TIDMBPTY
RNS Number : 3780X
bwin.party digital entertainment
28 August 2015
28 August 2015
bwin.party digital entertainment plc
Unaudited results for the six months ended 30 June 2015
Norbert Teufelberger, Chief Executive Officer, said:
"Clean EBITDA increased by 2% year-on-year despite the
introduction of VAT in a number of EU Member States and the new UK
point of consumption tax. However, our progress on non-core asset
disposals and other cost saving initiatives is running ahead of
plan - excluding the impact of EU VAT and UK point of consumption
tax ('POCT'), Clean EBITDA would have increased by 24%.
"Based upon our progress in the year-to-date and with the
further roll-out of our latest mobile products, the introduction of
new CRM tools and planned entry into two new nationally regulated
markets later this year, we remain confident about the full year
outlook."
Key points
-- Total revenue was EUR296.5m (2014: EUR317.1m) reflecting the
absence of the FIFA World Cup, lower margins in sports, market
declines in poker and the impact of EU VAT in certain markets;
nationally regulated and/or taxed markets represented 60% of total
revenue (2014: 56%)
-- Gross gaming revenue through mobile/touch grew by 50% and now
represents 30% of overall GGR (2014: 19%) with growth across all
verticals
-- Clean EBITDA up by 2% to EUR47.3m (2014: EUR46.4m) despite
being impacted by lower revenue and higher taxes. Excluding the
impact of EU VAT and the POCT, Clean EBITDA would have increased by
24% to EUR57.7m (2014: EUR46.4m)
-- On-track to meet or exceed EUR15m incremental cost saving target this year
-- Total consideration received from the sale of non-core assets
of EUR37.1m, in-line with previous guidance. Net cash* at 30 June
2015 of EUR58.1m (31 December 2014: EUR34.6m)
-- Basic EPS of EUR0.4 cents (2014: loss of EUR11.4 cents)
-- Current trading: absence of a major football tournament and
EU VAT meant that in the 8 weeks to 25 August 2015 average daily
net revenue was down 9% versus the same period in 2014; Board
remains confident about full year outlook
-- Whilst discussions with GVC are continuing, there has been no
change to the Board's recommendation for 888's offer and the
associated shareholder documents are expected to be sent to
shareholders shortly
-- Recommended half year dividend up 2% to 1.92 pence per share (2014: 1.89 pence)
Financial highlights
2015 2014
Six months ended 30 June EURmillion EURmillion
================================================ ============ ============
Net revenue 263.8 295.8
Other revenue 32.7 21.3
Total revenue 296.5 317.1
Clean EBITDA() 47.3 46.4
Operating profit (loss) 5.3 (100.4)
Profit (loss) after tax 2.9 (94.0)
Basic EPS (loss) per Ordinary share (EURcents)
Standard 0.4 (11.4)
Clean() 2.4 3.0
EBITDA adjusted for exchange differences, reorganisation
expenses, income or expenses that relate to exceptional items, and
non-cash charges relating to impairments and share-based payments
(see reconciliation of Clean EBITDA to operating profit/(loss)
below and reconciliation of Clean EPS to Basic EPS in note 4 to the
unaudited Financial Information).
* Net cash after deducting all customer liabilities and loan
borrowings but adding back net payment processor receivables
Performance by business unit
Nationally regulated
and /or taxed* Other Total
====================== ======================= =============== ===============
Total revenue (EUR
million)
Six months ended 30
June 2015 2014 2015 2014 2015 2014
====================== ========== =========== ======= ====== ======= ======
bwin labels 96.9 104.3 75.0 84.6 171.9 188.9
Games labels 49.8 52.6 42.8 54.6 92.6 107.2
Studios 6.6 6.6 - - 6.6 6.6
Non-core 24.8 14.4 - - 24.8 14.4
Corporate 0.6 - - - 0.6 -
Total revenue 178.7 177.9 117.8 139.2 296.5 317.1
*Austria, Belgium, Denmark, France, Germany (sports betting
only), Italy, Spain, UK and USA (New Jersey)
Total revenue Clean EBITDA
========================= ===================================== =====================================
Six months ended 30 2015 2014 2015 2014
June EURmillion EURmillion % change EURmillion EURmillion % change
========================= ============ ============ ========= ============ ============ =========
bwin labels 171.9 188.9 (9%) 40.2 35.4 14%
Games labels 92.6 107.2 (14%) 20.5 33.6 (39%)
Studios 38.6 43.2 (11%) (10.7) (9.6) (11%)
Non-core^ 34.7 24.1 44% 2.1 (8.4) 125%
Corporate 18.2 19.5 (7%) (4.8) (4.6) (4%)
Removal of inter-Group (59.5) (65.8) 10% - - n/a
Total operations 296.5 317.1 (6%) 47.3 46.4 2%
^ Segment includes EUR14.3m of revenue relating to assets
disposed of during the period
Performance by product
A segmental analysis by product of the Group's total revenue
between markets that are nationally regulated and/or subject to
local gaming taxes and those that are not is provided below:
Total revenue (EUR Nationally regulated
million) and /or taxed* Other Total
====================== ======================= =============== ===============
Six months ended 30
June 2015 2014 2015 2014 2015 2014
====================== ========= ============ ======= ====== ======= ======
Sports betting 82.8 89.1 28.3 38.3 111.1 127.4
Casino & games 28.2 27.6 70.2 75.7 98.4 103.3
Poker 14.8 19.6 19.1 24.5 33.9 44.1
Bingo 26.7 26.0 0.2 0.7 26.9 26.7
Other 26.2 15.6 - - 26.2 15.6
Total revenue 178.7 177.9 117.8 139.2 296.5 317.1
*Austria, Belgium, Denmark, France, Germany (sports betting
only), Italy, Spain, UK and USA (New Jersey)
A reconciliation between the revenue by business unit and by
product is included within the Summary of Results.
Consolidated Key Performance Indicators
Six months ended 30 June 2015 2014 % change
========================================= ========== ========== =========
Active player days (million) 23.0 29.5 (22%)
Daily average players (000s) 127.1 163.0 (22%)
Yield per active player day (EUR) 11.5 10.0 15%
New player sign-ups (000s) 370.1 485.8 (24%)
Average daily net revenue (EUR000) 1,457.5 1,634.3 (11%)
Full details of all of the Group's historic quarterly key
performance indicators can be downloaded from the Group's website
at: www.bwinparty.com.
Contacts:
bwin.party digital entertainment plc
Investors Media
Peter Reynolds +44 (0) 20 7337 0177 Jay Dossetter +44 (0) 20 7337 0134
Interviews with Norbert Teufelberger and Martin Weigold
Interviews with Norbert Teufelberger, Chief Executive Officer,
and Martin Weigold, Chief Financial Officer, in video/audio and
text will be available from 7.00am BST on 28 August 2015 on:
http://www.bwinparty.com.
Analyst meeting, webcast, dial-in and conference call details:
28 August 2015
There will be an analyst meeting for invited UK-based analysts
at Deutsche Bank AG,1 Great Winchester Street, London EC2N 2DB
starting at 9.30am BST. There will be a simultaneous webcast and
dial-in broadcast of the meeting. To register for the live webcast,
please pre-register for access by visiting the Group website
(www.bwinparty.com). Details for the dial-in facility are given
below. A copy of the webcast and slide presentation given at the
meeting will be available on the Group's website later today.
Dial-in details to listen to the analyst presentation at 9.30am,
28 August 2015
9.20 am Please call:+44 (0) 203 003 2666
Title bwin.party Half Year Results
9.30 am Meeting starts
A recording of the meeting will be available for a period of
seven days from 28 August 2015. To access the recording please dial
the following replay telephone number:
Replay telephone number: +44 (0) 208 196 1998
Replay passcode: 7606405#
All times are British Summer Time (BST).
About bwin.party
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 02:01 ET (06:01 GMT)
bwin.party digital entertainment plc (LSE: BPTY) is a global
online gaming company. The Company was formed from the merger of
bwin Interactive Entertainment AG and PartyGaming Plc on 31 March
2011. Incorporated, licensed and regulated in Gibraltar, the Group
also has licences in Alderney, Austria Belgium, France, Italy,
Denmark, Germany (Schleswig-Holstein), Malta, Spain, the UK and the
necessary approvals to operate in New Jersey. With offices in
Europe, India, Israel and the US, the Group generated revenue of
EUR611.9m and Clean EBITDA of EUR101.2m in 2014. bwin.party
commands leading market positions in each of its four key product
verticals: online sports betting, casino & games, poker and
bingo with some of the world's biggest online gaming brands
including bwin, partypoker, partycasino and FoxyBingo. The Group's
scale, technology and strong portfolio of games collectively
differentiate its customer offer from those of its competitors.
bwin.party is a constituent member of the FTSE 250 Index and the
FTSE4Good Index Series, which identifies companies that meet
globally recognised corporate responsibility standards. For more
information about bwin.party, visit www.bwinparty.com.
Chief Executive's review
Introduction
Clean EBITDA increased by 2% year-on-year despite the
introduction of VAT in a number of EU Member States, a lower than
expected sports margin and the UK point of consumption tax that was
introduced on 1 December 2014. However, our progress on non-core
asset disposals and other cost saving initiatives is running ahead
of plan - excluding the impact of EU VAT and UK point of
consumption tax, Clean EBITDA would have increased by 24%.
Total revenue declined by 6% to EUR296.5m (2014: EUR317.1m) with
trading during the first half of 2015 largely as expected: revenue
was impacted by the absence of a major football tournament and the
introduction of VAT in a number of EU Member States while strong
mobile growth helped to offset lower than expected sports betting
margins.
Operationally our shift to a label-led structure is beginning to
deliver the improvements expected with the removal of duplication,
increased transparency and accountability that, coupled with the
disposal of non-core assets, have contributed to a significant
reduction in costs. We are now on-track to exceed the EUR15m of
additional cost savings in 2015 that was originally targeted.
The regulatory and fiscal environment continues to evolve with
several Member States moving to adopt nationally regulated
frameworks, although questions remain for several of these
countries on whether their new or proposed regimes are compliant
with EU law. While Sweden has already been referred to the Court of
Justice of the European Union ('CJEU'), the European Commission has
also sent pilot letters to several countries, including Germany and
Belgium signifying the first stage of an infringement process.
In Romania, emergency ordinance no 92_2014 was enacted on 12
June 2015 requiring all gaming operators that accepted online bets
from players in Romania prior to being licensed to pay retroactive
taxes. Whilst a joint complaint by the European Gaming and Betting
Association, the Gibraltar Betting and Gaming Association and the
Maltese Remote Gaming Council has been made to the European
Commission in respect of this legislation, a provision of EUR7.9m
has been made in the first half representing the Board's estimate
of retroactive taxes that may be due in Romania.
New VAT rules came into force across the EU from 1 January 2015
impacting a number of areas of the digital economy, including
online gaming. As previously announced, this could represent a
c.EUR15m headwind for bwin.party in the current year while the POCT
is expected to result in additional gaming taxes of between EUR10m
and EUR11m in the current year.
Strategically, we have made excellent progress on selling-down
non-core assets and have already reached our target range of
between EUR30m-EUR50m of total proceeds. During the first half we
completed the sale of World Poker Tour ('WPT'), Win, Gaming Realms,
Winners and United Games and have now raised over EUR37m from the
sale of non-core businesses. Additional proceeds of between
approximately EUR3m and EUR5m are expected to be received in the
second half of 2015.
On 17 July 2015 the Board announced the terms of a recommended
offer from a wholly-owned subsidiary of 888 Holdings plc ('888')
comprising a mixture of cash and new 888 shares (the '888 Offer').
Based on the value of 888 shares at yesterday's close, the 888
Offer values each bwin.party share at approximately 104.7p per
share, representing a premium of 24.8% to the volume weighted
average closing price for the three month period prior to 14 May
2015 (being the last business day prior to the Group's announcement
on 15 May 2015 regarding its discussions with third parties in
relation to a variety of possible business combinations).
Whilst discussions with GVC are continuing, there has been no
change to the Board's recommendation for the 888 Offer and all
shareholder documents relating to the 888 Offer are expected to be
sent to shareholders shortly. Copies of all documents and further
details of the offer including all terms and conditions will then
be made available on the Group's corporate website:
www.bwinparty.com.
H1 2015 - Operational developments
Our shift to a label-led rather than product led structure has
continued to deliver operational improvements during the first half
with improved system availability and greater accountability. As a
result, we have made good progress on delivering against our
tactical goals: growing our presence in nationally regulated and/or
taxed markets; growing mobile; as well as continuing to enhance our
products and systems.
Increased focus on regulated and to-be-regulated markets
Increasing the proportion of the Group's total revenue coming
from nationally regulated and/or taxed markets remains a core
strategic objective for the Group and during the first half of 2015
this increased to 60% of total revenues versus 56% in the same
period in 2014. .
