets and the likelihood that those assets will be
utilised in the foreseeable future. The recognition relies on the
availability of sound and relatively detailed forecast information
regarding the future performance of the business which has the
legal right to utilise the deferred tax assets. The Group performed
its assessment of the recovery of deferred tax assets at 30 June
2023, taking into account the Group's actual and historic
performance, the impact of tax legislation enacted at the reporting
date and the detailed financial forecasts and budgets for the
business covering the periods over which the assets are expected to
be utilised. During the six months ended 30 June 2023, the Group
has recognised a deferred tax asset of GBP92m in respect of US
losses and other temporary timing differences as a result of
taxable profits being forecast during the period and beyond, its
confidence in its forecasts over the remainder of 2023 and the
strong forecasted profits in 2024.
New information may become available that causes the Group to
change its judgement regarding the adequacy of existing tax assets
and liabilities; such changes to tax assets and liabilities will
impact the income tax in the period in which such a determination
is made. Management uses in-house tax experts, professional firms
and previous experience when assessing tax risks and the Group
believes that the position for all tax assets and liabilities at 30
June 2023 is adequate based on its assessment of the range of
factors outlined above but given the inherent uncertainty, it is
possible that resolution of tax uncertainties may differ from the
amounts provided for.
Estimates
Determining the fair value of some assets and liabilities
requires estimation of the effects of uncertain future events on
those assets and liabilities at the end of the reporting period.
The following discussion sets forth key sources of estimation
uncertainty at the end of the reporting period that management
believes have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year.
Measurement of the recoverable amounts of cash generating units
containing goodwill, indefinite life licences and intangible
assets
The Group reviews the carrying value of goodwill for impairment
annually (or more frequently if there are indications that the
value of goodwill may be impaired) by comparing the carrying values
of these cash generating units with their recoverable amounts
(being the higher of value in use and fair value less costs to
sell). The impairment review is performed on a "value-in-use"
basis, which requires estimation of future net operating cash
flows, the time period over which they will occur, an appropriate
discount rate and an appropriate growth rate. Certain of these
estimates and assumptions are subjective in nature.
3. Judgements and estimates (continued)
The Group has reviewed the performance in the first half of 2023
in the UK&I Online, Retail, International, Australia and US
CGUs and based on this and in conjunction with the headroom that
existed at 31 December 2022 is satisfied that no impairment has
arisen during the six months ended 30 June 2023.
4. Operating segments
Reportable business segment information
The Group's four reportable segments are:
-- UK & Ireland;
-- Australia;
-- International; and
-- US.
UK & Ireland
The UK & Ireland ("UK&I") segment is comprised of the
operations of Sky Betting & Gaming, Paddy Power, Betfair and
from January 2022, tombola (see Note 10). Revenues are earned
primarily from sports betting (sportsbook and the exchange sports
betting product) and gaming services (games, casino, bingo and
poker). Services are provided primarily via the internet but also
through licensed bookmaking shop estates.
Australia
The Australia segment is comprised of the operations of the
Sportsbet brand and earns its revenues from sports betting services
provided to Australian customers primarily online.
International
The International segment is comprised of PokerStars, Betfair
International, Adjarabet, Junglee Games and from August 2022,
Sisal. The International segment earns most of its revenues from
poker, casino, rummy, lottery and sports betting through various
brands. Services are provided primarily via the internet but also
through licensed retail outlets mainly in Italy following the
acquisition of Sisal.
US
The US segment is comprised of the FanDuel, TVG, FOX Bet and
PokerStars brands' and earns its revenues from sports betting,
daily fantasy sports and gaming services (casino and poker)
provided to customers, using primarily the internet, with a
proportion of US sports betting services also provided through a
small number of retail outlets.
Corporate
Corporate administrative costs (Board, Finance, Legal, Internal
Audit, HR, Property and other central functions) cannot be readily
allocated to individual operating segments and are not used by the
CODM for making operating and resource allocation decisions. These
are shown in the reconciliation of reportable segments to Group
totals.
The accounting policies in respect of operating segments
reporting are the same as those described in the basis of
preparation and summary of significant accounting policies set out
in the Company's last annual financial statements in respect of the
year ended 31 December 2022.
The Group does not allocate income tax expense or financing
income and expenses to reportable segments. Treasury management is
centralised for the UK&I, Australia, International and US
segments.
Assets and liabilities information is reported internally in
total and not by reportable segment and, accordingly, no
information is provided in this note on assets and liabilities
split by reportable segment.
Seasonality
The Group's sportsbook revenue is driven by a combination of the
timing of sporting and other events and the Group's results derived
from those events. Gaming and other revenue is not as dependent on
the sporting calendar.
4. Operating segments (continued)
Reportable business segment information for the six months ended
30 June 2023 :
UK&I Australia International US Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ------------------ ------------------ ---------------------- ------------ ------------------ ------------------
Revenue from
external
customers 1,242.1 600.9 1,169.0 1,796.6 - 4,808.6
Cost of sales (374.0) (317.2) (417.3) (899.1) - (2,007.6)
-------------------- ------------------ ------------------ ---------------------- ------------ ------------------ ------------------
Gross profit 868.1 283.7 751.7 897.5 - 2,801.0
Operating costs
excluding
depreciation and
amortisation
before separately
disclosed
items (472.3) (125.3) (467.3) (848.5) (64.5) (1,977.9)
-------------------- ------------------ ------------------ ---------------------- ------------ ------------------ ------------------
Adjusted EBITDA(1)
before separately
disclosed
items 395.8 158.4 284.4 49.0 (64.5) 823.1
Depreciation and
amortisation
before separately
disclosed
items (58.8) (16.5) (106.9) (53.1) (2.3) (237.6)
Loss on disposal (0.2) - - - - (0.2)
-------------------- ------------------ ------------------ ---------------------- ------------ ------------------ ------------------
Reportable segment
profit/(loss)
before
separately
disclosed
items 336.8 141.9 177.5 (4.1) (66.8) 585.3
Amortisation of
acquisition-related
intangible assets
(Note
5) (124.6) (9.3) (171.3) (8.7) - (313.9)
Reportable segment
profit/(loss) after
amortisation of
acquisition-related
intangibles 212.2 132.6 6.2 (12.8) (66.8) 271.4
Transaction fees and
associated costs(2) (16.0)
Restructuring and
integration
costs(2) (41.8)
Operating profit 213.6
-------------------- ------------------ ------------------ ---------------------- ------------ ------------------
Financial income 15.2
Financial expense (146.1)
-------------------- ------------------ ------------------ ---------------------- ------------ ------------------ ------------------
Profit before tax 82.7
-------------------- ------------------ ------------------ ---------------------- ------------ ------------------ ------------------
4. Operating segments (continued)
Reportable business segment information for the six months ended
30 June 2022:
UK&I Australia International US Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ----------------- ----------------- ----------------- ------------------ ------------------ ------------------
Revenue from
external
customers 1,091.8 612.1 633.6 1,050.7 - 3,388.2
Cost of sales (335.0) (289.7) (184.0) (543.9) - (1,352.6)
-------------------- ----------------- ----------------- ----------------- ------------------ ------------------ ------------------
Gross profit 756.8 322.4 449.6 506.8 - 2,035.6
Operating costs
excluding
depreciation and
amortisation
before separately
disclosed
items (436.3) (103.1) (327.1) (638.6) (54.2) (1,559.3)
-------------------- ----------------- ----------------- ----------------- ------------------ ------------------ ------------------
Adjusted EBITDA(1) 320.5 219.3 122.5 (131.8) (54.2) 476.3
Depreciation and
amortisation
before separately
disclosed
items (63.4) (13.7) (32.8) (31.8) (2.9) (144.6)
Profit on disposal 0.2 - - 1.2 0.5 1.9
-------------------- ----------------- ----------------- ----------------- ------------------ ------------------ ------------------
Reportable segment
profit/(loss)
before
separately
disclosed
items 257.3 205.6 89.7 (162.4) (56.6) 333.6
Amortisation of
acquisition-related
intangible assets
(Note
5) (135.7) (11.4) (130.1) (8.9) - (286.1)
Reportable segment
profit/(loss) after
amortisation of
acquisition-related
intangibles 121.6 194.2 (40.4) (171.3) (56.6) 47.5
-------------------- ----------------- ----------------- ----------------- ------------------ ------------------
Transaction fees and
associated costs(2) (9.9)
Restructuring and
integration
costs(2) (32.3)
-------------------- ----------------- ----------------- ----------------- ------------------ ------------------ ------------------
Operating profit 5.3
-------------------- ----------------- ----------------- ----------------- ------------------ ------------------
Financial income 0.7
Financial expense (57.4)
-------------------- ----------------- ----------------- ----------------- ------------------ ------------------ ------------------
Loss before tax (51.4)
-------------------- ----------------- ----------------- ----------------- ------------------ ------------------ ------------------
1 Adjusted EBITDA which is a non-GAAP measure in the above
segment note is defined as profit for the six months before
separately disclosed items, depreciation, amortisation, impairment,
(loss) / gain on disposal, financial income, financial expense and
tax expense / credit. It is considered by the Directors to be a key
measure of the Group's financial performance.
2 The Group does not allocate transaction fees and restructuring
and integration costs to reportable segments.
