26 March
2024
THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION
FOR IMMEDIATE RELEASE
888 Holdings
Plc
("888" or "the
Group")
FY2023 Results and Value
Creation Plan
Clear strategy for success
and enhanced leadership team sets foundations for future
sustainable profitable growth
New Group identity,
strategic framework and Value Creation Plan
unveiled
888 (LSE: 888), one of the world's
leading betting and gaming companies with internationally renowned
brands including William Hill, 888 and Mr Green, today announces
its audited financial results for the year ended 31 December 2023
("FY23" or the "Period").
|
Reported
|
Pro
forma1
|
£
millions
|
2023
|
2022
|
YoY%
|
2023
|
2022
|
YoY%
|
|
|
|
|
|
|
|
Revenue
|
1,710.9
|
1,238.8
|
+38%
|
1,710.9
|
1,850.1
|
-8%
|
Adjusted
EBITDA2
|
308.3
|
217.9
|
+41%
|
308.3
|
310.6
|
-1%
|
Adjusted profit after
tax2
|
48.1
|
64.2
|
-25%
|
|
|
|
Loss after tax
|
(56.4)
|
(120.6)
|
-53%
|
|
|
|
Adjusted earnings per share
(p)2
|
10.7
|
15.1
|
-29%
|
|
|
|
Earnings per share (p)
|
(12.6)
|
(28.3)
|
-55%
|
|
|
|
|
|
|
|
|
|
|
Financial summary:
·
FY23 financial performance in-line with January
2024 Post-Close Trading Update:
· Revenue of £1,711m with higher quality mix driven by
proactive mix shift away from dotcom markets and customer mix
changes in the UK as a result of additional safer gambling
measures, alongside the change in the Group's marketing approach to
focus more on sustainable revenue and profitability.
· Adjusted
EBITDA Margin for FY23 of 18.0%, consistent with the previously
indicated range of 18-19% and an increase from 16.8% in FY22 as
improved profitability and focus on higher return marketing spend
more than offset the impact of dotcom market changes.
· Cash
(excluding customer balances) as at 31 December 2023 of £128m,
together with undrawn RCF of £150m, giving total liquidity of
approximately £278m as at 31 December 2023. Net debt fell slightly
to £1,717m, partially benefitting from FX movements, resulting in
an adjusted net debt / EBITDA ratio of 5.6x, stable year over
year.
New Value Creation Plan ("VCP") - A strategy for
success:
· Appointment of
Per Widerström as Chief Executive Officer in October 2023, with
swift and decisive actions taken to position the Group for long
term success.
· Strengthened
executive team with outstanding skills and experience to drive
execution - seven out of 10 positions are new appointments. Further
to the January 2024 Post Close Trading Update the Group appointed
Mark Kemp as Chief Commercial Officer and Stephen Sheridan as Chief
Customer & Operating Officer in March 2024.
· Group operating model reset, removing duplication and
inefficiencies while enhancing accountability, as well as
delivering approximately £30m of additional annual cost
savings.
·
New strategic framework established, with a clear
vision of what success looks like and the strategy to get there. As
part of this the Group has commenced six strategic initiatives to
drive operational excellence and prepare the business for
step-change value creation. Through a laser focus on execution the
Group will strengthen its core capabilities and competitive
advantages, creating a stronger platform for profitable
growth.
·
Simplified market archetypes to two categories:
Core Markets (UK, Italy, Spain, and Denmark) with in-country scale
and market-leading positions, and Optimise Markets. This supports
greater focus and investment in markets where the Group will
generate strong returns while maximising cash-flow from all
markets.
· In
line with this market focus, strategic review of the US B2C
business initiated in Q1 2024 to consider all potential
alternatives that can deliver value for the business, which will
deliver significant cost savings.
·
Proposed change of the Group's name to evoke plc,
subject to shareholder approval at the 2024 AGM, to better reflect
the strength of the Group's multi-brand operating model and its
vision and mission to make life more interesting by delighting
players with world-class betting and gaming
experiences.
VCP will drive high equity returns with strong execution
enhanced by reducing leverage:
·
Bold new medium-term targets to deliver high
return on equity from sustainable profitable growth:
· Drive profitable and sustainable revenue growth: 5-9% revenue
growth per year.
· Improve profitability and efficiency through operating
leverage: Adjusted EBITDA margin expansion of c.100 basis points
per year.
· Deleverage through disciplined capital allocation: leverage
of below 3.5x by the end of 2026.
Current trading and outlook:
·
Q1 2024 revenue expected to be in the range of
£420-430m3.
·
Positive outlook for FY24 revenue consistent with
medium-term targets, with consistent growth in active players
driving confidence in strong revenue growth online in both the UK
and International segments.
·
Trading is consistent with the Board's previously
announced expectations for Adjusted EBITDA for
20244.
Per Widerström, CEO of 888, commented:
"It is incredibly exciting to announce our Value Creation
Plan, our strategy for success, our new financial targets, and our
new corporate identity. Today marks the beginning of an exciting
new dawn for this business.
Having joined the company in October 2023 my conviction in
the significant opportunity for the Group is stronger than
ever. We have acted with pace, decisiveness and urgency to build a
clear strategy to deliver success. These actions
include significantly strengthening
our executive leadership team and developing a new strategic
framework and Value Creation Plan.
I firmly believe that the Group now has all the key
ingredients for long-term success: leading
positions in
growing markets with high and rising barriers to entry; powerful
proprietary technology; a top-class management team; and some of
the strongest betting and gaming brands in the
world.