Mobile growth
bwin labels - the roll-out of our latest 'MS2' mobile sports
betting application in Italy and Belgium, as well as our dotcom
markets, has been a key driver behind the strong growth in mobile
revenues. In the month of June, over 50% of bwin's sports betting
gross gaming revenue came through the mobile and touch channel
(2014: 37%). Across all products, the share of bwin's gross gaming
revenue coming through mobile and touch devices grew to 37% in the
first half (2014: 24%) and 38% in June 2015 (June 2014: 30%). As an
indicator of the transition to mobile we are now seeing around 35%
of our new player registrations come through mobile versus 14% in
January 2014.
Games labels - during the first half we launched new
applications for partycasino, GiocoDigitale and also Foxy Casino
that are each proving popular. As a result, approximately 22% of
Games labels' gross gaming revenue in the first half came through
the mobile channel (2014: 14%). From a feature perspective we have
incorporated new casino content from the likes of NetEntertainment,
IGT, WMS and Amaya as well as from our own in-house studio,
doubling the number of games on partycasino. In poker, we released
multi-table tournaments on mobile in all markets which is already
proving popular amongst our customers. As part of our effort to
simplify our operations and further costs, all of our US B2C
activities are now included within Games labels, whereas the US B2B
activities are included in Studios.
Product development and operations
In addition to the delivery of the mobile developments outlined
above, our Studios business unit remains focused on raising the
quality and availability of our services across all platforms. Our
continued investment in technology has delivered a marked reduction
in system downtime and reduced significantly the time taken to
restart our gaming platform following maintenance or systems
upgrades. In April we completed the final piece of our technology
integration with the successful migration of 900,000 Italian
accounts onto a single unified platform, supporting both bwin.it
and Giocodigitale.it.
Marketing
bwin labels - the launch of our 'Every Day is Match Day'
campaign in March leveraged the Group's Real Madrid and Bayern
Munich sponsorships with a fully integrated campaign across TV,
print and radio as well as digital and social channels. The
campaign drove new player sign-ups in our core markets and also
increased brand awareness. Our CRM and digital marketing approach
also took a further step forward with the implementation of a
series of new segmentation and customer modelling tools. The shift
towards these channels is being balanced with a reduction in our
ongoing investment in sports sponsorships.
Games Labels - The shift into regulated markets continues with
the UK defined as the key market for Games labels. Our decision to
focus the allocation of marketing resources on a localised
proposition has delivered growth across all products in the UK
which now contributes nearly half of the segment's revenue.
Our UK 'Poker for the People' campaign continues to draw more
players to the brand with a significant year-on-year increase in
the number of average daily players from the UK.
Recent marketing activity in our casino business has focused on
promoting our exclusive proprietary games, with a 19% uplift in
average daily UK revenue compared with previous year.
Our Foxy Bingo 'Get Happy' campaign drove a record number of new
depositing players during the first half which helped deliver a 27%
increase in new player signups versus the same period in 2014.
Strategic developments
Industry consolidation
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 02:01 ET (06:01 GMT)
The wave of industry consolidation that we predicted a year ago
is well under way with a number of deals in the sector already
complete and several others at an advanced stage. On 17 July 2015,
the Board announced the terms of a recommended offer by 888 to
acquire all of the issued and to-be-issued share capital of
bwin.party at a headline value of 104.09p per share. All
shareholder documents associated with the 888 Offer are expected to
be sent to shareholders shortly and will then be available on the
Group's corporate website at www.bwinparty.com.
Sale of non-core businesses
We have made excellent progress during the first half on
reducing losses and realising value from several non-core business
interests including: WPT, a land-based poker tournament and TV
production business; Win, a social gaming business; our investment
in Gaming Realms, a listed social gaming business; Winners, a
retail betting franchise in Spain; and United Games, a social
gaming developer. Total consideration received from these and other
non-core asset disposals was EUR37.1m as at 30 June 2015.
Regulatory developments
During the first half of 2015, the enactment of the emergency
ordinance in Romania resulted in the Group recognising a provision
of EUR7.9m representing the Board's estimate of retroactive taxes
that may be due. Elsewhere, several jurisdictions around the world
are continuing to explore the possible introduction of online
gambling legislation and a summary of some of the other key
regulatory developments affecting our ongoing business is set out
in the Appendix.
Impairment of intangible assets
The Group regularly monitors the carrying value of its
intangible assets. A review was undertaken at 30 June 2015 to
assess whether there were any factors that would give rise to
concerns on the carrying value of intangible assets. As a result of
the review, it was concluded that no impairment charge was
required. In the prior year, a non-cash impairment charge of
EUR94.7m was recorded in the first half relating to intangible
assets within poker and social gaming.
Dividend
In line with our dividend policy, the Board has declared a half
year dividend of 1.92 pence per Ordinary share (2014: 1.89 pence)
representing a 2% increase over the prior year. The half year
dividend will be payable to shareholders and depositary interest
holders on the register of shareholders and register of depositary
interest holders respectively on 11 September 2015 (the 'Record
Date'). It is expected that dividends will be paid on 9 October
2015. Shareholders wishing to receive dividends in Euros rather
than Pounds Sterling will need to register a currency election with
bwin.party's registrars on or before 18 September 2015. A separate
announcement regarding the dividend payment has been issued
today.
Current trading and outlook
The absence of a major football tournament this year and the
impact of the introduction of EU VAT from 1 January 2015 meant that
average daily net revenue in the 8 weeks to 25 August 2015 was
EUR1,325,700, down 9% versus the same period last year (2014:
EUR1,451,300). With continued mobile growth and cost savings
on-track, the Board remains confident about the full year
outlook.
Norbert Teufelberger
Chief Executive Officer
SUMMARY OF RESULTS
Net revenue by product has been included in the table below to
show the reconciliation of the results by segment to the results by
product.
Six months ended bwin Games Studios Non-core Corporate Removal Total
30 June 2015 labels labels functions of inter-segmental
EURmillion revenue
========================= ======= ======= ======= ======== ========== =================== =====
Sports 106.8 2.0 - - - - 108.8
Casino 54.9 40.9 - - - - 95.8
Poker 9.1 23.3 - - - - 32.4
Bingo 0.6 26.2 - - - - 26.8
Total net revenue 171.4 92.4 - - - - 263.8
Other revenue (external) 0.5 0.2 6.6 24.8 0.6 - 32.7
Other revenue (internal) - - 32.0 9.9 17.6 (59.5) -
Total revenue 171.9 92.6 38.6 34.7 18.2 (59.5) 296.5
Clean EBITDA 40.2 20.5 (10.7) 2.1 (4.8) - 47.3
Six months ended bwin Games Studios Non-core Corporate Removal Total
30 June 2014 labels labels functions of inter-segmental
EURmillion revenue
========================= ======= ======= ======= ======== ========== =================== =====
Sports 122.8 2.7 - - - - 125.5
Casino 52.4 48.8 - - - - 101.2
Poker 12.5 30.2 - - - - 42.7
Bingo 1.1 25.3 - - - - 26.4
Total Net revenue 188.8 107.0 - - - - 295.8
Other revenue (external) 0.1 0.2 6.6 14.4 - - 21.3
Other revenue (internal) - - 36.6 9.7 19.5 (65.8) -
Total revenue 188.9 107.2 43.2 24.1 19.5 (65.8) 317.1
Clean EBITDA 35.4 33.6 (9.6) (8.4) (4.6) - 46.4
Clean EBITDA increased by 2% year-on-year despite the
introduction of VAT in a number of EU Member States, a lower than
expected sports margin and the UK point of consumption tax that was
introduced on 1 December 2014. However, our progress on non-core
asset disposals and other cost saving initiatives is running ahead
of plan - excluding the impact of EU VAT and UK point of
consumption tax, Clean EBITDA would have increased by 24%.
bwin labels
Total revenue fell by 9% to EUR171.9m (2014: 188.9m) principally
due to the absence of the FIFA World Cup that benefitted last year
and the introduction of VAT. However, due to reduced operating
costs, Clean EBITDA rose by 14% to EUR40.2m (2014: EUR35.4m).
Games labels
Total revenue fell by 14% to EUR92.6m (2014: EUR107.2m)
primarily due to a decline in the poker market, reduced VIP
activity and the introduction of VAT in certain European markets.
Clean EBITDA fell by 39% to EUR20.5m (2014: EUR33.6m) due to lower
revenue coupled with the introduction of the POCT in the UK,
partially mitigated by reduced operating costs.
Studios
Total revenue in Studios fell by 11% to EUR38.6m (2014:
EUR43.2m) with revenues from internal customers reducing in-line
with the revenue reductions from bwin and Games labels, partially
offset by higher B2B revenues from external customers, principally
Borgata Hotel Casino and Spa in New Jersey. As a result oif the
lower revenue, the Clean EBITDA loss increased by 11% to EUR10.7m
(2014: EUR9.6m), partially mitigated by a reduction in operating
costs.
Non-core
Total revenues grew by 44% to EUR34.7m (2014: EUR24.1m)
primarily due to WPT, Kalixa and InterTrader. Growth at WPT was
driven by a pan-Asian licensing deal with Ourgame, and subsequent
to the period end, in July 2015 we announced a nine-year brand
licensing deal for the use of 'bwin live' to Obiettivo2016, an
Italian retail betting chain that is aiming to take a 15% share of
Italian retail betting by the end of 2017. As well as leveraging
the strength of our brands, these deals also enhance our live
offering by driving new player sign-ups and offering customers new
pay-out options.
Growth at Kalixa was driven by growth in third party processing
volumes and the acquisition of PXP Solutions in May 2014. The
growth at InterTrader was primarily driven by growth from its own
licensed service, InterTrader Direct.
Clean EBITDA from non-core activities improved substantially to
EUR2.1m which compares to an EBITDA loss of EUR8.4m in the same
period last year. The primary drivers of this improvement were the
Asian licensing deal referred to above, reduced operating losses in
Win which was sold on 12 March 2015, and growth in third party
revenues at Kalixa and InterTrader. The non-core disposals meant
that this segment included non-recurring revenue of EUR14.3m and
EBITDA of EUR2.0m in the first half of 2015.
Corporate
The loss at corporate increased marginally to EUR4.8m (2014:
EUR4.6m) primarily due to reduced charges to other internal
segments and foreign exchange movements.
Amortisation charges fell by 30% to EUR21.1m (2014: EUR30.0m),
but the increased capital expenditure in our Studios business in
2014 meant that depreciation charges increased to EUR15.6m (2014:
EUR11.4m). No impairment charges in the period (2014: EUR94.7m)
together with a profit on disposal of assets held-for-sale of
EUR5.0m, the release of a fair value liability created on
completion of the merger between bwin and PartyGaming in 2011 of
EUR4.9m and reduced reorganisation costs of EUR2.8m (2014:
EUR3.5m), partially offset by a provision for retroactive taxes of
EUR7.9m (2014: EURnil), meant that the business overall returned to
operating profit of EUR5.3m (2014: operating loss of EUR100.4m) and
a reported profit after tax of EUR2.9m (2014: loss after tax of
EUR94.0m).
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 02:01 ET (06:01 GMT)
Basic earnings per ordinary share was 0.4 EUR cents (2014: loss
per share 11.4 EUR cents). Clean EPS was 2.3 EUR cents (2014: 3.0
EUR cents).
The following table provides a reconciliation of the movements
between Clean EBITDA and operating profit (loss):
Reconciliation of Clean EBITDA to operating profit (loss)
2015 2014
Six months ended 30 June EURmillion EURmillion
================================================= ============ ============
Clean EBITDA 47.3 46.4
Exchange differences 2.7 (0.9)
Depreciation (15.6) (11.4)
Amortisation (21.1) (30.0)
Profit on disposal of assets held-for-sale 5.0 -
Retroactive taxes and associated charges (7.9) -
Share-based payments (4.8) (5.6)
Merger and acquisition expenses (2.4) (0.7)
Impairment losses - (94.7)
Reorganisation expenses (2.8) (3.5)
Release of acquisition fair value tax liability 4.9 -
Profit (loss) from operating activities 5.3 (100.4)
Each of our consolidated key performance indicators, which are
based on net revenue, are highlighted below.
Revenue by product
Total revenue
2015 2014
Six months ended 30 June EURmillion EURmillion
============================ ============ ============
Sports betting 111.1 127.4
Casino & Games 98.4 103.3
Poker 33.9 44.1
Bingo 26.9 26.7
Other 26.2 15.6
Total 296.5 317.1
Consolidated Key Performance Indicators
Six months ended 30 June 2015 2014 Change
------------------------------ -------- -------- -------
Active player days (million) 23.0 29.5 (22%)
Daily average players
(000s) 127.1 163.0 (22%)
Yield per active player
day (EUR) 11.5 10.0 15%
New player sign-ups (000s) 370.1 485.8 (24%)
Average daily net revenue
(EUR000) 1,457.5 1,634.3 (11%)
------------------------------- -------- -------- -------
Active player days fell by 22% reflecting the absence of a major
football tournament versus the prior year and the continued decline
in poker. Yield per active player day increased by 15% with
increases in all verticals with the exception of casino that was
impacted by a lower gross win margin. New player sign-ups fell by
24% with sports betting down 36% due to the absence of the FIFA
World Cup, and further declines in poker. However, new player
sign-ups increased by 9% and 27% in casino and bingo respectively.