Reconciliation of reportable segment pre Separately disclosed
items information to Group totals:
2023 2022
----------------- ------------------------------------------------------------ -----------------------------------------------------------
Before Before
separately Separately separately Separately
disclosed disclosed disclosed disclosed
items items Total items items Total
GBPm GBPm GBPm GBPm GBPm GBPm
Gross profit 2,801.0 - 2,801.0 2,035.6 - 2,035.6
Operating costs
excluding
depreciation,
amortisation
and (loss)/gain
on
disposal (1,977.9) (57.8) (2,035.7) (1,559.3) (42.2) (1,601.5)
----------------- ------------------- ------------------ ------------------- ------------------- ------------------ ------------------
EBITDA(1) 823.1 (57.8) 765.3 476.3 (42.2) 434.1
Depreciation and
amortisation (237.6) (313.9) (551.5) (144.6) (286.1) (430.7)
(Loss) /gain on
disposal (0.2) - (0.2) 1.9 - 1.9
Operating profit 585.3 (371.7) 213.6 333.6 (328.3) 5.3
Net finance costs (130.9) - (130.9) (56.7) - (56.7)
Profit / (loss)
before tax 454.4 (371.7) 82.7 276.9 (328.3) (51.4)
Tax
credit/(expense) (34.3) 79.7 45.4 (100.3) 39.5 (60.8)
----------------- ------------------- ------------------ ------------------- ------------------- ------------------ ------------------
Profit / (loss)
for the period 420.1 (292.0) 128.1 176.6 (288.8) (112.2)
----------------- ------------------- ------------------ ------------------- ------------------- ------------------ ------------------
1 EBITDA is defined as profit for the six months before
depreciation, amortisation, impairment, (loss)/gain on disposal,
financial income, financial expense and tax expense/credit. It is
considered by the Directors to be a key measure of the Group's
financial performance.
See Note 5 for further detail on separately disclosed items.
4. Operating segments (continued)
Disaggregation of revenue under IFRS 15:
Group revenue disaggregated by product line for the six months
ended 30 June 2023:
UK&I Australia International US Total
GBPm GBPm GBPm GBPm GBPm
----------- ----------------------- ------------------------ ---------------------- ---------------------- ---------------------
Sports
revenue(1) 708.7 600.9 315.4 1,371.1 2,996.1
Gaming
revenue(2) 533.4 - 853.6 425.5 1,812.5
----------- ----------------------- ------------------------ ---------------------- ---------------------- ---------------------
Total Group
revenue 1,242.1 600.9 1,169.0 1,796.6 4,808.6
----------- ----------------------- ------------------------ ---------------------- ---------------------- ---------------------
Group revenue disaggregated by product line for the six months
ended 30 June 2022(:)
UK&I Australia International US Total
GBPm GBPm GBPm GBPm GBPm
----------- ---------------------- ------------------------ ---------------------- ---------------------- ---------------------
Sports
revenue(1) 629.7 612.1 106.4 770.1 2,118.3
Gaming
revenue(2) 462.1 - 527.2 280.6 1,269.9
----------- ---------------------- ------------------------ ---------------------- ---------------------- ---------------------
Total Group
revenue 1,091.8 612.1 633.6 1,050.7 3,388.2
----------- ---------------------- ------------------------ ---------------------- ---------------------- ---------------------
1 Sports revenue comprises sportsbook, exchange sports betting,
daily fantasy sports and pari-mutuel betting.
2 Gaming revenue includes Games, Poker, Casino, Lottery, Rummy
and Bingo.
Geographical information
Group revenue disaggregated by geographical market for the six
months ended 30 June 2023:
UK&I Australia International US Total
GBPm GBPm GBPm GBPm GBPm
------------ ------------------------- ---------------------------- ---------------------------- --------------------- --------------------
US - - - 1,761.5 1,761.5
UK 1,085.7 - 28.3 - 1,114.0
Australia - 600.9 - - 600.9
Rest of
World(1) 1.9 - 403.5 35.1 440.5
EU (excl.
Italy
and
Ireland)(2) 10.7 - 183.3 - 194.0
Italy 18.2 - 551.2 - 569.4
Ireland 125.6 - 2.7 - 128.3
------------ ------------------------- ---------------------------- ---------------------------- --------------------- --------------------
Total Group
revenue 1,242.1 600.9 1,169.0 1,796.6 4,808.6
------------ ------------------------- ---------------------------- ---------------------------- --------------------- --------------------
1 The Rest of Worl d category includes multiple countries, that
individually represent less than 2% of total Group revenue.
2 The EU (excl. Italy and Ireland) category includes multiple
countries, that individually represent less than 2% of total Group
revenue.
Group revenue disaggregated by geographical market for the six
months ended 30 June 2022:
UK&I Australia International US Total
GBPm GBPm GBPm GBPm GBPm
US - - - 1,054.4 1,054.4
UK 952.5 - 31.5 - 984.0
Australia - 612.1 - - 612.1
Rest of
World(1) 1.6 - 318.5 (3.7) 316.4
EU (excl.
Italy
and
Ireland)(2) 9.1 - 185.0 - 194.1
Italy 12.9 - 96.1 - 109.0
Ireland 115.7 - 2.5 - 118.2
------------ ------------------------- ---------------------------- ----------------------------- ----------------------- ----------------------
Total Group
revenue 1,091.8 612.1 633.6 1,050.7 3,388.2
------------ ------------------------- ---------------------------- ----------------------------- ----------------------- ----------------------
1 The Rest of World category includes multiple countries that
individually represent less than 2% of total Group revenue.
2 The EU (excl. Italy and Ireland) category includes multiple
countries that individually represent less than 4% of total Group
revenue.
Revenues are attributable to geographical location on the basis
of the customers location.
5. Separately disclosed items
The separately disclosed items noted in Note 4 are comprised as
follows:
2023 2022
GBPm GBPm
-------------------------------------------- ----------------------------------- -----------------------------------
Transaction fees and associated costs (16.0) (9.9)
Restructuring and integration costs (41.8) (32.3)
EBITDA impact of separately disclosed
items (57.8) (42.2)
Amortisation of acquisition-related
intangible
assets (313.9) (286.1)
Loss before tax impact of separately
disclosed
items (371.7) (328.3)
-------------------------------------------- ----------------------------------- -----------------------------------
Tax credit on separately disclosed items 79.7 39.5
-------------------------------------------- ----------------------------------- -----------------------------------
Total separately disclosed items (292.0) (288.8)
-------------------------------------------- ----------------------------------- -----------------------------------
Attributable to:
Equity holders of the Company (290.6) (286.0)
Non-controlling interest (1.4) (2.8)
-------------------------------------------- ----------------------------------- -----------------------------------
(292.0) (288.8)
-------------------------------------------- ----------------------------------- -----------------------------------
Amortisation of acquisition-related intangible assets
Amortisation of GBP313.9m has been incurred in the period (six
months ended 30 June 2022: GBP286.1m) as a result of intangible
assets separately identified under IFRS 3 as a result of the merger
with Betfair in 2016, the acquisitions of FanDuel Limited in 2018
and Adjarabet in 2019, the Combination with TSG in 2020, the
acquisitions of Junglee and Singular in 2021 and the acquisitions
of tombola and Sisal in 2022.
Transaction fees and associated costs
During the six months ended 30 June 2023, GBP16.0m ( six months
ended 30 June 2022: GBP9.9m) of costs were incurred relating mainly
to the proposed US listing. The costs were included as separately
disclosed items as they have not been incurred in the ordinary
course of business.
Restructuring and integration costs
During the six months ended 30 June 2023 costs of GBP41.8m (six
months ended 30 June 2022: GBP32.3m) relating to incremental,
one-off costs, were incurred by the Group mainly as a result of
technology-driven efficiency projects and Sisal integration
costs.
Presentation within the Consolidated Income Statement
Transaction fees and associated costs and restructuring and
integration costs are included in the Consolidated Income Statement
within operating costs excluding depreciation, amortisation, and
loss/(gain) on disposal.
Tax credit on separately disclosed items
The tax credit of GBP79.7m (six months ended 30 June 2022:
GBP39.5m) has arisen primarily on the tax effect of acquisition
related intangible amortisation of GBP54.6m and the tax effect of
other separately identified items of GBP25.1m.
6. Financial income and expense
Recognised in profit or loss
2023 2022
GBPm GBPm
----------------------------------------------- --------------------------------- ----------------------------------
Financial income:
Foreign exchange gain on financing instruments
associated with financing activities 0.6 -
Movement in fair value of investment 0.1 -
On financial assets at amortised cost:
Interest income 14.5 0.7
----------------------------------------------- --------------------------------- ----------------------------------
Total 15.2 0.7
----------------------------------------------- --------------------------------- ----------------------------------
Financial expense:
Foreign exchange loss on financing instruments
associated with financing activities - 0.2
On financial liabilities at amortised
cost:
Interest on borrowings, bank guarantees
and bank facilities 128.0 43.2
Interest on lease liabilities 7.6 4.7
Other interest 10.5 9.3
----------------------------------------------- --------------------------------- ----------------------------------
Total 146.1 57.4
----------------------------------------------- --------------------------------- ----------------------------------
Recognised in other comprehensive income/(loss):
2023 2022
GBPm GBPm
----------------------------------------------- --------------------------------- ----------------------------------
Recognised in other comprehensive
income/(loss):
Effective portion of changes in fair value
of cash flow hedges (141.3) 269.7
Fair value of cash flow hedges transferred
to income statement 126.2 (244.2)
----------------------------------------------- --------------------------------- ----------------------------------
Net change in fair value of cash flow hedge
reserve (15.1) 25.5
Debt instruments at FVOCI 0.4 (2.3)
Foreign exchange gain/(loss) on net investment
hedges, net of tax 19.9 (41.0)
Foreign exchange (loss)/gain on translation
of the net assets of foreign currency
denominated
entities (187.3) 222.4
----------------------------------------------- --------------------------------- ----------------------------------
Total (182.1) 204.6
----------------------------------------------- --------------------------------- ----------------------------------
A gain of GBP1.1m was recorded in financial income/expense in
the income statement in respect of ineffective cash flow hedges in
the six months ended 30 June 2023 (six months ended 30 June 2022:
charge of GBP1.0m).