We are now clear on what success looks like, we have the team
and capabilities to deliver, and I am confident that the execution
of our plan will deliver a high return on equity from sustainable
profitable growth, enhanced by
deleveraging."
Sell side analyst and investor presentation
Per Widerström (Chief Executive
Officer), Sean Wilkins (Chief Financial Officer), and Vaughan Lewis
(Chief Strategy Officer) will host a presentation for sell-side
analysts and investors today at 08.45am (GMT).
Live audio webcast link:
https://brrmedia.news/888FYR23
To register to attend in-person or
participate in Q&A please contact 888@hudsonsandler.com
or call +44 (0)207 796 4133 for further
details.
A replay will be available on our
website shortly after: https://corporate.888.com/investors
Notes
1 FY22 is pro-forma as if 888
had owned William Hill for the entire period (acquisition completed
1 July 2022) and excludes the 888 bingo business (sold in July
2022).
2 Adjusted EBITDA is defined
as earnings before interest, tax, depreciation and amortisation,
and excluding share based payment charges, foreign exchange losses
and exceptional items and other defined adjustments. Adjusted
measures, including Adjusted EBITDA, are alternative performance
measures ("APMs"). These APMs should be considered in addition to,
and are not intended to be a substitute for, IFRS measurements. As
they are not defined by International Financial Reporting
Standards, they may not be directly comparable with other
companies' APMs. The Directors believe these APMs provide
additional useful information for understanding performance of the
Group. They are used to enhance the comparability of information
between reporting periods and are used by management for
performance analysis and planning. An explanation of our adjusted
results, including a reconciliation to the statutory results is
provided in the CFO report.
3 Assumes normalised win
margins for the remainder of the quarter.
4 17 January 2024 Post Close
Trading Update outlined expectations for 2024 Adjusted EBITDA to be
approximately £340m.
Enquiries and further information:
888 Holdings Plc
|
+44(0) 800 029 3050
|
Per Widerström, CEO
Sean Wilkins, CFO
Vaughan Lewis, Chief Strategy
Officer
|
|
Investor Relations
James Finney, Director of
IR
Media
|
ir@888holdings.com
888williamhill@hudsonsandler.com
|
Hudson Sandler
Alex Brennan / Charlotte Cobb /
Andy Richards
|
+44(0) 207 796 4133
|
About 888 Holdings Plc:
888 Holdings plc (and together
with its subsidiaries, "888" or the "Group") is one of the world's
leading betting and gaming companies. The Group owns and operates
internationally renowned brands including William Hill, 888, and Mr
Green. Incorporated in Gibraltar, and headquartered and listed in
London, the Group operates from offices around the
world.
The Group's vision is to make life
more interesting and its mission is to delight players with
world-class betting and gaming experiences.
Find out more at:
http://corporate.888.com/
Important Notices
This announcement may contain
certain forward-looking statements, beliefs or opinions, with
respect to the financial condition, results of operations and
business of 888. These statements, which contain the words
"anticipate", "believe", "intend", "estimate", "expect", "may",
"will", "seek", "continue", "aim", "target", "projected", "plan",
"goal", "achieve", words of similar meaning or other forward
looking statements, reflect 888's beliefs and expectations and are
based on numerous assumptions regarding 888's present and future
business strategies and the environment 888 will operate in and are
subject to risks and uncertainties that may cause actual results to
differ materially. No representation is made that any of these
statements or forecasts will come to pass or that any forecast
results will be achieved. Forward-looking statements involve
inherent known and unknown risks, uncertainties and contingencies
because they relate to events and depend on circumstances that may
or may not occur in the future and may cause the actual results,
performance or achievements of 888 to be materially different from
those expressed or implied by such forward looking statements. Many
of these risks and uncertainties relate to factors that are beyond
888's ability to control or estimate precisely, such as future
market conditions, currency fluctuations, the behaviour of other
market participants, the actions of regulators and other factors
such as 888's ability to continue to obtain financing to meet its
liquidity needs, changes in the political, social and regulatory
framework in which 888 operates or in economic or technological
trends or conditions. Past performance of 888 cannot be relied on
as a guide to future performance. As a result, you are cautioned
not to place undue reliance on such forward-looking statements. The
list above is not exhaustive and there are other factors that may
cause 888's actual results to differ materially from the
forward-looking statements contained in this announcement.
Forward-looking statements speak only as of their date and 888, its
respective parent and subsidiary undertakings, the subsidiary
undertakings of such parent undertakings, and any of such person's
respective directors, officers, employees, agents, affiliates or
advisers expressly disclaim any obligation to supplement, amend,
update or revise any of the forward-looking statements made herein,
except where it would be required to do so under applicable law. No
statement in this announcement is intended as a profit forecast or
a profit estimate and no statement in this announcement should be
interpreted to mean that the financial performance of 888 for the
current or future financial years would necessarily match or exceed
the historical published for 888.
CHIEF EXECUTIVE OFFICER'S
REVIEW
Introduction
I am pleased to take this
opportunity in my first statement as CEO of the Group to write to
our stakeholders and outline our vision for the future, including
our new strategic framework and exciting value creation
plan.
The world of betting and gaming has
changed significantly over the past decade. There has been a
continued push towards local regulation and ever-increasing
barriers to entry through significant compliance requirements. This
is coupled with rapid technological advancements fundamentally
changing the way customers interact with our products and
brands.