The net impact of these movements, together with the introduction
of VAT on certain online games in a number of EU countries, was
that average daily net revenue decreased by 11% from EUR1,634,300
to EUR1,457,500.
A detailed review of each of the individual product segments is
described below. Full details of all of the Group's historic
quarterly key performance indicators can be downloaded from the
Group's website at: www.bwinparty.com.
Sports betting
2015 2014
Six months ended 30 June EURmillion EURmillion Change
---------------------------------------------- ------------ ------------ -------
Total stakes 1,411.3 1,352.9 4%
Gross win margin 8.5% 10.3% (17%)
Gross revenue 120.5 139.6 (14%)
Bonuses and other fair value adjustments to
revenue (11.7) (14.1) 17%
Net revenue 108.8 125.5 (13%)
Other revenue 2.3 1.9 21%
Total revenue 111.1 127.4 (13%)
% of total revenue from nationally regulated
and/or taxed markets* 74% 70% 6%
Cost of sales (27.1) (29.8) 9%
Gross profit 84.0 97.6 (14%)
*Austria, Belgium, France, Denmark, Germany, Italy, Spain and
UK
Sports betting - Key Performance Indicators
Six months ended 30
June 2015 2014 Change
------------------------------ ------ ------ -------
Active player days (million) 14.3 19.0 (25%)
Daily average players
(000s) 79.0 105.0 (25%)
Yield per active player
day (EUR) 7.6 6.6 15%
New player sign-ups
(000s) 211.2 328.7 (36%)
Average daily net revenue
(EUR000) 601.1 693.4 (13%)
Betting volumes were up 4% despite strong volumes in the prior
year because of the FIFA World Cup with particularly strong growth
in mobile where betting volumes were up by 29%. However, due to a
poor run of sporting results in the period, the gross win margin
fell by 1.8 percentage points to 8.5% (2014: 10.3%). The net effect
was that gross revenue was down 14% and whilst bonus costs fell
from 1.0% to 0.8% of amounts wagered, net revenue was down 13% to
EUR108.8m (2014: EUR125.5m)
The roll-out of our latest MS2 mobile sports application across
a number of markets helped to drive betting volumes as outlined
above. This fed through into a 27% increase in gross gaming revenue
through mobile and touch devices that reached 48% of total sports
betting GGR (2014: 33%).
Key objectives for 2015/16:
We are continuing to drive our mobile offering that features
prominently in all of our forthcoming marketing campaigns that are
focused on nationally regulated and/or taxed markets. Having chosen
not to renew a number of our sponsorship commitments, we are
redeploying this marketing spend into a series of CRM and digital
marketing initiatives that are already beginning to improve player
yields and player retention. We plan to launch into Greece and
Romania before the end of the year with the exact timings dependent
upon licencing and completing the requisite modifications to our
product offering to comply with local licensing regulations.
Having delivered a 21% increase in other revenue in the first
half of 2015, we are making good progress on securing additional
and significant B2B customers for the sports betting platform as
well as looking at ways we may be able to drive additional revenues
through licensing of the bwin brand in certain markets. We expect
to be in a position to confirm significant progress on these
initiatives in the second half of 2015.
Casino & games
2015 2014
Six months ended 30 June EURmillion EURmillion Change
---------------------------------------------- ------------ ------------ -------
Total stakes 3,526.8 3,397.3 4%
Gross win margin 3.4% 3.6% (6%)
Gross revenue 119.3 124.0 (4%)
Bonuses and other fair value adjustments to
revenue (23.5) (22.8) (3%)
Net revenue 95.8 101.2 (5%)
Other revenue 2.6 2.1 24%
Total revenue 98.4 103.3 (5%)
% of total revenue from nationally regulated
and/or taxed markets* 29% 27% 7%
Cost of sales (6.6) (6.1) (8%)
Gross profit 91.8 97.2 (6%)
*Austria, Belgium, Denmark, Italy, Spain, UK and US (New
Jersey)
Casino & Games - Key Performance Indicators
Six months ended 30
June 2015 2014 Change
------------------------------ ---------- ---------- -------- --------- ---------- -------
Active player days (million) 3.4 3.4 0%
Daily average players
(000s) 18.8 18.8 0%
Yield per active player
day (EUR) 28.2 29.8 (5%)
New player sign-ups
(000s) 27.4 25.2 9%
Average daily net revenue
(EUR000) 529.3 559.1 (5%)
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Total stakes grew by 4% versus the prior year reflecting
particularly strong growth through the mobile channel and further
progress on driving the rates of cross-sell from sports betting.
The roll-out of 45 new casino games on mobile, including our own
Slider Blackjack and Slider Roulette games, prompted a 139%
increase in betting turnover that increased gross gaming revenue
through the mobile channel by 141%. Lower VIP activity coupled with
an increase in the popularity of live dealer games, as well as
higher cross-sell from sports whose players prefer lower hold games
such as blackjack and roulette meant that the overall gross win
margin for casino & games fell from 3.6% to 3.4%. The
introduction of VAT on certain online gambling games in a number of
EU countries from 1 January 2015 was also a factor in driving gross
win margins lower with the result that gross gaming revenue fell by
4% to EUR119.3m (2014: EUR124.0m). Adjusting for the impact of VAT,
net gaming revenue fell by 1% to EUR100.3m.
A focused marketing campaign in the UK meant that bonus costs
increased but the result was a 9% increase in new player sign-ups
and this should feed through into increased player activity in
future periods. Our UK effort also helped to drive revenues from
nationally regulated and/or taxed markets that increased by 3% in
absolute terms while revenue from other markets fell by 7%, the
result being that total net revenue fell by 5%. Other revenue
benefited from a strong performance from our New Jersey partner's
online casino that made good progress in the period. An 8% increase
in cost of sales following the introduction of the point of
consumption tax in the UK meant that gross profit fell by 6% to
EUR91.8m (2014: EUR97.2m)
Key objectives for 2015/16:
We are continuing to expand our product portfolio that now has
291 games in total of which 49 are also on mobile. Having launched
our online slots product in Spain in June, we hope to grow casino
revenues there in the second half whilst continuing to grow our
share of total casino revenue coming through mobile having reached
19% in the first six months of 2015 (2014: 8%).
Poker
2015 2014
Six months ended 30 June EURmillion EURmillion Change
---------------------------------------------- ------------ ------------ -------
Gross revenue 40.4 49.7 (19%)
Bonuses and other fair value adjustments to
revenue (8.0) (7.0) (14%)
Net revenue 32.4 42.7 (24%)
Other revenue 1.5 1.4 7%
Total revenue 33.9 44.1 (23%)
% of total revenue from nationally regulated
and/or taxed markets* 44% 44% 0%
Cost of sales (3.8) (5.1) 25%
Gross profit 30.1 39.0 (23%)
*Austria, Belgium, Denmark, France, Italy, Spain, UK and US (New
Jersey)
Poker - Key Performance Indicators
Six months ended 30
June 2015 2014 Change
--------------------------- ------ ------ -------
Active player days
(million) 4.9 6.7 (27%)
Daily average players
(000s) 27.1 37.0 (27%)
Yield per active player
day (EUR) 6.6 6.4 3%
New player sign-ups
(000s) 51.3 68.6 (25%)
Average daily net revenue
(EUR000) 179.0 235.9 (24%)
The challenges in European poker have continued with market
declines in Italy, France and Spain that have each contributed to
the continued decline in our own poker revenues. The introduction
of VAT in a number of EU countries has also been a headwind since
the start of 2015. However, we have started to see an improvement
in the month-on-month trend, particularly in the UK where we grew
new player sign-ups by 36% and active player days by 10% versus the
same period in 2014.
Our presence on mobile is also improving and gross poker
revenues through this channel have grown to approximately 9% of
total poker revenue compared with 5% during the first six months of
2014.
Objectives for 2015/16:
We will continue to build upon partypoker's recent progress in
the UK including focused promotional activity with a new partner
and will also seek to slow the decline elsewhere with a series of
mobile app push campaigns in conjunction with the usual step-up in
targeted marketing initiatives at the start of the new football
season.
Bingo
2015 2014
Six months ended 30 June EURmillion EURmillion Change
---------------------------------------------- ------------ ------------ -------
Gross revenue 60.1 57.1 5%
Bonuses and other fair value adjustments to
revenue (33.3) (30.7) (8%)
Net revenue 26.8 26.4 2%
Other revenue 0.1 0.3 (67%)
Total revenue 26.9 26.7 1%
% of total revenue from nationally regulated
and/or taxed markets* 99% 97% 2%
Cost of sales (4.5) (1.6) (181%)
Gross profit 22.4 25.1 (11%)
* Italy, Spain and UK
Bingo - Key Performance Indicators
Six months ended 30 June 2015 2014 Change
------------------------------ ------ ------ -------
Active player days (million) 2.4 2.9 (17%)
Daily average players
(000s) 13.3 16.0 (17%)
Yield per active player
day (EUR) 11.2 9.1 23%
New player sign-ups (000s) 80.2 63.3 27%
Average daily net revenue
(EUR000) 148.1 145.9 2%
Despite further declines in Italy and continued strong
competition in the UK, we increased gross revenue by 5%, driven by
a 10% increase in the UK that now represents over 90% of the total
and which benefited from a favourable movement of Sterling against
the Euro. The strength of our Foxy Bingo and Cheeky Bingo brands
remain central to our success and were further supported during the
period with a successful TV campaign in the UK resulting in a 27%
increase in new player sign-ups. With a key area of focus being on
more valuable players, overall active player days fell by 17% but
average yield per active player day increased by 23%, resulting in
a 2% increase in average daily revenue.
We have continued to make excellent progress on growing our
mobile presence and gross gaming revenues through mobile increased
to 33% of total bingo gross gaming revenue (2014: 21%).
Objectives for 2015/16:
We are continuing to drive our mobile and touch volumes with a
particular focus on the UK.
Other revenue
Other revenue grew by 68% to EUR26.2m (2014: EUR15.6m), with a
particularly strong performance by WPT following a licencing
agreement in Asia. WPT was subsequently sold to Ourgame on 24 June
2015 for EUR32.7m. Other disposals completed during the period
included Win, Gaming Realms, United Games and the majority of our
investment in Winners. Non-recurring revenue associated with these
disposals within this segment was EUR14.3m in 2015. Following these
disposals, other revenue now comprises Kalixa, B2B services,
InterTrader, software services and domain sales. Revenues grew in
all areas with the exception of software services as these
resources are redeployed to internal projects.
Cost of sales
Total Clean EBITDA cost of sales increased by 5% to EUR49.6m,
largely driven by the introduction of the POCT from 1 December
2014, increased programming costs at WPT, partially offset by
declines in gaming taxes elsewhere. Gaming taxes payable in
nationally regulated markets account for the majority of cost of
sales and totalled EUR41.8m (2014: EUR42.4m). Included within total
cost of sales but outside of Clean EBITDA is EUR7.9m relating to a
provision for retroactive penalties that may be levied on gaming
operators that accepted online bets from players in Romania prior
to being licensed. A joint complaint by the European Gaming and
Betting Association, the Gibraltar Betting and Gaming Association
and the Maltese Remote Gaming Council has been made to the European
Commission in respect of the legislation that was enacted giving
rise to these potential obligations.
2015 2014
Six months ended 30 June EURmillion EURmillion Change
========================================== ============ ============ =======
Gaming taxes 41.8 42.4 1%
Broadcasting costs 5.6 2.5 (124%)
Other 2.2 2.3 4%
Clean EBITDA cost of sales 49.6 47.2 (5%)
Retroactive taxes and associated charges 7.9 - n/a
Total cost of sales 57.5 47.2 (22%)
Other operating income/expenses
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Other operating income included one-off items of EUR4.9m
relating to the release of a fair value tax liability set-up at the
time of the merger between bwin and PartyGaming and a profit of
EUR5.0m recorded on the disposal of certain non-core investments.
Foreign exchange gains of EUR2.7m compare to a loss of EUR0.9m in
the same period in 2014. Other operating expenses comprise merger
and acquisition costs of EUR2.4m which includes EUR1.7m of advisory
costs incurred relating to potential consolidation discussions.