7. Tax expense
Tax is accrued for the interim reporting period using
Management's best estimate of the weighted average tax rate that is
expected to be applicable to estimated total annual earnings which
may be adjusted for any significant non-recurring events. This
expected annual effective tax rate is applied to the taxable income
of the interim period.
The Group's adjusted effective tax rate before separately
disclosed items for the period was 7.6% (six months ended 30 June
2022: 36.2%), which compares to the standard Irish tax rate of
12.5%. %. This is primarily driven by the changing mix of taxable
earnings across geographies and the recognition of a full deferred
tax asset for the tax losses and other temporary differences of the
US as at year-end. This deferred tax asset has been recognised on
the basis that its US business has significant positive evidence
that it will make profits in the future against which the losses
and other temporary differences can be used. This has been
reflected in calculating the expected annual effective tax rate and
will be apportioned between the interim periods. A tax credit on
separately disclosed items amounting to GBP79.7m was recorded
during the six months ended 30 June 2023 (six months ended 30 June
2022: credit of GBP39.5m) (see Note 5).
The future effective tax rate of the Group will be affected by
the ongoing geographic mix of profits in accordance with the OECD
guidelines in relation to Base Erosion and Profit Shifting. On 15
December 2022, European Union (EU) Member States unanimously
adopted the Minimum Tax Directive via written procedure ensuring a
global minimum level of taxation (set at 15%) for multinational
enterprise groups. GLoBE Model rules were released in March 2022
and broadly EU Member States have until 31 December 2023 to
transpose the Directive into national legislation with the rules to
be applicable for fiscal years starting on or after 31 December
2023.
7. Tax expense (continued)
None of the countries in which the Group operates has enacted or
substantively enacted Pillar Two Model Rules as part of their
national laws as of 30 June 2023. Whilst consultation on a number
of areas remains ongoing, we will continue to monitor developments
closely and we expect this to lead to an increase in tax from 2024
onwards.
8. Earnings per share
The Group presents basic and diluted earnings per share ("EPS")
data for its ordinary shares.
Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares outstanding during the
period. The weighted average number of shares has been adjusted for
amounts held as treasury shares and amounts held by the Paddy Power
Betfair plc Employee Benefit Trust ("EBT").
Diluted EPS is determined by adjusting the weighted average
number of ordinary shares outstanding for the effects of all
dilutive potential ordinary shares.
Adjusted EPS is determined by adjusting the profit attributable
to ordinary shareholders for the impact of separately disclosed
items.
The calculation of basic, diluted and adjusted EPS is as
follows:
2023 2022
--------------------------------------------- ------------------------------- ---------------------------------
Numerator in respect of basic and diluted
earnings per share (GBPm):
Profit/(loss) attributable to equity holders
of the Company 131.0 (114.3)
--------------------------------------------- ------------------------------- ---------------------------------
Numerator in respect of adjusted earnings
per share (GBPm):
Profit/(loss) attributable to equity holders
of the Company 131.0 (114.3)
Separately disclosed items (Note 5) 290.6 286.0
--------------------------------------------- ------------------------------- ---------------------------------
Profit for adjusted earnings per share
calculation 421.6 171.7
--------------------------------------------- ------------------------------- ---------------------------------
Weighted average number of ordinary shares
in issue during the period (in '000s)(1) 177,502 176,658
--------------------------------------------- ------------------------------- ---------------------------------
Basic earnings per share GBP0.738 (GBP0.647)
--------------------------------------------- ------------------------------- ---------------------------------
Adjusted basic earnings per share GBP2.375 GBP0.972
--------------------------------------------- ------------------------------- ---------------------------------
Adjustments to derive denominator in respect
of diluted earnings per share (in '000s):
---------------------------------------------
Weighted average number of ordinary shares
in issue during the period 177,502 176,658
--------------------------------------------- ------------------------------- ---------------------------------
Dilutive effect of share options and awards
on issue 2,372 -
--------------------------------------------- ------------------------------- ---------------------------------
Adjusted weighted average number of ordinary
shares in issue during the period(1) 179,874 176,658
--------------------------------------------- ------------------------------- ---------------------------------
Diluted earnings per share GBP0.728 (GBP0.647)
--------------------------------------------- ------------------------------- ---------------------------------
Adjusted diluted earnings per share GBP2.344 GBP0.972
--------------------------------------------- ------------------------------- ---------------------------------
1 Where any potential ordinary shares would have the effect of
decreasing a loss per share, they have not been treated as
dilutive. The number of options excluded from the diluted weighted
average number of ordinary shares calculation due to their effect
being anti-dilutive is 180,097 (2022: 2,187,856).
The average market value of the Company's shares of GBP143.83
(30 June 2022: GBP94.53) was used to calculate the dilutive effect
of share options based on the market value for the period that the
options were outstanding.
9. Goodwill
Goodwill acquired through business combination activity has been
allocated to CGUs that are expected to benefit from synergies in
that combination. The CGUs represent the lowest level within the
Group at which the associated goodwill is monitored for internal
management purposes, and are not larger than the operating segments
determined in accordance with IFRS 8. A total of 16 (2022: 16) CGUs
have been identified and these are grouped together for goodwill
impairment purposes as per the below. Any indefinite life
intangible assets attributed to one of the 16 CGUs (2022: 16) is
tested for impairment at the CGU level.
Number of cash generating
units Goodwill
--------------
31 December 31 December
30 June 2023 2022 30 June 2023 2022
UK&I Online 4 4 5,984.5 5,984.7
UK Retail 1 1 18.9 18.9
Irish Retail 1 1 20.7 20.7
International 6 6 3,576.1 3,696.3
Australia 1 1 471.2 505.1
US 3 3 606.0 634.3
-------------- -------------- ----------- ------------------------------ ------------------------------
Total Group 16 16 10,677.4 10,860.0
-------------- -------------- ----------- ------------------------------ ------------------------------
UK&I Irish
Online UK Retail Retail International Australia US Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- -------------- -------------- -------------- ------------- ------------- ------------- -------------
Balance at 1
January
2022 5,766.9 18.9 20.7 2,490.3 482.4 567.6 9,346.8
Arising on
acquisitions
during the
year (Note
10) 217.2 - - 1,021.9 - - 1,239.1
Foreign
currency
translation
adjustment 0.6 - - 184.1 22.7 66.7 274.1
------------- -------------- -------------- -------------- ------------- ------------- ------------- -------------
Balance at 1
January
2023 5,984.7 18.9 20.7 3,696.3 505.1 634.3 10,860.0
Adjustments
to
provisional
purchase
price
accounting
(Note 10) - - - (26.3) - - (26.3)
Foreign
currency
translation
adjustment (0.2) - - (93.9) (33.9) (28.3) (156.3)
Balance at 30
June
2023 5,984.5 18.9 20.7 3,576.1 471.2 606.0 10,677.4
The Group reviews the carrying value of goodwill for impairment
annually (or more frequently if there are indications that the
value of goodwill may be impaired) by comparing the carrying values
of these CGUs with their recoverable amounts (being the higher of
value in use and fair value less costs to sell).
The Group has reviewed the performance in the first half of 2023
in the UK&I Online, Retail, International, Australia and US
CGUs and based on this and in conjunction with the headroom that
existed at 31 December 2022 is satisfied that no impairment has
arisen during the six months ended 30 June 2023.
10. Business combinations
Six months ended 30 June 2023
There have been no acquisitions during the period.
Finalisation of Sisal acquisition accounting
On 4 August 2022, the Group completed the acquisition of 100% of
Sisal, Italy's leading retail and online gaming operator with
operations also in Turkey (of which it has a controlling 49%
interest) and Morocco. The purchase comprised of a cash payment of
GBP1,674.8m (EUR2,002m). As at 31 December 2022, the acquisition
accounting for this acquisition was provisional. During the six
months ended 30 June 2023, the Group finalised the acquisition
accounting for Sisal which resulted in the following adjustments to
the provisional amounts recognised.
Adjustments
Provisional to provisional Final Fair
Fair values acquisition values as
as at accounting at
4 August 4 August 4 August
2022 2022 2022
GBPm GBPm GBPm
Assets
Property, plant and equipment 156.0 9.5 165.5
Trade and other receivables 9.7 - 9.7
Deferred tax assets 16.2 (2.5) 13.7
Intangible assets 1,057.8 - 1,057.8
Total non-current assets 1,239.7 7.0 1,246.7
Trade and other receivables 67.3 3.9 71.2
Cash and cash equivalents - available
for corporate use 89.9 - 89.9
Cash and cash equivalents - customer
balances 304.2 - 304.2
Total current assets 461.4 3.9 465.3
Total assets 1,701.1 10.9 1,712.0
Liabilities
Trade and other payables 195.6 - 195.6
Customer balances 304.2 - 304.2
Lease liability 16.7 - 16.7
Total current liabilities 516.5 - 516.5
Trade and other payables 24.0 - 24.0
Lease liability 45.2 - 45.2
Provisions 39.8 (15.4) 24.4
Deferred tax liability 291.1 - 291.1
Total non-current liabilities 400.1 (15.4) 384.7
Total liabilities 916.6 (15.4) 901.2
Net assets acquired 784.5 26.3 810.8
Goodwill 1,015.8 (26.3) 989.5
Non-controlling interest measured
at the fair value of net assets
identified (125.5) - (125.5)
Consideration 1,674.8 - 1,674.8
These adjustments arose as a result of new information that was
obtained relating to conditions that existed at the acquisition
date primarily related to provisions and the fair value
finalisation of property, plant and equipment acquired which
increased the net assets acquired by GBP26.3m and reduced goodwill
by GBP26.3m.