What that means today is that for
those businesses seeking to follow the locally regulated path,
scale is critical. It is why industry consolidation continues at
pace and was a key strategic benefit of 888 acquiring William Hill
in 2022. Outsized returns also accrue to those operators that take
leading positions within target markets. To build leading
positions, operators need first-class brands, leading products, and
excellent people. Our business has these key ingredients for
success, but it has yet to unlock its full potential, in part
because of the significant impact of regulatory and compliance
changes we have made in the past two years.
Renewed focus and a new identity
The regulatory and compliance
changes we have made in recent years in some of our key regulated
markets as well as in our dotcom markets have changed the mix of
our business. As a result of this, coupled with the integration
activities undertaken to date, the combined business today is
fundamentally different to the previous individual businesses that
made up the combination.
The consumer brands remain as strong
as ever, but to reflect the fact that this is a new company on a
new journey, we are proposing to change the name of the Group to
evoke plc. This will be subject to shareholder approval at our
upcoming 2024 AGM.
We look forward to sharing more
about our new corporate brand in due course, but we believe that
creating an identity that better reflects the combined Group, our
mission and values, alongside the clear strategic framework and
value creation plan we are announcing today, will better support
the business in reaching its significant potential.
Moving forward, creating value through clarity of what
success looks like
In order for the business to achieve
its full potential, as well as having a clear Group-wide vision and
mission to explain why we
are here, it is critical that everyone in the Company has absolute
clarity on what success looks like, including what we plan to do, how we will execute our plans, and
where we intend to focus
in order to maximise our returns.
That's why since joining the
business on 16 October 2023 I have made rapid progress in
formulating our strategic framework, translating this into a value
creation plan, and ensuring that everyone in the business is fully
aligned behind it through our One Company programme.
Creating
value
Starting with what we will do; we will deliver high
return on equity underpinned by the following key
principles:
1.
Driving profitable and
sustainable revenue growth. We will deliver profitable and
sustainable revenue growth by both increasing our player base and
by growing share of wallet with our customers. We will utilise our
improved customer lifecycle management capabilities to ensure
strong sustainable revenues, always underpinned by a clear customer
value proposition and our uncompromising safer gambling
principles.
2.
Improving profitability and
efficiency through operating leverage. We will improve
profitability by investing into capability build up, in particular
through insights, AI, and intelligent automation. Along with our
'Glocal' operating model and supported by our proprietary
technology, this will increase our efficiency and deliver greater
productivity at lower cost, ensuring that the operating leverage in
our business model delivers profitable growth.
3.
Being highly disciplined with our
use of capital. Our financial leverage is relatively high in
the context of our sector, but I firmly believe this will be a
significant positive driver of our return on equity and will
magnify the returns that we will generate in the coming years. Our
business is highly cash generative and we will use this cash wisely
to ensure we deliver profitable growth and deleveraging, thereby
multiplying our return on equity.
The above key drivers of return on
equity underpin our bold medium-term targets, which further define
what success looks like for the company:
· Revenue growth of 5-9% per year
· Adjusted EBITDA margin expansion of 100 basis points per
year
· Leverage of below 3.5x by the end of 2026
Executing our
plan
Our success in achieving these goals
will be underpinned by our ability to drive successful operational
execution, which will be my key priority over the coming years.
This is the how of our
strategic framework.
Our focus will be on strengthening
the Group's core capabilities and competitive advantages to create
a scalable platform for profitable growth while being laser focused
on our customer value proposition. This will comprise three key
components:
· First-class and consistent
customer value propositions: Ensuring our distinct brands and products are tuned in to our
customer needs, offering personalised value with sustainability
embedded into every offering.
· Operational excellence
driven by data insights and intelligent automation:
This allows us to build scalability to drive
operating leverage, ensure consistent execution, deliver high
quality outcomes for customers, and unlock new opportunities for
efficiency.
· A winning
culture: We are committed to
fostering a culture that empowers our colleagues to unleash their
full potential and contribute to our collective success.
In order to turn this into tangible
actions, drive execution and value creation we have created six
strategic initiatives, which provide the roadmap for delivering our
value creation plan:
1.
Customer lifecycle management: Building personalised and long-term
customer relationships which are critical to sustainable growth,
driven by intelligent automation.
2.
Customer value propositions: Continuously differentiating our
brands from the competition and being relevant to specific customer
needs.
3.
Operations 2.0: Leveraging AI and automation to drive efficiency,
effectiveness, and scalability.
4. Product
and Technology foundation: Unifying our proprietary technology
platform while delivering outstanding products that are aligned
with our brands and customer needs.
5. Winning
organisation: One Company with a "Glocal" operating model that has
a shared culture that empowers everyone in the business and helps
us to attract and retain the best talent to power our value
creation journey.
6. ESG:
Integrating environmental, social, and governance principles into
our core operations to ensure sustainable long-term value
creation.
Refined market
focus
Given outsized returns go hand in
hand with market leadership positions, it is more important than
ever in today's regulatory and competitive environment that we are
laser-focused on where we
invest in order to generate superior returns on
investment.
Having reviewed our market focus
approach, we have redefined our market archetypes to fall under two
key categories: Core Markets and Optimise Markets. This simplified
approach enables increased focus and investment in our core
markets, while maximising cashflow from all markets.
We will remain laser-focused on our
four Core Markets - the UK, Italy, Spain, and Denmark - which
already generate approximately 85% of our total revenue and nearly
80% of our online revenue, and where we have established strong
positions. These are markets that boast attractive long-term growth
potential, high barriers to entry, and established regulatory
frameworks. In these markets we will continue to leverage our local
expertise and diverse brand portfolio to increase market share and
drive sustainable profitable growth.