Distribution expenses
As a percentage
of total revenue
2015 2014
Six months ended 30 June EURmillion EURmillion Change 2015 2014
--------------------------- -------------- ------------ ---------- ----------- ---------
Customer acquisition and
retention 59.9 70.1 15% 20.2% 22.1%
Affiliates 11.5 14.6 21% 3.9% 4.6%
Customer bad debts 0.4 2.3 83% 0.1% 0.7%
Third-party content 14.0 14.1 1% 4.7% 4.4%
Webhosting and technical
services 15.0 14.8 (1%) 5.1% 4.7%
Clean EBITDA distribution
expenses 100.8 115.9 13% 34.0% 36.5%
Reorganisation expenses 0.3 1.0 70% 0.1% 0.3%
Distribution expenses 101.1 116.9 14% 34.1% 36.8%
Customer acquisition and retention spend fell by 15% due to the
absence of a major football tournament this year and the major
marketing effort in the prior year around the FIFA World Cup. It
also reflects a concerted effort to reduce marketing costs in New
Jersey where despite an improvement in recent trends, the size of
the market remains lower than previously expected. The marked
reduction in affiliate costs reflects our continued focus on
reducing our reliance on this channel, as well as lower poker
revenue. Customer bad debts fell from 0.7% of revenue to 0.1% of
revenue due to a reduction in the amount of chargebacks experienced
during the period. Third-party content costs increased to 4.7% of
revenue (2014: 4.4%) due to the addition of more third-party
content to our casino offering that now includes games from WMS,
IGT, Net Entertainment and Amaya.
Administrative expenses
As a percentage
of total revenue
2015 2014
Six months ended 30 June EURmillion EURmillion Change 2015 2014
----------------------------------- -------------- -------------- --------- ----------- ---------
Transaction fees 13.5 13.7 1% 4.6% 4.3%
Staff costs 54.8 55.7 2% 18.5% 17.6%
Outsourced services 8.7 12.0 28% 2.9% 3.8%
Other overheads 22.0 26.4 17% 7.4% 8.3%
Clean EBITDA administrative
expenses 99.0 107.8 8% 33.4% 34.0%
Depreciation 15.6 11.4 (37%) 5.3% 3.6%
Amortisation 21.1 30.0 30% 7.1% 9.5%
Impairment losses - 94.7 100% n/a 29.9%
Reorganisation expenses 2.5 2.5 -% 0.8% 0.8%
Administrative expenses before
share based payments 138.2 246.4 44% 46.6% 77.7%
Share-based payments 4.8 5.6 14% 1.6% 1.8%
Administrative expenses 143.0 252.0 43% 48.2% 79.6%
We have continued to focus on reducing Clean EBITDA
administration costs that have fallen across all categories in the
period despite unfavourable foreign exchange movements. Transaction
fees fell in line with reduced volumes across the Group, but
increased as a percentage of revenue reflecting the additional
third party processing volume of PXP. Staff costs were reduced by
EUR0.9m on the back of our move to a label led structure, partially
offset by foreign exchange movements, an increase in workforce
performance-based incentive costs and the addition of the PXP
workforce. Outsourced services and other overheads were reduced by
EUR3.3m and EUR4.4m respectively reflecting the benefits of moving
to a single technology platform in both France and Italy as well as
our continued effort to reduce costs in these areas. The net result
was that Clean EBITDA administrative expenses were reduced by
EUR8.8m to EUR99.0m (2014: EUR107.8m).
The higher than normal capital expenditure in the Studios
business in 2014 also meant that depreciation increased by EUR4.2m
in the period to 5.3% of total revenue while the amortisation
charge, that is almost entirely related to acquired intangibles,
continued to fall to 7.1% of total revenue (2014: 9.5%). Comparable
reorganisation expenses of EUR2.5m (2014: EUR2.5m) reflect the last
significant expenditure on transitioning to our label-led set-up as
the new structure is now largely complete.
Taxation
The current tax charge for the period is EUR3.7m (2014:
EUR5.6m). After allowing for deferred tax credits primarily
relating to the unwinding of provisions set up on acquisitions of
EUR3.5m, the total tax charge for the period is EUR0.2m (2014: tax
credit of EUR6.5m). There is no tax associated with other
comprehensive income.
Net cash
As at
As at 31 December
30 June 2015 2014
EURmillion EURmillion
================================================ ============== =============
Cash and cash equivalents 193.2 162.9
Short-term investments 14.7 13.5
Loans and borrowings (62.2) (56.9)
Net cash 145.7 119.5
Payment service providers (less chargebacks) 25.2 31.2
Net cash including amounts held by processors 170.9 150.7
Less: Client liabilities and progressive prize
pools (112.8) (116.1)
Net cash including amounts held by processors
less client liabilities 58.1 34.6
Net cash (after deducting all customer liabilities but adding
back net payment processor receivables) increased to EUR58.1m (31
December 2014: EUR34.6m) assisted by the disposal of non-core
businesses and after payment of the final dividend of EUR21.7m.
Cashflow
2015 2014
Six months ended 30 June EURmillion EURmillion
----------------------------------------------------- ----------- -----------
Clean EBITDA 47.3 46.4
Exchange differences 2.7 (0.9)
Movements in working capital 21.3 12.1
Income taxes paid (4.7) (6.3)
Merger and acquisition costs (2.4) (0.7)
Reorganisation costs (2.8) (3.5)
Retroactive taxes and associated charges (7.9) -
Net cash inflow from operating activities 53.5 47.1
Issue of ordinary shares - 0.6
Purchase of own shares (0.1) (0.2)
Dividends paid (21.7) (18.0)
Sale of property, plant and equipment - 1.4
Acquisitions - (22.7)
Purchase of property, plant and equipment (18.6) (9.9)
Purchases of intangible assets (10.4) (11.2)
Repayment of loan from associates or joint ventures - 1.5
Sale of assets held-for-sale 30.5 -
Sale of available-for-sale investments 4.4 -
(Increase) decrease in short term investments (1.2) 1.9
Other (1.3) (0.1)
Net cash inflow (outflow) 35.1 (9.6)
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Cash generated in the period improved substantially year-on-year
from an outflow of EUR9.6m to an inflow of EUR35.1m. This was
primarily due to the fact that last year was impacted by the
acquisition of PXP Solutions in May 2014 (EUR22.7m) whereas the
first half of 2015 benefitted from the sale of certain non-core
assets that generated net cash proceeds of EUR34.9m. Operating
cashflow increased by 14% to EUR53.5m (2014: EUR47.1m). Dividend
payments of EUR21.7m (2014: EUR18.0m) reflected a higher payout on
the previous year together with a weaker Euro whilst capital
expenditure (including intangibles) rose to EUR29.0m (2014:
EUR21.1m) due to increased investment in our Studios business.
Principal risks
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
course of the financial year and could cause actual results to
differ materially from expected and historical results. To mitigate
against these risks bwin.party conducts a continuous process of
Group-wide assessments that examine whether any risk has increased,
decreased or become obsolete; identify any new risks, especially
from recent key business events; and the likelihood of a risk
occurring and what level of impact it would have on the Group.
Many of the threats and challenges faced by online gaming
companies are similar to those faced by other leisure and
entertainment industries. They include competition, changes to
consumer tastes, maintaining healthy financial ratios in compliance
with banking covenants and loss of key personnel.
There are also certain risks that are more specific to
bwin.party and to the online gaming industry. These risks and how
we seek to manage them are set out below:
1. Technology
The Group's customer offer includes products operated using
different labels and gaming licences, the majority of which are
driven by the Group's proprietary technology.
2013 saw the completion of the dotcom player migration project
and during 2014 our customer base in France was migrated
successfully onto our target technology platform. The migration of
our Italian customers to the target platform represents the last of
our integration projects following the Merger and was completed in
March 2015.
The fact that with the exception of bingo, the vast majority of
our customer base is already supported by our target platform,
highlights how important our technology is to the Group. In an
industry where service reliability and integrity are key
differentiating factors, our continual commitment to providing a
reliable, safe, secure, compliant and continuous service has been
our focus this year.
A Group-wide initiative on achieving close to 100% system
availability was introduced and we have made significant progress
in ensuring our customer facing systems are available for 24 hours
a day, 7 days a week. This is monitored and overseen by the IT
Committee.
Other technology-related risks, such as our continuing
operations in the event of a natural or man-made disaster, have
been addressed with a substantial investment during 2014 and both
the Group's disaster recovery and business continuity solutions
have been updated and tested during the past 12 months.
With continuous shifts in how consumers choose and are able to
access our services (via different devices and/or channels), the
process of maintaining and improving our technology will become
more complex. As mentioned elsewhere, the Group's key focus in 2015
is to improve our customer experience through an expanded mobile
offer across all products as well as high levels of
availability.
2. Regulation
Focusing on nationally regulated and/or taxed markets safeguards
our gaming revenues from potential national legislation threatening
to prohibit or restrict one or more of the products that we offer,
or online gaming entirely. There are potential risks to the
operations and financial position of the Group from all markets
where regulation is not clearly defined or adopted, especially in
relation to EU legislation and associated cases.
To manage this risk, the Group continues to engage (either
directly or indirectly) with national governments and regulators on
to-be regulated markets. The Group's Compliance and Regulatory
Affairs team keeps abreast of the regulatory landscape and report
to the Audit & Risk Committee on any developments. However, it
should be noted that most of the risks in relation to the
regulatory landscape are outside of our direct control.
Operating in nationally regulated and/or taxed markets
necessitates that we comply with the required rules and protocols.
Currently, the Group holds licences for and offers real money
gambling in 11 different territories, each with their own unique
licence obligations. The need to sometimes develop bespoke
technological, operational and promotional offers in each market
requires significant investment. The Group is committed to meeting
its licence obligations and monitors its compliance with regulatory
requirements by performing reviews of its licenced operations on a
periodic basis with the results reported to the Audit and Risk
Committee. The Group's licenced entities are subject to a series of
external audits by regulators and industry specialists to ensure
that policies and procedures are being followed as intended.
3. Taxation
As outlined above the Group's strategic focus is to operate in
nationally regulated and/or taxed markets. Revenues earned from
customers located in a particular jurisdiction may give rise to
further taxes in that jurisdiction. If such taxes are levied,
either on the basis of existing law or the current practice of any
tax authority, or by reason of a change in law or practice, then
this may have a material adverse effect on the amount of tax
payable by the Group.
Group companies operate only where they are incorporated,
domiciled or registered. The multi-location set up of the Group
gives rise to transfer pricing risk, mitigated by the fact that all
intra-group transactions are documented and take place on
commercial terms agreed with input from the Group's professional
advisors.
During 2014, a detailed review on the transfer pricing
arrangements was conducted on behalf of the Audit and Risk
Committee. The Group Director of Tax routinely holds workshops with
senior management and business unit leaders during the course of
the year.
On 1 January 2015, new VAT rules came into force across the EU
impacting several areas of the digital economy. Gambling has
typically been exempt from VAT but falls within the rules for VAT
on electronically supplied services. Under EU law, Member States
have the ability to apply VAT to gambling subject to certain
limitations and conditions, and tax may be due depending on where
customers are located and how Member States implement any
exemption. Whilst substantial uncertainty remains, in the light of
the new rules the Group is now filing for, and paying VAT, in
certain EU Member States. It is possible that VAT could be payable
in other EU Member States.
4. Shift to a new label-led approach
In 2014, the Group announced a fundamental shift in its
operations away from a product-led approach (sports betting, casino
& games, poker and bingo) towards one driven by label (bwin
labels, Games labels, Studios, Non-core and Corporate) effective
from 1 January 2015.
Whilst this shift to a new approach created some uncertainty for
employees, continuous support through regular communications via
location-driven 'Town Halls', webinars through the Group's intranet
and one-on-one 'question and answer' sessions with Human Resource
teams have each helped to maintain a transparent and continuous
channel of communication that has aided this transition.
Having business units and labels resourced across various
locations does give rise to specific location risks as well as
decentralisation risks; however this new approach has allowed the
creation of teams dedicated to specific labels rather than products
enabling faster decision-making, an improved customer offer and
better service.
The Group's corporate functions continue to be administered from
the corporate centre covering areas such as procurement, financial
reporting, budgeting, legal and HR services, with appropriate
service levels in place to provide each business unit with a
benchmark of service quality. The 2015 Internal Audit Plan as
approved by the Audit and Risk Committee ('ARC') reflects this new
operational set-up and findings of all reviews will be communicated
to the ARC during the year ahead.
5. Country and currency risk
Whilst the continuing uncertainty in the global economic outlook
inevitably increases the trading and balance sheet risks to which
the Group is exposed, the diversified nature of the Group's
business means that such risks are not disproportionately different
from any other commercial enterprise of a similar scale and
international reach. Conditions in the Eurozone remain challenging
and reference has already been made in previous statements to the
challenging economic backdrop in several European countries,
reducing the spending power of customers particularly in Southern
European countries, which the Group has attempted to reflect in its
financial forecasts. The weaker European economies are also
increasing the risk of currency volatility and the potential for
significant currency devaluation and business disruption if one or
more of these countries exits the Euro currency. Accordingly, the
Group's treasury processes and policies are designed with the aim
of minimising the Group's exposure to the Eurozone economic risk
and preserving our ability to operate if such events arise.
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The functional currency of the Company and a majority of the
Company's subsidiaries is the euro. bwin.party's treasury policy
dictates that all material transaction and currency liability
exposures are hedged with financial derivatives or cash.