10. Business combinations (continued)
Six months ended 30 June 2022
Acquisition of tombola
On 10 January 2022, the Group completed the acquisition of a
100% stake in tombola, the UK market's leading online bingo
operator. tombola is a successful bingo-led gaming company with an
emphasis on providing a low staking bingo proposition to a highly
engaged customer base. The purchase comprised of a cash payment of
GBP409.9m. Details of the fair value of identifiable assets and
liabilities acquired, purchase consideration and goodwill are as
follows:
Fair values as
at
10 January 2022
GBPm
Assets
Property, plant and equipment 11.4
Intangible assets 245.0
Total non-current assets 256.4
Trade and other receivables 12.6
Cash and cash equivalents - available for corporate
use 14.7
Total current assets 27.3
Total assets 283.7
Liabilities
Trade and other payables 29.7
Total current liabilities 29.7
Deferred tax liabilities 61.3
Total non-current liabilities 61.3
Total liabilities 91.0
Net assets acquired 192.7
Goodwill 217.2
Consideration 409.9
The consideration is analysed as:
Consideration satisfied by cash 409.9
Consideration 409.9
Included within the intangible assets were GBP245.0m of
separately identifiable intangibles comprising brand, customer
relations and technology acquired as part of the acquisition, with
the additional effect of a deferred tax liability of GBP61.3m
thereon. These intangible assets are being amortised over their
useful economic lives of up to 20 years. The book value equated to
the fair value on the remaining assets as all amounts are expected
to be received.
The main factors leading to the recognition of goodwill (none of
which is deductible for tax purposes) are the expansion of the
Group's position in online bingo and the sharing of product
capabilities, expertise and technology across the UK&I Online
division. The goodwill has been allocated to the existing UK&I
Online CGU.
10. Business combinations (continued)
Cash (outflows) / inflows from business combinations:
30 June 2023 30 June 2022
GBPm GBPm
---------------------------------------------- ---------------------------------- ---------------------------------
Cash consideration paid for acquisitions
in the period - (409.9)
Cash and cash equivalents - available for
corporate use acquired from acquisitions
in the period - 14.7
Cash consideration - acquisitions in previous
periods - (15.3)
As presented in the statement of cash
flows:
Purchase of businesses net of cash acquired - (395.2)
Payment of contingent deferred consideration - (15.3)
---------------------------------------------- ---------------------------------- ---------------------------------
During 2022, the Group settled in cash, deferred consideration
liabilities of GBP15.3m in relation to Betfair's historical
acquisition of HRTV, a horseracing television network based in the
US. No further payments are due in respect of this acquisition.
11. Investments and trade and other receivables
Non-current assets
30 June 2023 31 December
2022
GBPm GBPm
-------------------- --------------------------------- ----------------------------------
Investments - FVTPL 9.1 9.2
-------------------- --------------------------------- ----------------------------------
Investments relate to a small number of individually immaterial
equity investments in various companies.
30 June 2023 31 December
2022
GBPm GBPm
--------------------------------------- --------------------------------- ----------------------------------
Other receivables
Other receivables 45.8 21.4
Prepayments 10.4 12.6
Deferred financing costs (see Note 14) 4.7 4.5
Total 60.9 38.5
Other receivables
Other receivables are comprised primarily of tax advances,
deposits for licences and property as well as VAT and other refunds
due.
Deferred financing costs on Revolving Credit Facility
In May 2020, the Group entered into a new Revolving Credit
Facility agreement as part of its financing agreements. The Group
incurred GBP5.3m of initial transaction costs and fees relating to
the Revolving Credit Facility with an additional GBP3.7m
capitalised following the increase of the facility in September
2022, which have been capitalised and included within non-current
receivables. The balance at 30 June 2023, net of accretion, was
GBP4.7m (2022: GBP4.5m). These fees are charged as financial
expenses over the term of Revolving Credit Facility agreement. As
at 30 June 2023, nothing was drawn under the Revolving Credit
Facility (31 December 2022: GBP63.0m).
Current assets
30 June 2023 31 December
2022
GBPm GBPm
--------------------------------------- -------------------------------- ----------------------------------
Trade and other receivables
Trade receivables 44.3 95.4
Other receivables 51.8 73.4
Value-added tax and goods and services
tax 30.9 7.5
Prepayments 182.1 168.7
---------------------------------------
Total 309.1 345.0
--------------------------------------- -------------------------------- ----------------------------------
12. Trade and other payables
Current liabilities
31 December
30 June 2023 2022
GBPm GBPm
Trade and other payables
Trade payables 196.0 204.4
PAYE and social security 32.8 36.8
Value-added tax, goods and services tax,
betting duties, data rights, and product
and racefield fees 287.1 352.9
Employee benefits 158.2 181.4
Deferred consideration - business combinations 75.0 -
Accruals and other liabilities 695.4 757.6
Total 1,444.5 1,533.1
Non-current liabilities
30 June 2023 31 December
2022
GBPm GBPm
-----------------------------------
Trade and other payables
Employee benefits 5.8 6.2
Contingent deferred consideration - business
combinations 15.5 17.8
Put/call liability for acquisition 24.3 12.3
Accruals and other payables 15.2 14.5
Total 60.8 50.8
Deferred consideration - business combinations
In July 2023, the Group completed the acquisition of a further
32.5% outstanding shares of Junglee for a cash payment of GBP75m.
This liability has been recorded as a current liability as at 30
June 2023. This acquisition brings the Group's holding in Junglee
to 84.8% up from the previous controlling interest of 52.3%.
As outlined in previous financial statements, as part of the
acquisition of Junglee in 2021, a mechanism was agreed, consisting
of call and put options, that could see its ownership in the
business further increase in 2025. The call/put option
consideration can be settled, at the Group's election, in cash or
shares. As a consequence of both the put and call options being
only exercisable at fair value being the future EBITDA and revenue
multiple which are considered to be two key inputs into valuing the
option, it was determined that the fair value was not material and
was close to nominal value.
Contingent deferred consideration - business combination s
The Group's contin gent deferred consideration liability at 30
June 2023 amounted to GBP15.5m (31 December 2022: GBP17.8m) relates
to the acquisition of Singular in 2021.
Put/call liability
As part of the acquisition of Sachiko in 2022, the Group has put
in place arrangements, consisting of call and put options, that
could result in it acquiring the 5% of Junglee held by the former
shareholders of Sachiko in 2027 and 2032 based on the future
Revenue and EBITDA performance of Junglee. As the Group cannot
avoid settling the options in cash, a liability of GBP24.3m has
been recorded at 30 June 2023 (31 December 2022: GBP12.3m) driven
by the remeasurement of the present value of the amount payable
upon exercise of the option.
Amounts held in Trust
As at 30 June 2023, GBP352.4m (31 December 2022: GBP366.2m) was
held in trust in The Sporting Exchange (Clients) Limited on behalf
of the Group's customers and is equal to the amounts deposited into
customer accounts. Neither cash and cash equivalents or restricted
cash include these balances on the basis that they are held on
trust for customers and do not belong to and are not at the
disposal of the Group.
13. Provisions
Provisions balances at 30 June 2023 and 31 December 2022 and
movements during the six months ended 30 June 2023 are outlined
below:
Employee
benefits
(long
service Onerous Gaming Other
leave) contracts tax legal Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
Balance at
31 December
2022 4.0 9.4 22.6 70.0 8.2 114.2
Additional
provisions
recognised 0.7 0.8 2.4 5.2 0.8 9.9
Amounts used
during
the year (0.3) (3.5) (2.0) (3.7) (5.5) (15.0)
Purchase
price
accounting
adjustment
(see Note
10) - - - (15.4) - (15.4)
Unused
amounts
reversed (0.1) - 1.0 (6.3) - (5.4)
Foreign
currency
translation (0.2) (0.3) (0.6) (1.7) - (2.8)
Balance at
30 June
2023 4.1 6.4 23.4 48.1 3.5 85.5
Presented
in:
Balance at
31 December
2022:
Current 2.9 4.8 18.3 14.5 6.2 46.7
Non-current 1.1 4.6 4.3 55.5 2.0 67.5
Total 4.0 9.4 22.6 70.0 8.2 114.2
Balance at
30 June
2023:
Current 3.0 2.5 16.9 17.2 1.5 41.1
Non-current 1.1 3.9 6.5 30.9 2.0 44.4
Total 4.1 6.4 23.4 48.1 3.5 85.5
Employee benefits (long service leave)
The timing and amount of long service leave cash outflows are
primarily dependent on when staff employed at the reporting date
avail of their entitlement to leave and their expected salaries at
that time. As of 30 June 2023 and 31 December 2022, it was expected
that cash outflows would occur primarily within the following five
years.
Onerous contracts
The onerous contracts provision at 30 June 2023 relates to
various marketing and minimum guarantee contracts where the cost of
fulfilling these contracts exceeds the expected economic benefits
to be received from them.