In all other markets, our Optimise
category, we will prioritize cash flow generation and value
maximization through leveraging our enhanced capabilities and
scale. We will identify future potential core markets where we can
target podium positions with our improved organic capabilities or
through alternative strategic routes in the coming years. At the
same time, we will exit unprofitable markets or monetize assets
through alternative operating models, such as local
partnerships.
New group executive team and
operating model that is fit for purpose and future
proof
One of the key ingredients to
success and drive value creation is having the right people. We
have some fantastic people in the business, and an important part
of my job is to empower them to add real value as we deliver our
strategic priorities. A critical part of this is ensuring we have
the most effective management structure and operating model. Often
this means fewer layers, optimisation of spans-of-control, and
establishment of centres of excellence to provide world-class
service. Clarity of accountability is also paramount.
Over recent months we have
implemented several changes to our organisational structure to
ensure it is fully aligned to deliver our new strategic framework
and value creation plan. This has included the transformation of
our operating model into a "Glocal" structure with a revised Group
Executive team, with each member having clearly defined areas of
accountability across the business. We have significantly
strengthened our Group Executive team with seven new external hires
to fill critical roles across product and technology, operations,
commercial, finance, legal and growth.
We have assembled a truly
top-quality Group Executive team that will be laser focused on
delivering upon our strategic framework and value creation plan and
I am absolutely confident we will unlock our full
potential.
My
commitment to our value creation journey
We are at the beginning of an
exciting new journey. We will build on our strong foundations
through a clear strategy and focused plan that will deliver
sustainable profitable growth and unlock significant value
creation. I look forward to updating shareholders and our wider
stakeholders on progress against our plans over the coming months
and years.
CHIEF FINANCIAL OFFICER'S REPORT - BUSINESS & FINANCIAL
REVIEW
INTRODUCTION
Having joined the Group on 1
February 2024 it was clear that 2023 was a critical year for the
business, with strong delivery against the previously increased and
accelerated synergy target, as well as fundamental revenue mix
shifts that have improved the sustainability of the
business.
These mix shifts, both in terms of
the country mix towards more regulated markets and the customer mix
in the UK towards lower spending customers, had a significant
negative impact on the financial results for 2023 and the
year-over-year growth rates observed on a pro-forma
basis.
The business is now at a critical
but exciting juncture. We must invest in improving our capabilities
in a few critical areas to successfully drive sustainable,
profitable growth. Our clear plans are outlined in the CEO report
and will be supported by robust financial governance including
highly disciplined capital allocation. We will ensure our growth
plans support deleveraging and enable strong shareholder returns in
the coming years.
Outlook
We have a positive outlook for
FY24 revenue with consistent growth in active players driving
confidence in strong revenue growth online in both the UK&I and
International segments.
At the end of 2023 the Group
initiated a cost savings programme that is expected to drive
approximately £30m of cash cost savings a year. This will be
reinvested into further strengthening the Group's core capabilities
in several areas such as intelligent automation and AI-powered data
and insights, as well as marketing investment to support revenue
growth. These actions, together with the ongoing strategic
initiatives that support our value creation plan, are expected to
drive improved long-term sustainable profitable growth.
As part of our value creation
plan, we have outlined new medium term financial targets
of:
1. Revenue growth of 5-9% per
year
2. Adjusted EBITDA margin
expansion of 100 basis points per year
3. Leverage of below 3.5x by the
end of 2026
SUMMARY
Pro-forma results
Given the significance of the
acquisition of William Hill midway through the prior year, the
statutory results do not provide a clear comparison of performance
against the previous period, as they do not consolidate the results
of the William Hill business for all the prior period, given the
completion date of 1 July 2022. The pro forma results provide
a clearer performance of the Group in 2023 compared to
2022.
Since the acquisition, the William
Hill business has aligned to the monthly financial calendar of the
Group and, therefore, the FY 2022 pro forma financial comparatives
cover the period from 29 December 2021 to 31 December
2022.
On a pro forma basis, including
the results of William Hill in full for both periods and excluding
the 888 bingo business (which was sold during 2022) for both
periods, revenue of £1,710.9m was down 7.5% (£139.2m)
year-over-year. This was driven primarily by a proactive revenue
mix shift away from dotcom markets, which impacted revenues by
approximately £80m during FY 2023. Revenue was further impacted by
customer mix changes in the UK as a result of additional safer
gambling measures, as well as a change in the Group's marketing
approach to focus more on sustainable revenue and profitability.
Together, these changes have created a higher quality and more
sustainable business mix, including approximately 95% of FY 2023
revenue being generated from regulated and taxed markets (FY22
revenue 89%).
Our focus on profitability and
synergy delivery aided pro forma Adjusted EBITDA, with a marginal
reduction to £308.3m from £310.6m despite the significant impact of
our dotcom compliance changes, with dotcom markets typically being
higher margin. Adjusted EBITDA Margin increased to 18.0% from
16.8%, reflecting the improved profitability and focus on higher
return marketing spend which more than offset the impact of dotcom
market changes.
Further segmental details and
trends are discussed within the segmental section later in this
statement.
Synergies
In 2023 the business took decisive
actions enabling it to deliver £150m of cash synergies in FY 2023,
having accelerated the timeline for full synergy
delivery.
During 2023 the business
implemented a range of operational changes, removing some
duplication to create more efficient operations and begin
delivering the scale benefits of the combination with William Hill.