Consequently, those bwin.party companies that have adopted the Euro
as their functional currency ensure their financial assets and
liabilities in non-euro currencies are equal and that any residual
balance is held in Euros. With the so-called 'GIPSI' countries
(Greece, Ireland, Portugal, Spain and Italy), if one or more of
these countries exits the Euro then the Group may be exposed to a
currency devaluation of its financial assets to the extent that the
financial assets located in the exiting jurisdiction exceed its
financial liabilities. Accordingly, the treasury policy requires
that wherever practical and subject to regulatory requirements, the
financial assets located in each GIPSI country are limited so they
do not exceed the financial liabilities associated with that
jurisdiction.
6. Transaction Risk
Whilst the Company remains in in discussions regarding industry
consolidation, several additional areas of risk may affect the
Group's financial performance. These risks relate primarily to the
retention of key people, the ability to attract new talent, the
need to continue to focus on day-to-day operational activities and
the protection of company assets. Other risk factors may also
become relevant should uncertainty over the outcome of such
discussions continue for a lengthy period.
Any period of uncertainty regarding the future ownership of the
Group may increase the likelihood that certain of the risks above
have an impact on the Group's financial performance. However,
management has taken several mitigating actions to reduce their
impact and likelihood. The Audit and Risk Committee are fully aware
of the risks as well as the mitigating actions in place and
management have committed to work within the transaction framework
to help reduce the potential impact of such risks.
By order of the Board of Directors
Martin Weigold
Chief Financial Officer
28 August 2015
Statement of Directors' responsibilities
This interim management report is the responsibility of, and has
been approved by, the Directors of bwin.party digital entertainment
plc. Accordingly, the Directors confirm that to the best of their
knowledge:
-- the unaudited condensed consolidated set of financial
information has been prepared in accordance with IAS 34 - Interim
Financial Reporting as issued by the IASB and endorsed and adopted
by the European Union;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed consolidated set of financial statements; and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the Annual Report for the year ended 31 December
2014.
The Directors of bwin.party digital entertainment plc are listed
on the bwin.party website: www.bwinparty.com.
By order of the Board of Directors
Martin Weigold
Chief Financial Officer
bwin.party digital entertainment plc
28 August 2015
Financial information (unaudited)
Condensed consolidated statement of comprehensive income
2015 2014
Six months ended 30 June Notes EURmillion EURmillion
================================================== ===== =========== ===========
Continuing operations
Net revenue 263.8 295.8
Other revenue 32.7 21.3
Total revenue 2 296.5 317.1
Cost of sales (57.5) (47.2)
Gross profit 239.0 269.9
Other operating income 12.8 0.2
Other operating expense (2.4) (1.6)
Administrative expenses (143.0) (252.0)
Distribution expenses (101.1) (116.9)
================================================== ===== =========== ===========
Clean EBITDA 47.3 46.4
Exchange gains (losses) 2.7 (0.9)
Completed and in process merger and acquisition
costs (2.4) (0.7)
Amortisation (21.1) (30.0)
Depreciation (15.6) (11.4)
Profit on disposal of assets held-for-sale 5.0 -
Impairment losses - (94.7)
Retroactive taxes and associated charges (7.9) -
Release of acquisition fair value tax liability 4.9 -
Share-based payments (4.8) (5.6)
Reorganisation costs (2.8) (3.5)
================================================== ===== =========== ===========
Profit (Loss) from operating activities 5.3 (100.4)
Finance income 0.9 0.5
Finance expense (2.8) (1.4)
Share of (loss) profit of associates and joint
ventures (0.3) 0.8
Profit (Loss) before tax 3.1 (100.5)
Tax (charge) credit 3 (0.2) 6.5
Profit (Loss) after tax and for the period 2.9 (94.0)
Other comprehensive income (expense):
Items that will or may be reclassified to profit
or loss:
Exchange differences on translation of foreign
operations, net of tax 4.2 5.2
Change in fair value of available-for-sale
investments (0.6) 2.9
Total comprehensive income (expense) for the
period 6.5 (85.9)
Profit (loss) for the period attributable to:
Equity holders of the parent 3.6 (92.8)
Non-controlling interests (0.7) (1.2)
2.9 (94.0)
Total comprehensive income (expense) for the period
attributable to:
Equity holders of the parent 7.2 (84.7)
Non-controlling interests (0.7) (1.2)
6.5 (85.9)
Profit (Loss) per share (EUR cents)
Basic 4 0.4 (11.4)
Diluted 4 0.4 (11.4)
Condensed consolidated statement of financial position
As at As at
30 June 31 December
2015 2014
Notes EURmillion EURmillion
=================================================== ======= =========== ============
Non-current assets
Intangible assets 5 546.8 545.1
Property, plant and equipment 58.1 55.9
Investments 7.2 11.0
Other receivables 6 10.9 10.6
623.0 622.6
Current assets
Assets held for sale 4.0 27.5
Trade and other receivables 6 87.5 87.5
Short-term investments 14.7 13.5
Cash and cash equivalents 193.2 162.9
299.4 291.4
Total assets 922.4 914.0
Current liabilities
Trade and other payables 7 (94.4) (82.6)
Income and gaming taxes payable (40.4) (41.4)
Client liabilities and progressive prize pools (112.8) (116.1)
Provisions 9 (16.2) -
Loans and borrowings 8 - (31.8)
Liabilities held for sale - (7.4)
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(264.3)
(263.8) (279.3)
Non-current liabilities
Trade and other payables 7 (14.0) (17.4)
Provisions 9 (3.1) -
Loans and borrowings 8 (62.2) (25.1)
Deferred tax 10 (24.8) (27.2)
(104.1) (69.7)
Total liabilities (367.9) (349.0)
Total net assets 554.5 565.0
Equity
Share capital 0.1 0.1
Share premium account 3.0 3.0
Own shares (2.2) (2.1)
Capital contribution reserve 24.1 24.1
Capital redemption reserve 0.0 0.0
Available-for-sale reserve 1.6 2.2
Retained earnings 1,102.4 1,115.7
Other reserve (573.7) (573.7)
Currency reserve 6.9 2.7
Equity attributable to equity holders of the
parent 562.2 572.0
Non-controlling interests (7.7) (7.0)
Total Equity 554.5 565.0
Condensed consolidated statement of changes in equity
Total
Other comprehensive
As at Issues income Other As at
1 January of Dividends Purchase for the share-based 30 June
2014 shares paid of shares period payments 2014
EURmillion EURmillion EURmillion EURmillion EURmillion EURmillion EURmillion
==================== =========== =========== ============ ============ ============== ============ ============
Share capital 0.1 (0.0) - (0.0) - - 0.1
Share premium
account 2.2 0.6 - - - - 2.8
Own shares (5.2) 3.0 - (0.1) - - (2.3)
Capital
contribution
reserve 24.1 - - - - - 24.1
Capital redemption
reserve 0.0 - - - - - 0.0
Available-for-sale
reserve 2.6 - - - 2.9 - 5.5
Retained earnings 1,240.5 (2.4) (18.0) (0.7) (92.8) 5.6 1,132.2
Other reserve (573.7) - - - - - (573.7)
Currency reserve (8.2) - - - 5.2 - (3.0)
==================== =========== =========== ============ ============ ============== ============ ============
Total attributable
to equity holders
of the parent 682.4 1.2 (18.0) (0.8) (84.7) 5.6 585.7
Non-controlling
interests (4.8) - - - (1.2) - (6.0)
==================== =========== =========== ============ ============ ============== ============ ============
Total equity 677.6 1.2 (18.0) (0.8) (85.9) 5.6 579.7
==================== =========== =========== ============ ============ ============== ============ ============
Total
Other comprehensive As at
As at Issues income Other 31
1 July of Dividends Purchase for the share-based December
2014 shares paid of shares period payments 2014
EURmillion EURmillion EURmillion EURmillion EURmillion EURmillion EURmillion
==================== =========== ============ ============ ============ ============== ============ ===========
Share capital 0.1 (0.0) - (0.0) - - 0.1
Share premium
account 2.8 0.2 - - - - 3.0
Own shares (2.3) 0.3 - (0.1) - - (2.1)
Capital
contribution
reserve 24.1 - - - - - 24.1
Capital redemption
reserve 0.0 - - 0.0 - - 0.0
Available-for-sale
reserve 5.5 - - - (3.3) - 2.2
Retained earnings 1,132.2 (0.3) (19.8) (1.3) 0.7 4.2 1,115.7
Other reserve (573.7) - - - - - (573.7)
Currency reserve (3.0) - - - 5.7 - 2.7
==================== =========== ============ ============ ============ ============== ============ ===========
Total attributable
to equity holders
of the parent 585.7 0.2 (19.8) (1.4) 3.1 4.2 572.0
Non-controlling
interests (6.0) - - - (1.0) - (7.0)
==================== =========== ============ ============ ============ ============== ============ ===========
Total equity 579.7 0.2 (19.8) (1.4) 2.1 4.2 565.0
==================== =========== ============ ============ ============ ============== ============ ===========
Total
Other comprehensive
As at Issues income Other As at
1 January of Dividends Purchase for the share-based 30 June
2015 shares paid of shares period payments 2015
EURmillion EURmillion EURmillion EURmillion EURmillion EURmillion EURmillion
==================== =========== =========== ============ ============ ============== ============ ============
Share capital 0.1 (0.0) - - - - 0.1
Share premium
account 3.0 0.0 - - - - 3.0
Own shares (2.1) 0.0 - (0.1) - - (2.2)
Capital
contribution
reserve 24.1 - - - - - 24.1
Capital redemption
reserve 0.0 - - - - - 0.0
Available-for-sale
reserve 2.2 - - - (0.6) - 1.6
Retained earnings 1,115.7 (0.0) (21.7) - 3.6 4.8 1,102.4
Other reserve (573.7) - - - - - (573.7)
Currency reserve 2.7 - - - 4.2 - 6.9
==================== =========== =========== ============ ============ ============== ============ ============
Total attributable
to equity holders
of the parent 572.0 - (21.7) (0.1) 7.2 4.8 562.2
Non-controlling
interests (7.0) - - - (0.7) - (7.7)
==================== =========== =========== ============ ============ ============== ============ ============
Total equity 565.0 - (21.7) (0.1) 6.5 4.8 554.5
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==================== =========== =========== ============ ============ ============== ============ ============
Share premium is the amount subscribed for share capital in
excess of nominal value.
Capital contribution reserve is the amount arising from
share-based payments made by parties associated with the original
Principal Shareholders and cash held by the Employee Trust.
Capital redemption reserve is the amount transferred from share
capital on redemption of issued shares.
Available-for-sale reserve are the gains (losses) arising on
financial assets classified as available for sale.
Retained earnings represent cumulative profit / (loss) for the
period, share-based payments and any other items of other
comprehensive income not disclosed as separate reserves in the
table above.
The other reserve of EUR573.7 million is the amount arising from
the application of accounting which is similar to the pooling of
interests method, as set out in the Group's accounting
policies.
Currency reserve represents the gains/losses arising on
retranslating the net assets of overseas operations into Euros.
Non-controlling interests relate to the interests of other
shareholders in certain subsidiaries.
Condensed consolidated statement of cashflows
2015 2014
Six months ended 30 June EURmillion EURmillion
======================================================== =========== ===========
Profit (loss) for the period 2.9 (94.0)
Adjustments for:
Depreciation of property, plant and equipment 15.6 11.4
Amortisation of intangibles 21.1 30.0
Impairment of goodwill - 19.7
Impairment of intangible assets - 75.0
Share of loss (profit) of associates 0.3 (0.8)
Profit arising on disposal of assets held-for-sale (5.0) -
Release of acquisition fair value tax liability (4.9) -
Interest expense 2.8 1.4
Interest income (0.9) (0.5)
Share-based payments 4.8 5.6
Income tax charge (credit) 0.2 (6.5)
Operating cashflows before movements in working capital
and provisions 36.9 41.3
(Increase) Decrease in trade and other receivables (3.0) 16.7
Increase (decrease) in trade and other payables 16.4 (4.6)
Increase in provisions 7.9 -
Cash generated from operations 55.8
Cash generated from operations 58.2 53.4
Income taxes paid (4.7) (6.3)
Net cash inflow from operating activities 53.5 47.1
Investing activities
Acquisition of subsidiaries and businesses (net of
cash acquired) - (22.7)
Purchases of intangible assets (10.4) (11.2)
Purchases of property, plant and equipment (18.6) (9.9)
Purchase of investments (1.2) -
Sale of available-for-sale investments 4.4 -
Sale of property, plant and equipment - 1.4
Sale of intangibles 0.2 -
Sale of assets held-for-sale net of cash disposed
of 30.5 -
Interest received 0.9 0.5
Repayment of loan from joint venture - 1.5
(Increase) decrease in short-term investments (1.2) 1.9
Net cash generated by (used in) investing activities 4.6 (38.5)
Financing activities
Issue of ordinary shares 0.0 0.6
Purchase of own shares (0.1) (0.2)
Dividends paid (21.7) (18.0)
Repayment of bank borrowings - (18.6)
New bank borrowings - 18.4
Interest paid (1.2) (0.4)
Net cash used by financing activities (23.0) (18.2)
Net increase (decrease) in cash and cash equivalents 35.1 (9.6)
Exchange differences (4.8) 2.2
Cash and cash equivalents at beginning of period 162.9 173.3
Cash and cash equivalents at end of period 193.2 165.9
Segregated cash: Included within cash and cash equivalents is
EUR49.1m (2014: EUR30.8m) related to cash held in segregated
accounts in certain regulated markets.