Gaming tax
These are gaming tax provisions relating to amounts provided for
taxes in certain jurisdictions where the interpretation of tax
legislation is uncertain. When the Group disagrees with the
application of unclear tax legislation, for example when it is
applied retrospectively and / or results in a one-off
disproportionate tax equivalent to many times the profit derived by
the Group from its historic activities in that jurisdiction, the
Group continues to challenge these interpretations.
Whilst the maximum potential obligation for all ongoing cases
could be greater than the recognised provision, and the outcomes
may not be known for some time, a liability has been recorded for
the Directors' best estimate of the cash outflows that will
ultimately be required in respect of each claim. Management has not
provided a sensitivity for this provision as the range is not
considered to be material.
Other legal
Other legal provisions generally consist of payments for various
future legal settlements where, based on all available information,
management believes it is probable that there will be a future
outflow.
These provisions comprise a number of different legal cases, the
majority of which are immaterial. The most significant relates to
the foreign payments contingent liabilities outlined in more detail
in Note 18. Further disclosure in respect of these provisions has
not been provided as such information would be expected to be
prejudicial to the Group's position in such matters.
Whilst the maximum potential obligation for all ongoing cases
could be greater than the recognised provision, and the outcomes
may not be known for some time, a liability has been recorded for
the Directors' best estimate of the cash outflows that will
ultimately be required in respect of each claim. Management has not
provided a sensitivity for this provision as the range is not
considered to be material.
Other
Other provisions primarily comprise a number of different
regulatory provisions.
14. Borrowings
The following is a summary of borrowings, including accrued
interest, outstanding as at 30 June 2023 and 31 December 2022:
30 June 2023 31 December 2022
Principal Carrying Principal
outstanding amount outstanding Carrying
Contractual balance in (including balance in amount (including
interest currency accrued currency accrued
rate(1) of borrowing interest)(2) of borrowing interest)
Local currency Local currency
% (m) GBPm (m) GBPm
GBP First
Lien Term
Loan A 2025 6.23 GBP1,017.9 1,013.2 GBP1,017.9 1,012.0
EUR First
Lien Term
Loan A 2026 5.96 EUR549.5 472.7 EUR549.5 486.9
USD First
Lien Term
Loan A 2026 7.08 $200.0 157.9 $200.0 165.3
USD First
Lien Term
Loan B 2026 2.76 $2,887.0 2,261.0 $2,901.7 2,375.7
USD First
Lien Term
Loan B 2028 6.67 $1,240.6 979.6 $1,246.9 1,030.5
EUR First
Lien Term
Loan B 2026 5.52 EUR507.2 431.6 EUR507.2 443.9
GBP
Revolving
Credit
Facility
2025 6.23 GBP- - GBP63.0 63.2
Total
borrowings 5,316.0 5,577.5
Presented
in:
Current
portion 33.1 35.6
Non-current
portion 5,282.9 5,541.9
Total
borrowings 5,316.0 5,577.5
1 The rates include the impact of the contractual Swap
Agreements (as defined below).
2 The carrying amounts at 30 June 2023 include accrued interest
of GBPnil (31 December 2022: GBP1.1m) presented within the current
portion of borrowings above.
During the six months ended 30 June 2023, the Group incurred the
following interest on its then outstanding borrowings:
Effective
interest Interest Interest Total Interest
rate(1) accretion (2) (2)
% GBPm GBPm GBPm
GBP First
Lien Term
Loan A 2025 6.70 1.5 29.2 30.7
EUR First
Lien Term
Loan A 2026 6.20 - 12.9 12.9
USD First
Lien Term
Loan A 2026 7.30 - 6.3 6.3
USD First
Lien Term
Loan B 2026 3.10 2.8 27.8 30.6
USD First
Lien Term
Loan B 2028 6.90 - 39.1 39.1
EUR First
Lien Term
Loan B 2026 6.10 0.7 11.4 12.1
GBP
Revolving
Credit
Facility
2025 6.20 - 1.3 1.3
Total 5.0 128.0 133.0
1 The effective interest rate calculation includes the impact of
the Swap Agreements (as defined below).
2 Interest shown includes the impact of the Swap Agreements and
is the cash cost. In addition to the amount included above, the
Group incurred GBP2.0m of interest expense relating to commitment,
utilisation, and fronting fees associated with its Revolving Credit
Facility.
The Group's change in borrowings during the six months ended 30
June 2023 was as follows:
Balance
Balance at 30
at 1 New Principal Interest June
Jan 2023 debt payments accretion(1) FX translation 2023
GBPm GBPm GBPm GBPm GBPm GBPm
GBP First Lien Term Loan A
2025 1,011.7 - - 1.5 - 1,013.2
EUR First Lien Term Loan A
2026 486.8 - - - (14.1) 472.7
USD First Lien Term Loan A
2026 165.2 - - - (7.3) 157.9
USD First Lien Term Loan B
2026 2,375.3 - (11.8) 2.8 (105.3) 2,261.0
USD First Lien Term Loan B
2028 1,030.3 - (5.0) - (45.7) 979.6
EUR First Lien Term Loan B
2026 444.1 - - 0.7 (13.2) 431.6
GBP Revolving Credit
Facility
2025 63.0 501.0 (564.0) - - -
Total 5,576.4 501.0 (580.8) 5.0 (185.6) 5,316.0
Accrued interest 1.1 -
Total borrowings 5,577.5 5,316.0
1 Interest accretion represents interest expense calculated at
the effective interest rate less interest expense calculated at the
contractual interest rate and is recorded in financial expenses in
the consolidated income statement.
14. Borrowings (continued)
Revolving Credit Facility and First Lien Term Loans
Each of the Group's facilities are discussed below.
TLA Agreement - GBP First Lien Term Loan A
In May 2020, certain members of the Group entered into a Term
Loan A and Revolving Credit Facility Agreement (the "TLA
Agreement") comprising a term loan and revolving credit facility
totalling GBP1.4bn. In December 2021, an additional lender was
added to the facility increasing the overall TLA Agreement by
GBP100m bringing the total to GBP1.5bn. From this GBP100m, the
Group received GBP68m cash drawings from the TLA with the remaining
GBP32m becoming available as incremental Revolving Credit Facility.
In 2022, we entered into the Third Amendment of the TLA Agreement
which enabled the drawdown of EUR549.5m and $200.0m during the
year. The TLA Agreement described above now provides a term loan
facility in an aggregate amount of:
-- GBP1,017.9m (2022: GBP1,017.9m) priced at SONIA plus 0.0326%
CSA plus a margin of 1.75% (the "GBP First Lien Term Loan A"), with
a maturity date of 5 May 2025 and a SONIA floor of 0%;
-- EUR549.5m (2022: EUR549.5m) priced at 1M EURIBOR plus 2.75%
and a EURIBOR floor of 0% (the "EUR First Lien Term Loan A") with a
maturity date of 31 July 2026; and
-- $200.0m (2022: $200.0m) priced at Daily Compound SOFR plus
0.2616% CSA plus a margin of 2.75% (the "USD First Lien Term Loan
A") with a maturity date of 31 July 2026.
There is no amortisation on the GBP, EUR and USD First Lien Term
Loan A and the principals are due at maturity. The Group incurred
GBP11.9m of initial transaction costs and fees on drawdown which
have been capitalised against the principal of the debt in 2020 and
are recorded as financial expense over the term of the debt using
the effective interest rate method.
TLA Agreement - Revolving Credit Facility
The TLA Agreement described above provides a multi-currency
revolving credit facility in an aggregate amount of GBP748.8m
(2022: GBP748.8m) (the "Revolving Credit Facility"). Maturing on 5
May 2025, the Revolving Credit Facility includes a margin of 1.75%
over SONIA for borrowings with a 0% interest rate floor as well as
a utilisation fee ranging from 0.1% to 0.4% based on the proportion
of drawings to the total commitment. The commitment fee on the
Revolving Credit Facility is 35% of the margin and is payable in
respect of available but undrawn borrowings. The Revolving Credit
Facility is available for general corporate purposes including the
refinancing of existing borrowings. During the period ending 30
June 2023 the Group drew down GBP501.0m of this facility and repaid
GBP564.0m leaving an outstanding principal amount of GBP0m (2022:
GBP63.0m). The Group has an undrawn capacity of GBP738m (2022:
GBP675m) on the Revolving Credit Facility with GBP11m (2022:
GBP11m) of capacity reserved for the issuance of Group guarantees
as of 30 June 2023.
The terms of the TLA Agreement limit the Group's ability to,
among other things: (i) incur additional debt (ii) grant additional
liens on their assets and equity (iii) distribute equity interests
and/or distribute any assets to third parties (iv) make certain
loans or investments (including acquisitions) (v) consolidate,
merge, sell or otherwise dispose of all or substantially all assets
(vi) pay dividends on or make distributions in respect of capital
stock or make restricted payments, and (vii) modify the terms of
certain debt or organisational documents, in each case subject to
certain permitted exceptions. The TLA Agreement requires, subject
to a testing threshold, that the Company comply on a bi-annual
basis with a maximum net total leverage ratio of 5.1 to 1.0. During
the six months ended 30 June 2023, the Group is in compliance with
all covenants related to its First Lien Term Loan A.