The Group also reviewed and adapted its marketing approach across
markets with a focus on driving more efficient marketing decisions
to support sustainable, profitable growth.
Following my appointment alongside
that of Per, our new CEO, the business has reviewed its operating
model in line with the new value creation plan. This process has
identified further opportunities for savings as the Group delivers
on its potential. These additional savings, along with any further
efficiencies identified, will be reinvested into driving growth,
including through increased marketing and investment in improving
our core capabilities.
Deleveraging
At 31 December 2023 net debt was
£1,716.9m, representing a £10.8m reduction from 31 December 2022.
The reduction in net debt was primarily driven by favourable
foreign exchange rate movements on the debt principal, offset by a
£47.9m cash outflow (excluding customer balances) in 2023, which
included £46.0m of exceptional costs paid out in the period.
Leverage at 31 December 2023 was 5.6x, unchanged from the pro forma
leverage at 31 December 2022.
Our disciplined approach to
capital allocation includes reviewing opportunities to generate
cash from lower-return, or non-core assets, and during 2023 the
Group realised approximately £41.8m from non-core asset sales
including the sale of our Latvia business, and the sale and
leaseback of some freehold properties.
Reconciliation of Statutory EBITDA to Adjusted
EBITDA, Adjusted profit before tax and Adjusted profit after
tax
|
Adjusted
results
|
|
Exceptional items and
adjustments****
|
|
Statutory
results
|
|
2023
£'m
|
2022
£'m
|
|
2023
£'m
|
2022
£'m
|
|
2023
£'m
|
2022
£'m
|
Revenue
|
1,710.9
|
1,238.8
|
|
0.0
|
0.0
|
|
1,710.9
|
1,238.8
|
Cost of
sales
|
(572.6)
|
(444.4)
|
|
2.6
|
3.9
|
|
(570.0)
|
(440.5)
|
Gross
profit
|
1,138.3
|
794.4
|
|
2.6
|
3.9
|
|
1,140.9
|
798.3
|
Marketing
expenses
|
(237.6)
|
(257.8)
|
|
0.0
|
0.0
|
|
(237.6)
|
(257.8)
|
Operating expenses
**
|
(593.8)
|
(319.0)
|
|
(49.6)
|
(106.3)
|
|
(643.4)
|
(425.3)
|
Share of post-tax
profit of equity accounted associate
|
1.4
|
0.3
|
|
0.0
|
0.0
|
|
1.4
|
0.3
|
EBITDA *
|
308.3
|
217.9
|
|
(47.0)
|
(102.4)
|
|
261.3
|
115.5
|
Depreciation and
amortisation ***
|
(114.0)
|
(63.6)
|
|
(114.3)
|
(56.7)
|
|
(228.3)
|
(120.3)
|
Profit before interest and
tax
|
194.3
|
154.3
|
|
(161.3)
|
(159.1)
|
|
33.0
|
(4.8)
|
Finance income and
expenses
|
(173.7)
|
(73.8)
|
|
19.4
|
(37.1)
|
|
(154.3)
|
(110.9)
|
(Loss)/Profit before
tax
|
20.6
|
80.5
|
|
(141.9)
|
(196.2)
|
|
(121.3)
|
(115.7)
|
Taxation
|
27.5
|
(16.3)
|
|
37.4
|
11.4
|
|
64.9
|
(4.9)
|
(Loss)/Profit after
tax
|
48.1
|
64.2
|
|
(104.5)
|
(184.8)
|
|
(56.4)
|
(120.6)
|
Basic earnings per
share
|
10.7
|
15.1
|
|
|
|
|
(12.6)
|
(28.3)
|
* EBITDA is defined as earnings
before interest, tax, depreciation and amortisation.
** Statutory Operating expenses of
£643.4m includes Operating expenses of £590.8m (being the Operating
expenses of £819.1m less Depreciation and amortisation of £228.3m)
and Exceptional items - operating expenses of £52.6m per the
Consolidated Income Statement.
*** Statutory Depreciation and
amortisation of £228.3m has been separated from Operating expenses
of £819.1m per the Consolidated Income Statement.
**** Foreign exchange within
adjustments of £2.6m gain within Cost of sales, £1.6m expense
within Operating expenses and £36.6m gain within Finance income and
expenses.
Adjusted EBITDA is defined as
EBITDA excluding share-based payment charges, foreign exchange
losses and exceptional items and other defined adjustments. Foreign
exchange losses and share benefit charges were excluded to allow
for further understanding of the underlying financial performance
of the Group. Further detail on exceptional items and adjusted
measures is provided above.
In the reporting of financial
information, the Directors use various APMs. These APMs should be
considered in addition to, and are not intended to be a substitute
for, IFRS measurements. As they are not defined by International
Financial Reporting Standards, they may not be directly comparable
with other companies' APMs. The Directors believe these APMs
provide additional useful information for understanding performance
of the Group. They are used to enhance the comparability of
information between reporting periods and are used by management
for performance analysis and planning. An explanation of our
adjusted results to the statutory results is provided in note 3 to
the condensed financial statements.
|
Pro forma
(Unaudited)
|
2023
|
2022
|
Change
|
£'m
|
£'m
|
Revenue
|
1,710.9
|
1,850.1
|
(7.5)%
|
Adjusted Cost of
sales
|
(572.6)
|
(599.2)
|
|
Gross
profit
|
1,138.3
|
1,250.9
|
(9.0)%
|
Marketing
expenses
|
(237.6)
|
(331.8)
|
|
Adjusted operating
expenses
|
(593.8)
|
(608.7)
|
|
Share of post-tax
profit of equity accounted associate
|
1.4
|
0.2
|
|
Adjusted
EBITDA
|
308.3
|
310.6
|
(0.7)%
|
CONSOLIDATED INCOME STATEMENT
Revenue
Revenue for the Group was
£1,710.9m for 2023, an increase on a statutory basis of 38.1%
compared to 2022, reflecting the consolidation of William Hill
revenues from H2 2022.