Notes to the condensed consolidated financial information
1. Basis of preparation
The unaudited interim condensed consolidated financial
statements for the six months ended 30 June 2015 have been prepared
in accordance with International Accounting Standard ('IAS') 34 -
Interim Financial Reporting, and have been prepared on the basis of
International Financial Reporting Standards ('IFRSs') and
International Financial Reporting Interpretations Committee
('IFRIC') interpretations as adopted by the European Union that are
effective for the year ending 31 December 2015.
The unaudited interim condensed consolidated financial
statements for the six months ended 30 June 2015, which were
approved by the Board on 28 August 2015, do not comprise statutory
accounts, and should be read in conjunction with the Annual Report
for the year ended 31 December 2014. Those accounts have been
reported upon by the Group's auditors and delivered to Companies
House in Gibraltar. The report of the auditors on those accounts
was unqualified. The Annual Report is published in the Investors
section of the Group website at www.bwinparty.com and is available
from the Company on request.
The unaudited interim condensed consolidated financial
statements are prepared on the basis of the accounting policies
stated in the Group's Annual Report 2014 which is available on the
Group's website at www.bwinparty.com. In the current reporting
period, the Group has adopted a number of revised Standards and
Interpretations. However, none of these have had a material impact
on the Group's reporting. In addition, the IASB has issued a number
of IFRS and IFRIC amendments or interpretations since the last
annual report was published. It is not expected that any of these
will have a material impact on the Group.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the interim condensed consolidated financial
statements.
2. Segment information
The Group's operations were historically segmented into the
following reporting segments:
-- sports betting;
-- casino & games;
-- poker;
-- bingo; and
-- other
In order to improve operational performance the Group
re-structured its operations. Following this restructure a review
was undertaken of the need to change the Group's reporting of
results to the Chief Operating Decision Makers ('CODMs') which has
had a consequential effect on the reporting of segmental
information under IFRS 8. Accordingly, since 1 January 2015 the
Group's operations are segmented into the following reporting
segments:
-- bwin labels (including bwin, Gamebookers);
-- Games labels (including partycasino, partypoker, Foxy Bingo,
Gioco Digitale and the Group's US B2C operations);
-- Studios - the Group's technology provided through arms-length
B2B agreements with both internal and external customers;
-- Non-core - includes Kalixa, as well as InterTrader and some
smaller, non-core assets as well as assets disposed of in the
period (World Poker Tour, Win (social gaming) and Winners); and
-- Corporate - includes shared and corporate functions such as
finance, legal and HR which are performed by the corporate centre
and the costs associated with being a listed business.
Under the previous basis of segmental reporting, direct costs
were allocated directly to each segment, and the remaining central
costs were allocated pro rata to gross profit. Under the new basis
only directly attributable costs sit in each business unit with a
re-charge across business units where services are provided to
another unit.
The new basis also aims to reflect more appropriately the fact
that Studios now runs a fully-integrated and scaleable technology
platform offering full gaming services and generating revenue from
both internal and external customers.
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The segmental analysis below also shows the prior year
comparative on the new segmental basis of reporting in order to aid
comparability.
Six months ended 30 bwin Games Studios Non-core Corporate Removal Total
June 2015 labels labels * of inter-segmental
EURmillion revenue
========================= ======= ======= ======= ======== ========= =================== =====
Net revenue 171.4 92.4 - - - - 263.8
Other revenue (external) 0.5 0.2 6.6 24.8 0.6 - 32.7
Other revenue (internal) - - 32.0 9.9 17.6 (59.5) -
Total revenue 171.9 92.6 38.6 34.7 18.2 (59.5) 296.5
Clean EBITDA 40.2 20.5 (10.7) 2.1 (4.8) - 47.3
* Segment includes EUR14.3m of revenue relating to assets
disposed of during the period
2. Segment information (continued)
Six months ended 30 bwin Games Studios Non-core Corporate Removal Total
June 2014 labels labels of inter-segmental
EURmillion revenue
========================= ======= ======= ======= ======== ========= =================== =====
Net revenue 188.8 107.0 - - - - 295.8
Other revenue (external) 0.1 0.2 6.6 14.4 - - 21.3
Other revenue (internal) - - 36.6 9.7 19.5 (65.8) -
Total revenue 188.9 107.2 43.2 24.1 19.5 (65.8) 317.1
Clean EBITDA 35.4 33.6 (9.6) (8.4) (4.6) - 46.4
Geographical analysis of total revenue
The following table provides an analysis of the Group's total
revenue by geographical segment:
2015 2014
Six months ended 30 June EURmillion EURmillion
========================= =========== ===========
Germany 71.2 79.3
United Kingdom 39.9 35.9
Other 185.4 201.9
Total revenue 296.5 317.1
3. Tax
Analysis of tax charge
2015 2014
Six months ended 30 June EURmillion EURmillion
========================================== =========== ===========
Current tax expense for the period 3.7 5.6
Deferred tax credit for the period (3.5) (12.1)
Income tax charge (credit) for the period 0.2 (6.5)
The current tax charge for the period is EUR3.7m (2014:
EUR5.6m). After allowing for deferred tax credits primarily
relating to the unwinding of provisions set up on acquisitions of
EUR3.5m, the total tax charge for the period is EUR0.2m (2014: tax
credit of EUR6.5m). There is no tax associated with other
comprehensive income.
The total (credit) expense for the period can be reconciled to
accounting profit (loss) as follows:
2015 2014
Six months ended 30 June EURmillion EURmillion
=============================================== =========== ===========
Profit (Loss) before tax 3.1 (100.5)
Tax at effective rate in Gibraltar at
10% (2014: 10%) 0.3 (10.1)
Effect of income not taxable and expenses
not allowable for tax purposes 1.2 2.9
Effect of deferred tax on acquired intangibles
and impairments (3.5) (12.1)
Effect of different tax rates applied
in overseas jurisdictions 2.2 3.3
Effect of impairment not allowed for tax
purposes - 9.5
Total income tax charge (credit) for the
period 0.2 (6.5)
The expenses not allowed for tax purposes are primarily
amortisation of intangible assets. Income not taxable includes the
release of the fair value tax liability and profits arising on
disposal of subsidiary operations.
3. Tax (continued)
Factors affecting the tax charge for the period
The Group's policy is to manage, control and operate Group
companies only in the countries in which they are registered. At
the period end there were Group companies registered in 23
countries including Gibraltar. However, the rules and practice
governing the taxation of eCommerce activity are evolving in many
countries. It is possible that the amount of tax that will
eventually become payable may differ from the amount provided in
the financial information.
Factors that may affect future tax charges
As the Group is involved in worldwide operations, future tax
charges will be affected by the level and mix of profitability in
different jurisdictions.
Future tax charges will be reduced by a deferred tax credit in
respect of amortisation and/or impairment of certain acquired
intangibles.
4. Earnings per Share ('EPS')
2015 2014
========= =========
Six months ended 30 June EUR cents EUR cents
========================= ========= =========
Basic EPS 0.4 (11.4)
Diluted EPS 0.4 (11.4)*
Basic Clean EPS 2.6 3.0
Diluted Clean EPS 2.5 3.0
* A diluted EPS calculation may not increase a basic EPS
calculation when the basic EPS is a loss.
Basic earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period, excluding
those held as own shares.
Diluted earnings per share
Diluted earnings per share is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the period,
excluding those held as own shares, and adjusted for the number of
potentially dilutive share options and contingently issuable
instruments.
Six months ended 30 June 2015 2014
===================================================== ===== ======
Basic EPS
Basic profit (loss) (EURmillion) 3.6 (92.8)
Weighted average number of ordinary shares (million) 822.5 810.5
Basic profit (loss) per ordinary share (EUR cents) 0.4 (11.4)
Basic Clean EPS
Clean earnings (EURmillion) 21.0 24.6
Weighted average number of ordinary shares (million) 822.5 810.5
Adjusted earnings per ordinary share (EUR cents) 2.6 3.0
Clean earnings per share
The performance measure of EPS used internally by management to
manage the operations of the business and remove the impact of
one-off and certain non-cash items is Clean EPS, which is
calculated before exchange differences, reorganisation expenses,
income or expenses that relate to exceptional items and non-cash
charges relating to share-based payments. Management believes that
this better reflects the underlying performance of the business and
assists in providing a clearer view of the fundamental performance
of the Group.
4. Earnings per Share ('EPS') (continued)
Clean net earnings excluding amortisation and impairments on
acquisitions attributable to equity shareholders is derived as
follows:
2015 2014
========== ==========
Six months ended 30 June EURmillion EURmillion
========================================================== ========== ==========
Profit (loss) for the purposes of basic and diluted
earnings per share being profit (loss) attributable
to equity holders of the parent 3.6 (92.8)
Reorganisation expenses 2.8 3.5
Merger and acquisition expenses 2.4 0.7
Retroactive taxes and associated charges 7.9 -
Exchange differences (2.7) 0.9
Share-based payments 4.8 5.6
Profit on disposal of assets held-for-sale (5.0) -
Release of fair value tax liability (4.9) -
Amortisation on acquired intangible assets 14.0 24.1
- Effect of deferred tax release thereon (1.9) (3.8)
Impairments on acquired intangible assets and goodwill - 94.7
- Effect of deferred tax release thereon - (8.3)
Clean earnings 21.0 24.6
2015 2014
Number Number
Six months ended 30 June million million
============================================================ ======== ========
Weighted average number of shares
Number of shares in issue as at 1 January 823.2 813.9
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Number of shares in issue as at 1 January held by
the Employee Trust (1.9) (3.1)
Weighted average number of shares issued during
the period 1.2 0.2
Weighted average number of shares purchased during
the period - (0.5)
Weighted average number of ordinary shares for the
purposes of basic earnings per share 822.5 810.5
Effect of potential dilutive share options and contingently
issuable shares 17.2 16.1
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 839.7 826.6
In accordance with IAS 33, the weighted average number of shares
for diluted earnings per share takes into account all potentially
dilutive equity instruments granted which are not included in the
number of shares for basic earnings per share above. Although the
unvested, potentially dilutive equity instruments are contingently
issuable, in accordance with IAS 33, the period end is treated as
the end of the performance period. Those option holders who were
employees at that date are deemed to have satisfied the performance
requirements and their related potentially dilutive equity
instruments have been included for the purpose of diluted EPS.
5. Intangible assets
Acquired
Goodwill intangibles Other intangibles Total
EURmillion EURmillion EURmillion EURmillion
========================================= ============= ============== =================== ===========
Cost or valuation
As at 1 January 2014 725.7 753.6 54.2 1,533.5
Acquired through business combinations 22.5 18.1 - 40.6
Additions - - 11.2 11.2
Exchange movements 3.0 (0.3) (0.1) 2.6
As at 30 June 2014 751.2 771.4 65.3 1,587.9
Adjustment on consideration of prior
business combinations (0.5) (0.1) - (0.6)
Additions - - 11.5 11.5
Disposals - - (1.4) (1.4)
Reclassification as assets held-for-sale (8.4) (13.9) (7.7) (30.0)
Exchange movements 4.6 3.9 0.3 8.8
As at 31 December 2014 746.9 761.3 68.0 1,576.2
Additions - - 10.4 10.4
Disposals - (0.2) (0.2)
Exchange movements 10.2 7.0 1.3 18.5
As at 30 June 2015 757.1 768.3 79.5 1,604.9
Amortisation
As at 1 January 2014 460.7 422.2 24.5 907.4
Charge for the period - 24.1 5.9 30.0
Impairment 19.7 59.4 15.6 94.7
Exchange movements - (0.3) (0.6) (0.9)
As at 30 June 2014 480.4 505.4 45.4 1,031.2
Charge for the period - 15.9 5.1 21.0
Impairment - - 1.2 1.2
Disposals - - (1.4) (1.4)
Reclassification as assets held-for-sale (7.8) (9.9) (7.5) (25.2)
Exchange movements 1.0 2.5 0.8 4.3
As at 31 December 2014 473.6 513.9 43.6 1,031.1
Charge for the period - 14.0 7.1 21.1
Disposals - - - -
Exchange movements 0.1 5.6 0.2 5.9
As at 30 June 2015 473.7 533.5 50.9 1,058.1
Carrying amounts
As at 30 June 2014 270.8 266.0 19.9 556.7
As at 31 December 2014 273.3 247.4 24.4 545.1
As at 30 June 2015 283.4 234.8 28.6 546.8
Acquired intangible assets primarily include customer lists,
customer relationships, brands and software. The fair value of
acquired intangibles is based on cashflow projections at the time
of acquisition. Customer lists from existing customers take into
account the expected impact of player attrition.