First Lien Term Loan B's
The Group's First Lien Term Loan B has three separate tranches
outstanding as follows:
-- USD first lien term loan with an outstanding principal
balance of $2,887.0m (2022: $2,901.7m) priced at 3M SOFR plus CSA
plus 2.25% (2022: 2.25%) (the "USD First Lien Term Loan B") with a
maturity date of 21 July 2026, and a SOFR floor, as applicable, of
0%;
-- USD first lien term loan with an outstanding principal
balance of $1,240.6m (2022: $1,246.9m) priced at 3M Term SOFR plus
CSA plus 3.25% (2022: 3.25%) margin with a 0.5% SOFR floor (the
"the USD First Lien Term Loan B 2") with a maturity date of 22 July
2028; and
-- EURO first lien term loan with an outstanding principal
balance of EUR507.2m (2022: EUR507.2m) priced at EURIBOR plus 2.5%
(2022: 2.5%) (the "EUR First Lien Term Loan B") with a maturity
date of 21 July 2026 and EURIBOR floor, as applicable, of 0%.
The two USD First Lien Term Loan B tranches requires scheduled
quarterly principal payments in amounts equal to 0.25% of the
combined initial aggregate principal amount of the USD First Lien
Term Loan B of $4,188m (2022: $4,188m), with the balance due at
maturity of each tranche. There is no amortisation on the EUR First
Lien Term Loan B and the principal is due at maturity.
14. Borrowings (continued)
The three tranches of First Lien Term Loan B are governed by the
"Syndicated Facility Agreement". The Syndicated Facility Agreement
limits Stars Group Holdings B.V. and Flutter Financing B.V, as
borrowers, and its subsidiaries' ability to, among other things,
(i) incur additional debt (ii) grant additional liens on their
assets and equity (iii) distribute equity interests and/or
distribute any assets to third parties (iv) make certain loans or
investments (including acquisitions), (v) consolidate, merge, sell
or otherwise dispose of all or substantially all assets (vi) pay
dividends on or make distributions in respect of capital stock or
make restricted payments (vii) enter into certain transactions with
affiliates (viii) change lines of business and (ix) modify the
terms of certain debt or organisational documents, in each case
subject to certain permitted exceptions. The agreement also
provides for customary mandatory prepayments, including a customary
excess cash flow sweep if certain conditions are met. During the
six months ended 30 June 2023, the Group is in compliance with all
covenants related to its First Lien Term Loan B's.
Reconciliation to Statement of Cash Flows:
Reconciliation of movements in borrowings to the Statement of
Cash Flows:
2023 2022
GBPm GBPm
------------------------- -------------------------------- ---------------------------------
Financing activities:
Proceeds from borrowings 501.0 275.0
Repayment of borrowings (580.8) (96.6)
Interest paid (129.3) (46.8)
15. Derivatives
Derivatives and hedge accounting
The Group uses derivative financial instruments for risk
management and risk mitigation purposes. As such, any change in
cash flows associated with derivative instruments are expected to
be offset by changes in cash flows related to the hedged item. The
Group's derivatives are discussed below.
Swap agreements
The Group has executed cross-currency and interest rate swaps to
better match the currency mix of the Group's EBITDA and risk
profile. On 7 June 2023 the Group terminated a portion of the
existing USD First Lien Term Loan B cross-currency interest rate
swaps due for maturity in July 2023 as part of a restructuring of
the Group's hedging arrangements receiving cash of GBP170.2m on
termination. In combination with the already existing hedging
arrangements, the Group entered new cross-currency interest rate
swap agreements and new interest rate swap agreements to align to
the risk management strategy.
In combination , these hedging instruments comprise of:
(i) USD-EUR amortising cross-currency interest rate swap
agreements (the "EUR Cross-Currency Interest Rate Swaps") with an
outstanding notional amount of EUR859m (GBP739m) (31 December 2022:
EUR2,009m (GBP1,780m)), which fix the USD to EUR exchange rate at
1.025 (2022: 1.127) and fix the euro interest payments at an
average interest rate of 5.51% (31 December 2022: 2.92%) on
portions of the USD First Lien Term Loan B's 2026 and 2028;
(ii) USD-GBP amortising cross-currency interest rate swap
agreements (the "GBP Cross-Currency Interest Rate Swaps") with a
remaining notional amount of GBP739m (31 December 2022: GBP1,689m),
which fix the USD to GBP exchange rate at 1.167 (2022: 1.234) and
fix the GBP interest payments at an average interest rate of 7.54%
(31 December 2022: 5.63%) on portions of the USD First Lien Term
Loan B's 2026 and 2028, and entire USD First Lien Term Loan A 2026;
and
(iii) Interest rate swap agreements with a notional amount of
$1,100m (GBP946m) (2022: nil) that fix the USD interest payments at
an average interest rate of 4.48%. (31 December 2022: nil) on a
portion of the USD First Lien Term Loan B 2026.
The swaps outlined above are in hedging relationships with and
have a profile that amortises in line with the USD First Lien Term
Loan B's. The swaps mature in September 2024 and June 2025.
Sports betting open positions
Amounts received from customers on sportsbook events that have
not occurred by the balance sheet date are derivative financial
instruments and have been recognised by the Group on initial
recognition as financial liabilities at fair value through profit
or loss.
The fair value of open sports bets at 30 June 2023 and 31
December 2022 has been calculated using the latest available prices
on relevant sporting events. The carrying amount of the liabilities
is not significantly different from the amount that the Group is
expected to pay out at maturity of the financial instruments.
Sports bets are non-interest bearing. There is no interest rate or
credit risk associated with open sports bets.
It is primarily based on expectations as to the results of
sporting and other events on which bets are placed. Changes in
those expectations and ultimately the actual results when the
events occur will result in changes in fair value.
There are no reasonably probable changes to assumptions and
inputs that would lead to material changes in the fair value
methodology, although final value will be determined by future
sporting results.
15. Derivatives (continued)
The following table summarises the fair value of derivatives as
at 30 June 2023 and 31 December 2022:
30 June 2023 31 December 2022
Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm
Derivatives held for
hedging
Derivatives designated as
cash
flow hedges:
Cross-currency interest
rate
swaps - current - - 275.1 -
Cross-currency interest
rate
swaps - non-current - (95.7) - (61.0)
Interest rate swaps -
non-current 5.7 - - -
Total derivatives
designated
as cash flow hedges 5.7 (95.7) 275.1 (61.0)
Derivatives designated as
net
investment hedges:
Cross-currency interest
rate
swaps - current - - 4.5 (37.1)
Cross-currency interest
rate
swaps - non-current - (4.9) - (12.2)
Total derivatives
designated
as net investment hedges - (4.9) 4.5 (49.3)
Total derivatives held
for hedging 5.7 (100.6) 279.6 (110.3)
Derivatives held for risk
management
and other purposes not
designated
as hedges
Sports betting open
positions
- current - (66.4) - (107.6)
Sports betting open
positions
- non-current - (0.7) - (0.5)
Total derivatives held
for risk
management and other
purposes
not designated as hedges - (67.1) - (108.1)
16. Share capital and reserves
Share capital
The total authorised share capital of the Company comprises
300,000,000 ordinary shares of EUR0.09 each (2022: 300,000,000
ordinary shares of EUR0.09 each). All issued share capital is fully
paid. The holders of ordinary shares are entitled to vote at
general meetings of the Company on a one vote per share held basis.
Ordinary shareholders are also entitled to receive dividends as may
be declared by the Company from time to time.
Transactions during the six months ended 30 June 2023:
-- A total of 463,516 ordinary shares were issued as a result of
the exercise of employee share options, giving rise to share
capital and share premium of GBP3.8m;
Transactions during the six months ended 30 June 2022:
-- A total of 192,342 ordinary shares were issued as a result of
the exercise of employee share options, giving rise to share
capital and share premium of GBP3.1m;
Equity reserves at 30 June 2023 and at 31 December 2022 include
the following classes of reserves:
Shares held by Employee Benefit Trust
At 30 June 2023, the Paddy Power Betfair plc Employee Benefit
Trust ("EBT") held 826,796 (31 December 2022: 1,396) of the
Company's own shares, which were acquired at a total cumulative
cost of GBP131.5m (31 December 2022: GBP0.2m) in respect of
potential future awards relating to the Group's employee share
plans. The Company's distributable reserves at 30 June 2023 are
restricted by this cost amount. 825,400 shares were purchased at a
cost of GBP131.3m during the six months ended 30 June 2023 (31
December 2022: 23,775 shares at a cost of GBP2.8m). During the six
months ended 30 June 2023, no shares were transferred from the EBT
to the beneficiaries of the EBT (year ended 31 December 2022:
55,537 shares with an original cost of GBP6.6m).
Cash flow hedge reserve
The cash flow hedge reserve represents the effective portion of
the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that had not yet
occurred at that date.
Fair value reserve
The fair value reserve represents the fair value movement in
Current Investments at FVOCI - customer deposits.
16. Share capital and reserves (continued)
Foreign exchange translation reserve
The foreign exchange translation reserve at 30 June 2023
amounted to a debit balance of GBP106.4m (31 December 2022: credit
balance of GBP60.3m) and arose from the retranslation of the
Group's net investment in primarily EUR and USD functional currency
companies. The movement in the foreign exchange translation reserve
for the six months ended 30 June 2023, reflects mainly the
strengthening of EUR and USD against GBP in the period.
Other reserves
Other reserves comprise undenominated capital. Undenominated
capital at 30 June 2023 of GBP3.7m (31 December 2022 GBP2.5m)
relates to the nominal value of shares in the Company acquired by
the Company of GBP2.3m (31 December 2022: GBP2.3m) and subsequently
cancelled, the impact of Hyperinflation of GBP1.2m and an amount of
GBP0.2m (31 December 2022: GBP0.2m) which arose on the
redenomination of the ordinary share capital of the Company at the
time of conversion from Irish pounds to Euro.