On a pro forma basis, revenue
decreased by 7.5% primarily reflecting dotcom compliance changes
and UK online customer mix changes as noted above.
Revenue from sports betting was
£648.8m, representing a 0.9% decline on a pro forma basis. Stakes
were down 11.3%, offset by an increase in betting net win margin
from 10.8% to 12.1%. Both primarily reflect the customer mix
changes in the UK online segment to lower staking, higher margin,
recreational customers. Gaming revenue of £1,062.1m was down 11.2%
year-over-year, predominantly driven by the factors mentioned
above, with dotcom markets more heavily weighted towards
gaming.
Cost of sales
Cost of sales mainly comprise of
gaming taxes and levies, royalties payable to third parties,
chargebacks, payment service provider ("PSP") commissions and costs
related to operational risk management and customer due diligence
services. Cost of sales increased on a statutory basis to £570.0m
from £440.5m due to the acquisition of William Hill in H2 2022. On
a pro forma basis, cost of sales decreased by 4.4% to £572.6m
principally reflecting the reduction in revenue, with cost of sales
representing 33.5% of revenues (2022: 32.4%). The slight increase
in cost of sales as a percentage of revenue primarily reflects the
change in country mix, with a higher proportion of locally
regulated and taxed revenues in 2023.
Gross profit
On a statutory basis, gross profit
increased to £1,138.3m from £794.4m with the consolidation of the
results of William Hill from H2 2022.
On a pro forma basis, gross profit
decreased by 9.0% from £1,250.9m to £1,138.3m, alongside a decrease
in the gross margin from 67.6% to 66.5% with more revenue generated
from regulated and taxed markets as described above.
Marketing expenses
Marketing is a significant
investment for our Group to drive growth through investing in our
leading brands, as well as customer acquisition and retention
activities. On a statutory basis marketing decreased by 7.8% from
£257.8m in 2022 to £237.6m driven by marketing synergies, as well
as increased focus on higher return marketing investments. This
represents a marketing to revenue ratio (marketing ratio) of 13.9%
(2022: 20.8%), with the reduction being driven by both lower
marketing and the inclusion of a full year of Retail results, where
the marketing ratio is significantly lower.
On a pro forma basis, marketing
expenses decreased by 28.4% from £331.8m to £237.6m. Certain
marketing is demand driven and flexible, so part of the reduction
is as a result of the reduced online revenue noted above. Further
marketing savings were also achieved following the acquisition of
William Hill and the development of a refined brand marketing
strategy to focus on driving sustainable profitable growth with
improved marketing efficiency. The marketing ratio decreased from
17.9% in 2022 to 13.9% in 2023. This partly reflects the mix of
revenue with more generated from the Retail business where the
marketing investment is significantly lower. Excluding the Retail
segment, the online marketing ratio decreased from 24.4% to 19.7%
reflecting the refined brand marketing strategy and improved
marketing efficiency.
Operating expenses
Operating expenses mainly comprise
of employment costs, property costs, technology services and
maintenance, and legal and professional fees. On a statutory level,
operating expenses increased to £643.4m from £425.3m in 2022. This
increase is due to the acquisition of William Hill with the Retail
business having a much higher proportion of operating expenses to
revenue given the employment and property costs required to
operate.
On a pro forma basis, adjusted
operating expenses excluding depreciation and amortisation
decreased by 2.4% from £608.7m in 2022 to £593.8m in 2023. The
reduction in overheads reflects the successful delivery of
synergies and focus on cost control more than offsetting underlying
inflation challenges across the business, particularly within the
Retail estate.
EBITDA & Adjusted EBITDA
Reported EBITDA increased by
126.2% from £115.5m to £261.3m. On an adjusted basis, the increase
was 41.5% to £308.3m from £217.9m, with an Adjusted EBITDA margin
of 18.0% compared to 17.6% in 2022.
On a pro forma basis, Adjusted
EBITDA decreased marginally to £308.3m in 2023 compared to £310.6m
in 2022. The Adjusted EBITDA Margin increased to 18.0% in 2023 from
16.8% in 2022 driven by the successful delivery of synergies and
focus on cost efficiency more than offsetting the impact of
compliance and regulation headwinds noted above.
Finance Income and Expenses
Net finance expenses of £154.3m
(2022: £110.9m) related predominantly to the interest from the debt
on acquisition of William Hill of £139.4m (2022: £97.7m), which is
net of foreign exchange. The finance expense resulting from leases
was £6.9m (2022: £3.0m) with the increase due to the inclusion of a
full year of results from the acquired Retail business within
William Hill, which operates primarily from leasehold sites. The
finance expense from hedging activities was £12.1m (2022: £3.3m)
predominantly due to foreign exchange movements.
(Loss) / profit before tax
The net loss before tax for 2023
was £121.3m (2022: net loss before tax of £115.7m). On an adjusted
basis, profits decreased by 74.4% to a profit of £20.6m (2022: net
profit before tax of £80.5m), with the increased financing costs
from the debt on acquisition of William Hill offsetting the
increased earnings from the enlarged Group.