5. Intangible assets (continued)
Other intangibles primarily include development expenditure,
long-term gaming and intellectual property licences and purchased
domain names. Development expenditure represents software
infrastructure assets that have been developed and generated
internally. Licences are amortised over the life of the licences
and other intangibles are being amortised over their estimated
useful economic lives of between three and five years.
The Group regularly monitors the carrying value of its
intangible assets. A detailed review was undertaken at 31 December
2014 to assess whether the carrying value of assets was supported
by the net present value of future cashflows derived from those
assets using cashflow projections. The review concluded that no
impairments were required. The Board is not aware of any evidence
of impairment during the current period and therefore no
impairments have been recorded.
6. Trade and other receivables
As at As at
30 June 31 December
2015 2014
EURmillion EURmillion
================================ =========== ============
Payment service providers 26.6 32.4
Less: chargeback provision (1.4) (1.2)
Payment service providers - net 25.2 31.2
Prepayments 20.9 17.2
Derivative financial assets - 1.9
Other receivables 41.4 37.2
Current assets 87.5 87.5
Contingent consideration 10.9 10.6
Non-current assets 10.9 10.6
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair values, which is based
on estimates of amounts recoverable. The recoverable amount is
determined by calculating the present value of expected future
cashflows.
Provisions relate to chargebacks which are recognised at the
Directors' best estimate of the provision based on past experience
of such expenses applied to the level of activity.
Contingent consideration relates to amounts receivable for the
sale of Ongame and domain names. The non-discounted book values for
these amounts are EUR13.0m (2014: EUR12.4m) due later than one year
but not later than five years.
7. Trade and other payables
As at As at
30 June 31 December
2015 2014
EURmillion EURmillion
================================================== =========== ============
Contingent consideration 0.4 0.2
Derivative financial liabilities 1.2 -
Other payables 92.8 82.4
Current liabilities 94.4 82.6
Contingent consideration 4.4 4.5
Other payables 9.6 12.9
Later than one year but not later than five years 14.0 17.4
Non-current liabilities 14.0 17.4
7. Trade and other payables (continued)
Deferred and contingent consideration relates to amounts payable
in respect of previous acquisitions.
Other payables comprise amounts outstanding for trade purchases
and other on-going costs. The carrying amount of other payables
approximates to their fair value which is based on the net present
value of expected future cashflows.
The amount due for deferred and contingent consideration is
recognised at fair value.
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The non-discounted book values for the contingent consideration
are as follows:
Contingent consideration Other payables
As at As at As at As at
30 June 31 December 30 June 31 December
2015 2014 2015 2014
EURmillion EURmillion EURmillion EURmillion
================================== =============== ============ =========== ============
Within one year 0.5 0.2 93.0 83.3
Later than one year but not later
than five years 5.5 5.6 10.2 14.1
6.0 5.8 103.2 97.4
8. Loans and borrowings
As at As at
30 June 31 December
2015 2014
EURmillion EURmillion
================================== ========== ========== ============= ============
Secured bank facilities - 31.8
Current liabilities - 31.8
Secured bank facilities 62.2 25.1
Later than one year but not later
than five years 62.2 25.1
Non-current liabilities 62.2 25.1
Bank borrowings are recognised at fair value and subsequently
carried at amortised cost based on their effective interest rate.
The discount rate applied was 3.76% (31 December 2014: 5.26%).
In June 2015 the previous borrowing facilities were consolidated
with the lender into a revolving credit facility including
extending the maturity date. Principal terms and the debt repayment
schedule of loans and borrowings before amortisation are as
follows:
Loan drawn Nominal Year of
As at 30 June 2015 Total facility down rate maturity Security
================== ================ ============= =========== ========= ===========================
The Royal Bank of GBP75 million GBP45 million 3 months 2018 Floating charge over
Scotland plc LIBOR plus the assets of several
2.50% of the Group's significant
subsidiary undertakings
GBP5
================== ================ ============= =========== ========= ===========================
As at 31 December Loan drawn Nominal Year of
2014 Total facility down rate maturity Security
================= ================ ============= =========== ========= ===========================
The Royal Bank of GBP25 million GBP25 million 3 months 2015 Floating charge over
Scotland plc LIBOR plus the assets of Cashcade
3.25% Limited and its subsidiary
undertakings
The Royal Bank of GBP50 million GBP20 million 3 months 2016 Floating charge over
Scotland plc LIBOR plus the assets of various
3.00% of the Group's subsidiary
undertakings
8. Loans and borrowings (continued)
The maturity analysis of loans and borrowings, including
interest and fees, is as follows:
As at As at
30 June 31 December
2015 2014
EURmillion EURmillion
================================================== =========== ============
Within one year 2.0 34.3
Later than one year and not later than five years 68.3 26.6
70.3 60.9
9. Provisions
Retroactive
taxes and
associated
charges Onerous contracts Total
EURmillion EURmillion EURmillion
======================================== =========== ================= ===========
As at 1 January 2015 - - -
Charged to the profit or loss 7.9 8.3 16.2
Current liabilities as at 30 June 2015 7.9 8.3 16.2
As at 1 January 2015 - - -
Charged to the profit or loss - 3.1 3.1
Non-current liabilities at 30 June 2015 - 3.1 3.1
Onerous contracts relate to provisions made against the future
costs of contracts where the future economic benefits received by
the Group are less than the costs involved with fulfilling the
remaining terms and conditions of the contracts and are recognised
at the Directors' best estimate based on their knowledge of the
markets of the countries involved. The provision arose as a result
of the disposal of WPT as per note 13.
As a result of ordinance being enacted within Romania, all
gaming operators that have accepted online bets from players in
Romania prior to being licensed to pay retroactive taxes. The
provision for retroactive taxes has been recognised at the
Director's best estimates although the terms of settlement for the
associated charge are still uncertain.
The amounts due for provisions are recognised at fair value
based on the above and carried at the best estimate of the
provision. Due to the short-term nature of the provisions, no
discounting has been applied.
10. Deferred tax
EURmillion
============================================================== ==========
As at 1 January 2014 36.9
Exchange differences 0.1
Acquired through business combinations 3.5
Credited to condensed consolidated statement of comprehensive
income (3.8)
Credited on impairment of intangible fixed assets (8.3)
As at 30 June 2014 28.4
Exchange differences 0.1
Credited to condensed consolidated statement of comprehensive
income (1.3)
As at 31 December 2014 27.2
Exchange differences 0.2
Charged to condensed consolidated statement of comprehensive
income 0.6
Credited to condensed consolidated statement of comprehensive
income (3.2)
As at 30 June 2015 24.8
10. Deferred tax (continued)
Deferred tax relates primarily to temporary timing differences
arising from fair value adjustments of acquired intangibles.
11. Contingent liabilities
From time to time the Group is subject to legal claims and
actions against it. The Group takes legal advice as to the
likelihood of success of such claims and actions.
As part of the Board's ongoing regulatory compliance process,
the Board continues to monitor legal and regulatory developments
and their potential impact on the business and takes appropriate
advice in respect of these developments.
Indirect taxation
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Group companies may be subject to VAT on transactions which have
been treated as exempt supplies of gambling, or on supplies which
have been zero rated for export to Gibraltar where legislation
provides that the services are received or used and enjoyed in the
country where the service provider is located. Revenues earned from
customers located in any particular jurisdiction may give rise to
further taxes in that jurisdiction. If such taxes are levied,
either on the basis of current law or the current practice of any
tax authority, or by reason of a change in the law or practice,
then this may have a material adverse effect on the amount of tax
payable by the Group or on its financial position. Where it is
considered probable that a previously identified contingent
liability will give rise to an actual outflow of funds, then a
provision is made in respect of the relevant jurisdiction and
period impacted. Where the likelihood of a liability arising is
considered remote, or the possible contingency is not material to
the financial position of the Group, the contingency is not
recognised as a liability at the balance sheet date.
Litigation
As a consequence of the as yet non-harmonised regulatory
environment for online gaming in Europe, a number of civil and
administrative proceedings are pending against the Group and/or its
board members in several countries (including but not limited to
Germany, Portugal and Spain) aimed at preventing bwin.party from
offering its services in these countries.
On 16 October 2014, the Portuguese Supreme Court confirmed a
ruling of the Oporto Court of First Instance of September 2011
against Liga Portuguesa de Futebol Profissional ('Liga'),
bwin.party digital entertainment plc and bwin.party services
(Gibraltar) Ltd ('bwin.party'). In this initial ruling the first
instance Court had (i) declared the (meanwhile already terminated)
sponsorship agreement between bwin.party and the Liga as illegal,
(ii) declared bwin.party's gaming offer and advertising measures as
illegal in Portugal, (iii) prohibited bwin.party to exploit mutual
bets and lottery games in Portugal and to carry out any form of
publicity or promotion of the website bwin.com, (iv) imposed on the
defendants pecuniary sanctions of (A) EUR50,000 for each day the
infraction lasts, payable to the Portuguese Casino Association
('APC') and (B) EUR50,000 for each infraction, payable to Santa
Casa da Misericórdia de Lisboa, and (v) ordered the publishing of
the ruling and the notification of Portuguese media
organisations.
Following the initial first instance ruling, the Liga and
bwin.party already took measures in order to comply with the
decision. However, it cannot be ruled out that certain activities
may still be considered as violation of the ruling.
In June 2012, APC initiated enforcement proceedings against the
Liga and bwin.party, requesting the payment of pecuniary sanctions
in the total amount of EUR6.35 million for the alleged violation of
the first instance court judgment during the period between 24
September 2011 and 31 January 2012. The Liga and bwin.party remain
firmly of the view that such enforcement action is without merit.
In June 2012, the Oporto enforcement court dismissed APC's
enforcement claim for lack of enforceability. APC filed an appeal
against this decision, which the appellate enforcement court
granted on 25 November 2014 and decided that pecuniary sanctions
were enforceable at the time APC initiated the enforcement
proceeding without assessing the enforcement case on its merits. On
29 May 2015, the Supreme Court rejected the appeal submitted by the
Liga solely on formal admissibility grounds and the Liga
subsequently filed a petition requesting that the case be presided
over by a chamber of three judges of the Supreme Court. Despite the
petition pending at the Supreme Court on the formal question of
enforceability, the enforcement proceedings initiated by APC may be
continued before the Oporto enforcement court, where the Liga and
bwin.party will submit their defence arguments.
11. Contingent liabilities (continued)
In July 2012, the Spanish gaming operator Codere Apuestas S.A.
('Codere') filed an unfair competition complaint against various
bwin.party group companies. Prior to this complaint, the Spanish
Court rejected Codere's request for a preliminary injunction. The
complaint filed by Codere seeks damages in the amount of approx.
EUR25 million. On 10 July 2014, the Court issued the ruling
dismissing Codere's claim and all of its petitions. On 16 October
2014, Codere filed an appeal against the ruling of first
instance.
On 28 February 2014, bwin.party digital entertainment plc
received a claim filed at the District Court of Limassol by Rodolfo
Odoni against Nomato Investments Limited ('Nomato') and six other
defendants, including bwin.party digital entertainment plc and BAW
International Limited (now bwin.party services (Gibraltar)
Limited). Among other things, Mr. Odoni seeks damages in the amount
of EUR6.9 million or 30% of realised profits in Nomato since 29
June 2005 and a declaration that he holds 30% of the shares in
Nomato. As the documents were not served to bwin.party digital
entertainment plc and bwin.party services (Gibraltar) Limited in
accordance with EU-Regulation 1393/2007/EC on the service of
documents and not all documents had been translated into English,
bwin.party refused to accept the service according to the rights
granted under the EU-Regulation. Local counsel filed a conditional
appearance to prevent a default judgment and an application to set
aside service and/or strike out the action, which the court
assessed in the oral hearing of 5 February 2015. The court has not
yet set a date for its decision on the formal issues.
No provision has been made for contingent liabilities relating
to the above detailed claims. The Directors do not consider that
there are any other contingent liabilities requiring
disclosure.
12. Related parties
Group
Transactions between Group companies have been eliminated on
consolidation and are not disclosed in this note.
Directors and key management
Key management are those individuals who the Directors believe
have significant authority and responsibility for planning,
directing and controlling the activities of the Group. The
aggregate short-term and long-term benefits, as well as share-based
payments of the Directors and key management of the Group are set
out below:
2015 2014
Six months ended 30 June EURmillion EURmillion
========================= =========== ===========
Short-term benefits 3.0 3.5
Share-based payments 1.5 1.9
Termination benefits - 0.5
4.5 5.9
An interest bearing loan to a former Board member of EUR3.1m was
repaid during the period. The Group held an investment in a fund of
EUR2.0m for whom this former Board member was a partner. The value
of the fund remained flat in the period.
One director has a loan with the Group of EUR3.1m with interest
accrued. The Group holds certain guarantees against this loan and
believes the amounts to be fully recoverable.