Share-based payment reserve
During the six months ended 30 June 2023, an amount of GBP74.0m
was expensed in the Consolidated Income Statement with respect to
share based payments (six months ended 30 June 2022: GBP50.1m) and
an amount of GBP39.3m (six months ended 30 June 2022: GBP11.7m) in
respect of share options exercised during the year was transferred
from the share-based payment reserve to retained earnings.
An amount of GBP5.6m of deferred tax relating primarily to the
Group's share-based payments was credited to retained earnings in
the six months ended 30 June 2023 (six months ended 30 June 2022:
credit of GBP0.8m). An amount of GBP3.3m of current tax relating to
the Group's share-based payments was credited to retained earnings
in six months ended 30 June 2023 (six months ended 30 June 2022:
GBP0.2m).
Non-controlling interest
No dividends were paid to a non-controlling interest during the
six months ended 30 June 2023. During the six months ended 30 June
2022 the Group paid dividends totalling GBP5.4m to the
non-controlling interest in Adjarabet.
As outlined in more detail in Note 12, as a result of the
exercise of the option in respect of the Junglee non-controlling
interest and the agreement to settle in cash in July 2023, an
amount of GBP10.4m was recorded in non-controlling interest with
the remaining amount of GBP64.9m booked to retained earnings.
17. Fair values
Financial instruments carried at fair value
Fair value hierarchy
The table below analyses recurring fair value measurements for
financial assets and financial liabilities. These fair value
measurements are categorised into different levels in the fair
value hierarchy based on the inputs to the valuation method used.
The different levels are defined as follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Group can access at the
measurement date;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly; and
-- Level 3: unobservable inputs for the asset or liability.
30 June 2023
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
Current
investments at
FVOCI
- customer
deposits 123.7 18.1 - 141.8
Investments -
FVTPL - - 9.1 9.1
Derivatives - 5.6 - 5.6
------------------------ ------------------------
Total financial
assets 123.7 23.7 9.1 156.5
------------------------ ------------------------
Derivative
financial
liabilities - 100.6 67.1 167.7
Non-derivative
financial
liabilities 75.0 - 39.8 114.8
Total financial
liabilities 75.0 100.6 106.9 282.5
17. Fair values (continued)
31 December 2022
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
Current
investments at
FVOCI
- customer
deposits 126.2 11.8 - 138.0
Investments -
FVTPL - - 9.2 9.2
Derivatives - 279.6 - 279.6
Total financial
assets 126.2 291.4 9.2 426.8
Derivative
financial
liabilities - 110.4 108.1 218.5
Non-derivative
financial
liabilities - - 30.1 30.1
Total financial
liabilities - 110.4 138.2 248.6
As part of its periodic review of fair values, the Group
recognises transfers, if any, between levels of the fair value
hierarchy at the end of the reporting period during which the
transfer occurred. There were no transfers between levels of the
fair value hierarchy during the periods ended 30 June 2023 or 31
December 2022.
Valuation of Level 2 financial instruments
Borrowings
The Group has determined that the principal value of the GBP,
EUR and USD First Lien Term Loan A (as defined above) approximates
its fair value. The Group estimates the fair value of its First
Lien Term Loan B by using a composite price derived from observable
market data for a basket of similar instruments which approximates
fair value.
Current investments (Bonds) - FVOCI - customer deposits
The Group has determined that the carrying value of the bonds
approximates their fair value which is determined by using
observable quoted prices or observable input parameters derived
from comparable bonds/markets. Although the Group has determined
that a number of the bonds fall within Level 1 of the fair value
hierarchy, there are a class of bonds which have been classified as
Level 2 due to the existence of relatively inactive trading markets
for those bonds.
Derivative financial instruments
Swap agreements
The Group uses derivative financial instruments to manage its
interest rate and foreign currency risk. The valuation of these
instruments is determined using widely accepted valuation
techniques including discounted cash flow analysis of the expected
cash flows of each derivative. This analysis reflects the
contractual terms of the derivatives, including the period to
maturity, and uses observable market-based inputs, such as yield
curves, spot and forward FX rates.
To comply with the provisions of IFRS 13, Fair Value
Measurement, the Group incorporates credit valuation adjustments to
appropriately reflect both its own non-performance risk and the
applicable counterparty's non-performance risk in the fair value
measurements. In adjusting the fair value of its derivative
contracts for the effect of non-performance risk, the Group has
considered the impact of netting and any applicable credit
enhancements, such as collateral postings, thresholds, mutual puts
and guarantees.
Although the Group has determined that the majority of the
inputs used to value its derivatives fall within Level 2 of the
fair value hierarchy, the credit valuation adjustments associated
with its derivatives utilise Level 3 inputs, such as estimates of
current credit spreads to evaluate the likelihood of default by
itself and its counterparties. At both 30 June 2023 and 31 December
2022, the Group assessed the significance of the impact of the
credit valuation adjustments on the overall valuation of its
derivative positions, determined that the credit valuation
adjustments are not significant to the overall valuation of its
derivatives. As a result, the Group determined that its valuations
of its derivatives in their entirety are classified in Level 2 of
the fair value hierarchy.
Level 3 fair values
Derivatives (Level 3)
Some of the Group's financial assets and liabilities are
classified as Level 3 of the fair value hierarchy because the
respective fair value determinations use inputs that are not based
on observable market data. As at 30 June 2023, the valuation
techniques and key inputs used by the Group for each Level 3 asset
or liability were as follows:
Sports betting open positions (Level 3)
Derivative financial liabilities comprise sports betting open
positions. The fair value of open sports bets at the period end has
been calculated using the latest available prices on relevant
sporting events. Changes in the fair value of the unsettled bets
are recorded in revenue in the consolidated income statement.
It is primarily based on expectations as to the results of
sporting and other events on which bets are placed. Changes in
those expectations and ultimately the actual results when the
events occur will result in changes in fair value.
There are no reasonably probable changes to assumptions and
inputs that would lead to material changes in the fair value
methodology although final value will be determined by future
sporting results.
17. Fair values (continued)
Non-derivative financial instruments (Level 3)
Investments
The Group valued its equity investments in private companies
with reference to earnings measures from similar businesses in the
same or similar industry and adjusts for any significant changes in
the earnings multiple and the valuation. A reasonable change in
assumptions would not have a material impact on fair value. Changes
in the fair value of equity in private companies are recorded in
financial income or financial expense in the consolidated income
statement.
Contingent deferred consideration (Level 3)
Non-derivative financial liabilities include contingent
consideration. The contingent consideration payable is primarily
determined with reference to forecast performance for the acquired
businesses during the relevant time periods and the amounts to be
paid in such scenarios. The fair value was estimated by assigning
probabilities to the potential payout scenarios. The significant
unobservable inputs are forecast performance for the acquired
businesses.
The fair value of contingent consideration is primarily
dependent on forecast performance for the acquired businesses in
excess of a predetermined base target. An increase and decrease of
10% in the excess over the predetermined base target during the
relevant time periods would increase and decrease the value of
contingent consideration at 30 June 2023 by GBP1.5m and GBP1.5m
respectively (31 December 2022: GBP1.1m and GBP2.0m).
FOX Corporation
As announced on 2 October 2019, in order to achieve economic
alignment of Flutter's and TSG's strategic third party
relationships across their respective US businesses, concurrent
with the Combination with TSG, the Group entered into an
arrangement with FOX, pursuant to which FSG Services, a
wholly-owned subsidiary of FOX, had an option to acquire an 18.6%
equity interest in FanDuel Group at its fair market value in July
2021. Under the terms of the agreement an arbitration mechanism was
put in place in the event of a disagreement between the two parties
relating to the option.
In April 2021, FOX filed an arbitration claim against the Group
with respect to its option to acquire an 18.6% equity interest in
FanDuel seeking the same price that the Group paid for the
acquisition of 37.2% of FanDuel from Fastball Holdings LLC in
December 2020, based on an $11.2 billion valuation for FanDuel. In
the Group's opinion this valuation would be materially favourable
for FOX compared to the fair market valuation as of July 2021.
On 7 November 2022, the Group announced the outcome of the
arbitration. The arbitration tribunal has determined that the price
payable for the option is based on FanDuel's fair market value as
of 3 December 2020, the date on which Flutter announced the
acquisition of Fastball's 37.2% stake in FanDuel. The tribunal has
determined the fair market value of FanDuel as of December 2020
amounts to $20bn. This contrasts with an implied $11.2bn valuation
for FanDuel when Flutter acquired the stake from Fastball.
FOX has a ten-year period from December 2020 within which to
exercise the Option, should it wish to do so, subject to an annual
compounding carrying value adjustment of 5%. Cash payment is
required at the time of exercise and the option can only be
exercised in full. Exercise of the option requires FOX to be
licensed and should FOX not exercise within this timeframe, the
option shall lapse.
As of 30 June 2023 the option price is c$4.2bn made up of the
$3.7bn exercise price for 18.6% of FanDuel plus the 5% annual
carrying value adjustment.
The fair market value of the option as at 30 June 2023 is
required to reflect the value that a market participant would have
paid for such an option, with the option exercise price, reflecting
the conditions that would have existed at 30 June 2023. Given the
market assessment of comparable US assets, it is management's view
that there has been no increase in the market value of FanDuel
since the valuation date of the option, and therefore it is
determined that the value of the option is out of the money for FOX
and the derivative has close to nominal value at 30 June 2023.