Taxation
On a statutory basis, the
Group recognised a tax credit of £64.9m on a loss before tax of
£121.3m, giving an effective tax rate of 53.5% (2022: tax charge of
£4.9m and an effective tax rate of 4.2%). The tax credit and
therefore the tax rate is higher than the expected tax credit
arising on the loss of 23.5% primarily due to operating in
territories with lower effective tax rates such as Gibraltar, Spain
and Malta, additional prior year tax credits from filing
submissions in Gibraltar and from the recognition of a previously
unrecognised deferred tax asset relating to the Group's intangible
assets. These benefits have been offset by the reduced
availability of tax relief arising on costs incurred in the
period.
On an adjusted basis, the Group
recognised a tax credit of £27.5m on a loss before tax of £20.6m,
giving an effective tax rate of 133.5%. (2022: tax charge of £16.3m
and an effective tax rate of 20.2%). This higher rate reflects the
mix of profits and losses before tax across the group giving rise
to a lower consolidated base on which the rate is
calculated.
Net (loss)/profit and adjusted net profit
The net loss for 2023 was £56.4m
(2022: net loss of £120.6m). On an adjusted basis, profit decreased
by 25.1% to £48.1m from £64.2m in 2022, reflecting the items
discussed above.
Earnings per share
Basic loss per share reduced to
12.6p (2022: loss of 28.3p) because of the full year consolidation
of William Hill in 2023.
On an adjusted basis, basic
earnings per share decreased by 29.1% to 10.7p (2022: 15.1p).
Further information on the reconciliation of earnings per share is
given in note 7.
Dividends
The Board of Directors is not
recommending a dividend to be paid in respect of the year ended 31
December 2023 (2022: nil per share). The Board's decision is to
suspend payments of dividends until leverage is at or below 3x, as
previously announced following the acquisition of William
Hill.
Income statement by Segment
The below tables show the Group's
performance by segment on a reported and pro forma basis
respectively:
|
Statutory
|
Revenue
|
Adjusted
EBITDA
|
|
2023
|
2022
|
Change
from
|
% of reported
Revenue
(2023)
|
2023
|
2022
|
Change
from
|
% of Adjusted
EBITDA
(2023)
|
£'m
|
£'m
|
previous
year
|
£'m
|
£'m
|
previous
year
|
Retail
|
535.0
|
255.5
|
109.4%
|
31.3%
|
98.9
|
41.2
|
140.0%
|
32.1%
|
UK&I
Online
|
658.5
|
455.5
|
44.6%
|
38.5%
|
152.3
|
61.6
|
147.2%
|
49.4%
|
Total UK &
I
|
1,193.5
|
711.0
|
67.9%
|
69.8%
|
251.2
|
102.8
|
144.4%
|
81.5%
|
International
|
517.4
|
508.3
|
1.8%
|
30.2%
|
99.4
|
118.3
|
(16.0%)
|
32.2%
|
Other
|
0.0
|
19.5
|
(100.0%)
|
0.0%
|
0.0
|
1.7
|
(100.0%)
|
0.0%
|
Corporate
|
0.0
|
0.0
|
-
|
0.0%
|
(42.3)
|
(4.9)
|
763.3%
|
(13.7%)
|
Total
|
1,710.9
|
1,238.8
|
38.1%
|
100.0%
|
308.3
|
217.9
|
41.5%
|
100.0%
|
|
Pro forma
|
Revenue
|
Adjusted
EBITDA
|
|
2023
|
2022
|
Change
from
|
% of reported
Revenue
(2023)
|
2023
|
2022
|
Change
from
|
% of Adjusted
EBITDA
(2023)
|
£'m
|
£'m
|
previous
year
|
£'m
|
£'m
|
previous
year
|
Retail
|
535.0
|
519.0
|
3.1%
|
31.3%
|
98.9
|
90.7
|
9.0%
|
32.1%
|
UK&I
Online
|
658.5
|
717.4
|
(8.2%)
|
38.5%
|
152.3
|
111.9
|
36.1%
|
49.4%
|
Total UK &
I
|
1,193.5
|
1,236.3
|
(3.5%)
|
69.8%
|
251.2
|
202.6
|
24.0%
|
81.5%
|
International
|
517.4
|
613.7
|
(15.7%)
|
30.2%
|
99.4
|
136.0
|
(26.9%)
|
32.2%
|
Corporate
|
0.0
|
0.0
|
-
|
0%
|
(42.3)
|
(28.1)
|
50.5%
|
(13.7%)
|
Total
|
1,710.9
|
1,850.1
|
(7.5)%
|
100.0%
|
308.3
|
310.6
|
(0.7)%
|
100.0%
|
For the commentary on divisional
performance below, the pro forma financials give a clearer
comparative of performance compared to the previous period.
Furthermore, it reflects adjusted results, since that is the basis
on which these are reported internally and in our segmental
analysis. An explanation of our adjusted results to the statutory
results, is provided above and in note 3 to the condensed financial
statements.
UK & Ireland (UK&I)
UK&I Online
On a statutory basis, revenue
increased by 44.6% to £658.5m and Adjusted EBITDA increased by
£90.7m compared to the previous period, driven by the acquisition
of William Hill.
On a pro forma basis, revenue
declined by 8.2% to £658.5m reflecting the impact of our business
mix shifting towards lower-spending customers, with average revenue
per customer down 18%, which more than offset strong growth in
average monthly actives of 11%. This mix shift was driven by a
range of proactive compliance measures adopted ahead of the
upcoming regulatory change in the UK, including, among other items,
significantly lowering thresholds for financial checks, increasing
the level of customer interactions and interventions, and lowering
stake limits on online slots.