One director has previously made a deposit into a customer
account with InterTrader with a balance as at 30 June 2015 of
EURnil (2014: EUR2.3m). The director is a director and shareholder
of a company that provides investment advisory services to a fund
for which InterTrader Limited is the broker. InterTrader earned
commissions of EUR16,200 (2014: EURnil) in the period and the fund
had a balance of EUR3,530,681 deposited with InterTrader as at 30
June 2015.
In 2014 and 2015 a furnished property was leased to two separate
members of key management at an annual lease rental of EURnil for
which the fair rental value of the property was EUR42,100.
12. Related parties (continued)
Short-term interest free loans totalling EUR135,800 have been
advanced to members of key management personnel. These amounts are
being repaid on a short-term basis. The balance of loans
outstanding at 30 June 2015 was EUR35,200 and is expected to be
fully recoverable.
The Group purchased certain advertising services of EUR0.5m from
a company that has a non-controlling interest in a Group subsidiary
with amounts owed at 30 June 2015 of EUR0.2m.
The Group purchased certain customer services of EUR1.4m from an
associate, with amounts owed at 30 June 2015 of EUR0.2m.
The Group purchased certain rights to broadcast licensed media
of EUR1.8m from a joint venture, with amounts prepaid at 30 June
2015 of EUR2.6m.
13. Disposals during the period
On 24 June 2015, the Group sold the World Poker Tour ('WPT')
business to Ourgame International Holdings ('Ourgame') for
consideration of EUR31.8m in cash paid during the period and
further working capital adjustments of EUR0.9m. This business had
been carried within the balance sheet as held-for-sale.
The value of the underlying identifiable assets and liabilities
sold, the sale consideration and the profit on disposal were as
follows:
EURmillion
================================================= ============
Non-current assets
Intangible assets 4.4
Property, Plant and equipment 1.7
Current assets
Trade and other receivables 20.4
Cash and cash equivalents 1.3
Current Liabilities
Trade and other payables (3.4)
Client liabilities and prize pools (0.2)
Reserves
Currency reserve reclassified to profit or loss (8.2)
Net movement in assets 16.0
Net cash received 31.8
Working capital adjustment 0.9
Onerous contract arising on disposal (11.4)
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Fair value receivable 21.3
================================================= ============
Profit on disposal 5.3
The group has disposed of certain other non-core assets during
the period from those assets held-for-sale realising a loss of
EUR0.3m.
14. Dividends
In line with our progressive dividend policy, the Board has
declared a half year dividend of 1.92 pence per Ordinary share
(2014: 1.89 pence) representing a 2% increase over the same period
in the prior year. The half year dividend will be payable to
shareholders and depositary interest holders on the register of
shareholders and register of depositary interest holders
respectively on 11 September 2015 (the 'Record Date'). It is
expected that dividends will be paid on 9 October 2015.
Shareholders wishing to receive dividends in Euros rather than
Pounds Sterling will need to register a currency election with
bwin.party's registrars on or before 18 September 2015. A separate
announcement regarding the dividend payment has been issued
today.
15. Events after the balance sheet date
On 8 July 2015 the Group acquired the 28% minority interest
holding in its French subsidiary BES S.A.S for EUR8.9m following
the exercise of a committed contractual option by the ex-minority
holder.
Independent review report to bwin.party digital entertainment
plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2015 which comprises the condensed
consolidated statement of comprehensive income, the condensed
consolidated statement of financial position, the condensed
consolidated statement of changes in equity, the condensed
consolidated statement of cashflows and related notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed consolidated set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority and for no other purpose. No person is entitled
to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms
of engagement or has been expressly authorised to do so by our
prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity', issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and 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.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2015 is not prepared, in all material respects, in accordance
with International Accounting Standard 34, as adopted by the
European Union, and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
BDO LLP
Chartered Accountants and Registered Auditors
55 Baker Street
London W1U 7EU
United Kingdom
28 August 2015
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
APPENDIX
Regulatory overview
Europe
There have been a number of developments at a European level
over the past few months. As well as the launch of the European
Commission's Digital Single Market strategy on 6 May 2015 and the
publication by PWC of a study into the merits and benefits of
enhanced administration cooperation between Member States1, the
4(th) Anti-Money Laundering Directive came into force on 25 June
2015 and Member States will need to transpose the directive into
national law by 26 June 2017.
On infringement proceedings, probably the most significant
development from the industry's point of view was the European
Commission's Pilot Letter that was sent to Germany (see below). It
is not expected that there will be a further update on
infringements until after the 2015 summer break.
The Swedish Government's reaction to being the first country to
be referred to the Court of Justice of the European Union ('CJEU')
was to initiate reform of its gambling framework. However,
political turmoil has meant that a new framework is not expected to
be in place until late 2017. Current estimates are that a ruling
from the CJEU will not be made before 2016.
Germany (27% of net revenue in H1 2015)
Despite 1 July 2015 having marked the third anniversary of the
Amended Interstate Treaty on Gambling coming into force, no sports
betting licences have yet been issued and the regulatory process
appears to be in a state of disarray. Having been informed that
bwin.party was one of the 20 operators to be awarded a sports
betting licence under the Amended Interstate Treaty, the licensing
procedure remains on hold pending the outcome of a series of legal
actions initiated by unsuccessful applicants that are seeking to
challenge the selection of licencees by the Ministry of the
Interior of Hesse. The Administrative Court of Wiesbaden voiced
harsh criticism of the licensing process in several cases, finding
that the licensing process was in fact illegal. The Hesse Ministry
has appealed these cases.
The German Federal Court announced on 7 May 2015 that it would
not be taking a decision on the legality of the system of
prohibiting, subject to licences, online sports betting and casino
under the Amended Interstate Treaty, but would rather rule on it in
a case that is due to be heard during the fourth quarter of 2015.
Furthermore, the German licensing procedure is again under scrutiny
of the CJEU in a case referred from Sonthofen, in particular
questioning the German licensing procedure's adherence to the
transparency criteria under EU law. The oral hearing before the
CJEU took place on 10 June 2015. The CJEU's Advocate General has
announced to issue his Opinion on 17 September 2015. A decision in
this case is not expected before the end of 2015/early 2016.
End of June 2015, further criticism to the Amended Interstate
Treaty was added by the European Commission's Pilot Letter (the
first step in a formal infringement procedure). In its Pilot
Letter, the European Commission criticises the consistency of
German legislation, the long duration of the licensing procedure
and asks the German authorities how they intend to end the state
monopoly that is currently still in force.
United Kingdom (13% of net revenue in H1 2015)
The Group has been operating under the new regulatory regime
since the end of 2014 and we received our full licence in May 2015.
Following the introduction of a so-called 'point of consumption
tax' on 1 January 2015, a legal challenge to the compliance of the
new tax with EU law has resulted in the High Court referring the
case to the CJEU. There is no indication as yet on when this case
might be heard.
Italy (8% of net revenue in H1 2015)
A process to revise the existing regulatory framework for gaming
is currently underway. The so-called empowering act (legge delega),
among other things, is expected to result in some restrictions on
marketing but also a change to the current tax on turnover for
sports betting and poker tournaments to a tax on gross gaming
revenue which should prove to be beneficial for operators. Whilst
the timing of such a change remains unclear, it is expected that
the process for its implementation will resume later this year.
France (5% of net revenue in H1 2015)
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According to ARJEL, the French regulator, online sports betting
gross gaming revenues in France grew 7% in the second quarter of
2015 to EUR63m (Q2 2014: EUR59m) while poker continued to decline
by 2% to EUR56m(2) . The continued declines in poker have prompted
calls for a number of changes to the current regulatory regime by
ARJEL, including opening up the French poker market to allow
pooling with other international markets and the introduction of
measures to make it easier for ARJEL to block non-licensed
operators from accessing French consumers. It is expected that a
bill on eCommerce will be debated in the autumn of 2015 that will
consider these and other amendments to the existing regulatory
framework.
Spain (5% of net revenue in H1 2015)
According to data from the Spanish regulator3, in terms of gross
gaming revenue the total online gaming market grew by 26% in the
first quarter of 2015 versus the same period the previous year.
This was driven by sports betting that grew by 56%. Casino grew GGR
by 39% while poker declined by 14% and bingo was broadly flat. A
new decree on advertising, responsible gambling and supervision was
issued by the regulator earlier this year for consultation and the
industry is waiting to see the final version to see what impact, if
any it may have on the shape and trajectory of the Spanish
market.
Belgium (3% of net revenue in H1 2015)
bwin.party was one of seven operators approved to offer live
dealer games in February 2015 by the Belgian authorities that are
continuing to contest the basis of an infringement notice issued by
the European Commission. What next steps might be taken on either
side remains unclear.
Denmark (<1% of net revenue in H1 2015)
According to the latest figures from the Danish regulator4, the
market in Denmark is estimated to have grown by 13% in the second
quarter of 2015. While sports betting grew by 6%, casino grew by
24% while poker was flat. Danske Spil, our local partner, remains
the market leader.
As ever, there are a number of countries across the EU that are
at various stages of transition in terms of their move to a
regulatory framework for online gaming with several proposed
regulations currently being considered. The exact details of such
proposals and whether or not they can become law and when remains
uncertain.
United States (New Jersey: 1% of net revenue in H1 2015)
New Jersey remains the largest regulated market in the US and
during the first half of 2015 total gross gaming revenues grew by
14% to $72.0m. While casino revenues grew by 29%, poker revenues
declined by 26% with the result that casino now represents
approximately 82% of the total.
Elsewhere, in Pennsylvania, a bill containing very high tax
rates and a large licensing fee, has attracted criticism from a
number of operators who argue that such a regime would prove
unworkable.
In California, while AB431 passed out of committee and also
successfully was voted out of the Assembly Appropriations
Committee, areas of disagreement remain on several issues including
'bad actors' as well as whether or not racetracks would be eligible
to offer online poker.
In New York, an online poker bill has been introduced but is not
expected to make much progress in the current legislative session.
With a proposed 15% tax on gross gaming revenue, we are working
with our partners to ensure that we are able to access this market
should suitable legislation be enacted.
Glossary
'888' 888 Holdings plc
'Active player days' aggregate number of days in the
given period in which active
players have contributed to rake
and/or placed a wager. This can
be calculated by multiplying
average active players by the
number of days in the period
'active player' or 'active real in relation to the Group's products,
money' a player who has contributed
to rake and/or placed a wager
'average active players' or the daily average number of players
'Daily average players' who contributed to rake and/or
placed a wager in the given period.
This can be calculated by dividing
active player days in the given
period, by the number of days
in that period
'B2B' business-to-business
'B2C' business-to-consumer
'Board' or 'Directors' the Directors listed on the Company's
website, www.bwinparty.com
'bwin' bwin Interactive Entertainment
AG, its subsidiaries and its
associated companies
'bwin labels' Labels operated within the bwin
segment including bwin and Gamebookers
'bwin.party' bwin.party digital entertainment
plc, the name of the Group formed
by the Merger of PartyGaming
Plc and bwin Interactive Entertainment
AG
'bwin.party Shares' the Company's existing Shares
and the new shares issued to
the bwin shareholders in conjunction
with the completion of the merger
'Cashcade' Cashcade Limited and its subsidiaries
'Clean EBITDA and 'Clean EPS' EBITDA adjusted for exchange
differences, reorganisation expenses,
income or expenses that relate
to exceptional items, and non-cash
charges relating to impairments
and share-based payments (see
reconciliation of Clean EBITDA
to operating profit/(loss) and
reconciliation of Clean EPS to
Basic EPS within this release)
'Company' or 'PartyGaming' or PartyGaming Plc prior to completion
'bwin.party' of the Merger and bwin.party
digital entertainment plc ('bwin.party')
after the merger
'EBITDA' earnings before interest, tax,
depreciation and amortisation
'Employee Trust' the bwin.party Shares Trust,
a discretionary share ownership
trust established by the Company
in which the potential beneficiaries
include all of the current and
former employees and self-employed
consultants of the Group
'Foxy Bingo' www.foxybingo.com, one of Europe's
largest active bingo sites that
was acquired as part of the purchase
of Cashcade
'FTSE4good Index Series' a benchmark of tradeable indices
for responsible investors. The
index is derived from the globally
recognised FTSE Global Equity
Index Series
'Games labels' Labels operated within the Games
segment including partycasino,
partypoker, Foxy Bingo, Gioco
Digitale and the Group's US B2C
operations
'Gioco Digitale' www.giocodigitale.it, one of
the Group's principal bingo websites
'gross win margin' gross win as a percentage of
the amount wagered
'gross win' customer stakes less customer
winnings
'gross gaming revenue' or 'GGR' gross win added to rake
'Group' or 'bwin.party Group' the Company and its consolidated
subsidiaries and subsidiary undertakings
'GVC' GVC Holdings PLC
'IAS' International Accounting Standards
'IASB' International Accounting Standards
Board
'IFRS' International Financial Reporting
Standards
'InterTrader' Our financial markets service,
formerly known as PartyMarkets.com
'Kalixa' The Group's payments business
'KPIs' Key Performance Indicators such
as active player days and yield
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