Non-controlling interest agreements
Boyd
A mechanism has been agreed with Boyd who hold a non-controlling
interest in FanDuel Group, consisting of call and put options,
which enables the Group to acquire the remaining 5% at prevailing
market valuations in 2028. The call/put option consideration can be
settled, at the Group's election, in cash or shares. As a
consequence of both the put and call options being only exercisable
at fair value based on the market value of FanDuel at the date of
exercise of the options, it was determined that the fair value was
not material and was close to nominal value.
As announced on 2 October 2019, in order to achieve economic
alignment of Flutter's and TSG's strategic third-party
relationships across their respective US businesses, the Group
entered into arrangements conditional on completion of the
Combination with Boyd pursuant to which Boyd would receive a total
payment of 1.5% of the increase in FoxBet's market value between
completion of the Combination and July 2023 (subject to a carrying
value adjustment). Any payment due to Boyd in respect of this is
not expected to be significant.
17. Fair values (continued)
On 22 October 2021, FanDuel Group Parent LLC ("FanDuel") and
Boyd Interactive Holdings LLC ("Boyd") entered into an arrangement
where Boyd contributed 91,828 Investor Units equivalent to 0.5% of
FanDuel's total Investor Units in exchange for 91,828 warrants to
acquire Investor Units of FanDuel. The aggregate exercise price of
the warrants is $1.00 and are exercisable at any time within the
next 10 years. If the warrants remain outstanding after 10 years,
they will be automatically converted into the number of Investor
Units for which such warrants are exercisable. As this transaction
involves the exchange of one form of fixed equity instrument for
another fixed instrument with a non-controlling interest for no
additional consideration, no further accounting is required.
Junglee
As part of the acquisition of Junglee, the Group has put in
place arrangements, consisting of call and put options, that could
see its ownership in the business increase in 2025. The call/put
option consideration can be settled, at the Group's election, in
cash or shares. As a consequence of both the put and call options
being only exercisable at fair value being the future EBITDA and
revenue multiple which are considered to be two key inputs into
valuing the option, it was determined that the fair value was not
material and was close to nominal value.
During 2023, options were exercised enabling the Group to
purchase a portion of the non-controlling shareholders shares, and
the Group entered into an arrangement with the non-controlling
shareholders to acquire a further 32.5% for a cash payment of
$97.4m (GBP75m) in line with the terms of the original
agreement.
Sachiko
As part of the acquisition of Sachiko (see Note 12), the Group
has put in place arrangements, consisting of call and put options,
that could result in it acquiring the 5% of Junglee held by the
former shareholders of Sachiko in 2028 and 2032 for an amount based
on the future Revenue and EBITDA performance of Junglee. As the
Group cannot avoid settling the put/call options in cash, a
liability of GBP24.3m has been recorded at 30 June 2023 (31
December 2022:GBP12.3m). An increase and decrease of 10% in the
forecasted target during the relevant time periods would increase
and decrease the value of the option at 30 June 2023 by GBP2.4m and
GBP2.4m respectively.
18. Commitments and contingencies
Guarantees
The Group has uncommitted working capital overdraft facilities
of GBP16.2m (31 December 2022: GBP16.2m) with Allied Irish Banks
p.l.c. These facilities are secured by a Letter of Guarantee from
Flutter Entertainment plc.
The Group has bank guarantees: (i) in favour of certain gaming
regulatory authorities to guarantee the payment of player funds,
player prizes, and certain taxes and fees due by a number of Group
companies; and (ii) in respect of certain third-party rental and
other property commitments, merchant facilities and third party
letter of credit facilities. The maximum amount of the guarantees
at 30 June 2023 was GBP257.0m (31 December 2022: GBP246.7m). No
claims had been made against the guarantees as of 30 June 2023 (31
December 2022: GBPNil). The guarantees are secured by counter
indemnities from Flutter Entertainment plc and certain of its
subsidiary companies. The value of cash deposits over which the
guaranteeing banks hold security was GBP22.6m at 30 June 2023 (31
December 2022: GBP22.6m).
As mentioned in Note 14, borrowings under the TLA Agreement and
Syndicated Facility Agreement are guaranteed by the Company and
certain of its operating subsidiaries.
Contingent liabilities
The Group operates in an uncertain marketplace where many
governments are either introducing or contemplating new regulatory
or fiscal arrangements.
The Board monitors legal and regulatory developments and their
potential impact on the business, however, given the lack of a
harmonised regulatory environment, the value and timing of any
obligations in this regard are subject to a high degree of
uncertainty and cannot always be reliably predicted.
Prior to the combination with TSG in 2020, the Board of TSG
became aware of the possibility of improper foreign payments by TSG
or its subsidiaries in certain jurisdictions outside of Canada and
the United States relating to its historical B2B business (which
was never profitable and effectively ceased operations in 2014).
When this matter arose, TSG contacted the relevant authorities in
the United States and Canada with respect to these matters and,
following the Combination, the Group continues to co-operate with
the United States and Canada governmental authorities in respect of
all inquiries. Based on its review to date, the Board of Flutter
has not identified issues that it believes would have a significant
adverse effect on the Group's financial position or business
operations.
The Group has seen a number of player claims in Austria and
Germany for reimbursement of historic gaming losses. We have
provided our remote services in Austria and Germany (outside of
Schleswig-Holstein) from Maltese entities on the basis of
multi-jurisdictional Maltese licences and EU law, however the
Austrian Courts and some German Courts consider our services are
contrary to their respective local laws.
18. Commitments and contingencies (continued)
The Group strongly disputes the basis of these claims and any
related judgements. The prospect of any player claims or judgements
being successfully enforced in Malta against our Maltese licensed
entities is unlikely as to allow the enforcement of these claims
against a legitimately licensed entity is contrary to Maltese local
law and public policy. It is not possible at this stage ,however,
to provide a reasonable estimate of the contingent liability as the
matter is still at an early stage and unlikely to be fully resolved
in the short term.
19. Related parties
There were no material transactions with related parties during
the six months ended 30 June 2023 or the six months ended 30 June
2022.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
20. Events after the reporting date
Acquisition of 32.5% shares of Junglee Games
In July 2023, as outlined in more detail in Note 12, the Group
made a cash payment of $97.4m (GBP75m) in respect of the
acquisition of a further 32.5% outstanding shares of Junglee Games.
This acquisition brings the Group's holding in Junglee Games to
84.8% up from the previous controlling interest of 52.3%. This
liability has been recorded as a current liability as at 30 June
2023.
FOX Bet
On 31 July 2023, we announced the closure of the sports betting
platform FOX Bet. FOX Bet was part of the The Stars Group US along
with the US facing operations of PokerStars. Flutter will retain
ownership of PokerStars, while FOX will retain future use of the
FOX Bet brand (including Super 6).
Independent Review Report to Flutter Entertainment PLC ("the
Entity")
Conclusion
We have been engaged by the Entity to review the Entity's
condensed set of consolidated financial statements in the
half-yearly financial report for the six months ended 30 June 2023
which comprises the Condensed Consolidated Interim Income
Statement, the Condensed Consolidated Interim Statement of Other
Comprehensive Income, the Condensed Consolidated Interim Statement
of Financial Position, the Condensed Consolidated Interim Statement
of Cash Flows, the Condensed Consolidated Interim Statement of
Changes in Equity, a summary of significant accounting policies and
other explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half-yearly financial report for the
six months ended 30 June 2023 is not prepared, in all material
respects in accordance with International Accounting Standard 34
Interim Financial Reporting ("IAS 34") as adopted by the EU and the
Transparency (Directive 2004/109/EC) Regulations 2007
("Transparency Directive"), and the Central Bank (Investment Market
Conduct) Rules 2019 ("Transparency Rules of the Central Bank of
Ireland).
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (Ireland) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (Ireland) 2410") issued for use in Ireland. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (Ireland)
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We read the other information contained in the half-yearly
financial report to identify material inconsistencies with the
information in the condensed set of consolidated financial
statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the review. If
we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention that causes us to believe that the directors have
inappropriately adopted the going concern basis of accounting, or
that the directors have identified material uncertainties relating
to going concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (Ireland) 2410. However, future events or
conditions may cause the Entity to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
Entity will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Transparency Directive and the Transparency Rules of the
Central Bank of Ireland.
The directors are responsible for preparing the condensed set of
consolidated financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the
EU.
As disclosed in note 1, the annual financial statements of the
Entity for the year ended 31 December 2022 are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU.
In preparing the condensed set of consolidated financial
statements, the directors are responsible for assessing the
Entity's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to
liquidate the Entity or to cease operations, or have no realistic
alternative but to do so.
Our responsibility
Our responsibility is to express to the Entity a conclusion on
the condensed set of consolidated financial statements in the
half-yearly financial report based on our review.
Our conclusion, including our conclusions relating to going
concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion section of
this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Entity in accordance with the
terms of our engagement to assist the Entity in meeting the
requirements of the Transparency Directive and the Transparency
Rules of the Central Bank of Ireland. Our review has been
undertaken so that we might state to the Entity 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 Entity for our
review work, for this report, or for the conclusions we have
reached.
KPMG 8 August 2023
Chartered Accountants
1 Stokes place
St. Stephen's Green
Dublin 2
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END
IR PPMLTMTAMBTJ
(END) Dow Jones Newswires
August 09, 2023 02:00 ET (06:00 GMT)
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