Alongside the more proactive
compliance measures and approach, revenue was impacted by the
change in marketing approach to focus on higher return marketing
and customer retention, rather than acquisition. This has been
particularly prevalent in the 888 brands in the UK which had
historically invested significantly in customer acquisition given
its subscale market position, particularly in sports. With the
range of brands and assets the Group now has in the UK it can be
much more effective with its marketing investment, which has
improved profitability but reduced revenue in the short
term.
Pro forma adjusted EBITDA
increased by £40.4m (36.1%) with the Adjusted EBITDA margin
improving by 7.5 percentage points to 23.1% as a result of
optimised marketing and delivery of synergies.
Retail
On a statutory basis, Retail
generated revenue of £535.0m and Adjusted EBITDA of £98.9m as the
Retail business continued to deliver robust financial performance
and strong cash generation.
On a pro forma basis, revenue
increased by 3.1% to £535.0m in 2023 despite a 3% reduction in the
number of shops. This was driven by continued strong customer
engagement, and a slightly higher sportsbook net win margin year
over year, particularly at some of the bigger racing festivals.
During the year the Group replaced and upgraded approximately 2,000
SSBTs and added an additional 1,000 SSBTs (self-service betting
terminals) across the estate, contributing to an improved product
offering which supported revenue growth.
Pro forma Adjusted EBITDA
increased by £8.2m to £98.9m in 2023 driven by the revenue growth,
with high operating leverage within Retail, as well as excellent
cost control including our refined staffing model.
There were 1,343 shops open at the
end of 2023 compared to 1,386 at the end of 2022.
The small reduction to the already
well optimised estate largely reflects the impact of inflationary
cost increases making certain shops no longer commercially
viable.
International
On a statutory basis,
International revenue increased by 1.8% to
£517.4m and Adjusted EBITDA decreased by £18.9m compared to the
previous period. The revenue increase was driven by the acquisition
of William Hill, with the dotcom compliance changes more than
offsetting this impact at an Adjusted EBITDA level.
On a pro forma basis revenue
declined by 15.7% to £517.4m, as double-digit growth in our core
markets of Italy and Spain was more than offset by a significant
reduction in revenue from our dotcom markets. This was a result of
our regulatory and compliance changes, principally the suspension
of VIP customer accounts in the Middle East, as the business did
not recover as expected following the initial
suspension.
Pro forma adjusted EBITDA declined
by £36.6m to £99.4m with the Adjusted EBITDA margin declining by
3.0 percentage points to 19.2% primarily reflecting the loss of
revenue from dotcom markets, where margins are typically much
higher.
Corporate costs
On a statutory basis, corporate
costs were £42.3m in 2023 compared to £4.9m in 2022. This is due to
the timing of the release of staff incentive accruals in the prior
year across the Group including those accrued prior to acquisition
within William Hill.
On a pro forma basis, there was an
increase in corporate costs of £14.2m to £42.3m due to
capitalisation rate alignments across the Group, as well as
reallocation of overheads across segments.
EXCEPTIONAL ITEMS AND ADJUSTMENTS
Operating Exceptional
items
|
2023
|
2022
|
|
£'m
|
£'m
|
Retroactive duties and associated
charges
|
-
|
(3.9)
|
Integration and transformation
costs
|
49.3
|
14.4
|
Corporate transaction related
costs
|
(0.1)
|
24.5
|
Regulatory provisions and
associated costs
|
3.4
|
-
|
Disposal of 888 Bingo
|
-
|
11.7
|
Impairment of US Goodwill and
other assets
|
-
|
55.7
|
Revaluation of Contingent
consideration
|
-
|
(9.2)
|
Total exceptional items before interest and
tax
|
52.6
|
93.2
|
Bond early redemption
fees
|
-
|
14.1
|
Gain on settlement of
bonds
|
-
|
(7.1)
|
Total exceptional items before tax
|
52.6
|
100.2
|
Tax on exceptional
items
|
(9.0)
|
2.8
|
Total exceptional items
|
43.6
|
103.0
|
|
|
|
Adjustments:
|
|
|
Fair value gain on financial
assets
|
(4.1)
|
-
|
Amortisation of Finance
Fees
|
17.2
|
7.4
|
Amortisation of acquired
intangibles
|
114.3
|
56.7
|
Foreign exchange
|
(37.6)
|
26.7
|
Share benefit (credit) /
charge
|
(0.5)
|
5.2
|
Total Adjustments before tax
|
89.3
|
96.0
|
Tax on
adjustments
|
(28.4)
|
(14.2)
|
Total Adjustments
|
60.9
|
81.8
|
|
|
|
Total exceptional items and adjustments
|
104.5
|
184.8
|
Operating exceptional items in the
year totalled £43.6m in 2023 compared to £103.0m in
2022.
Exceptional items are defined as
those items which are considered one-off or material in size or
nature to be brought to attention to better understand the Group's
financial performance. Refer to note 3 to the condensed financial
statements for further detail.
There were £49.3m of costs
incurred relating to the on-going integration and transformation of
the William Hill business in order to achieve synergies. The cash
costs to achieve the targeted integration synergies and the global
cost saving programme has therefore now increased to cost
approximately £115m, incurred through to 2025 with the majority
incurred in 2023 or expected to be incurred in 2024. This includes
the global cost saving programme of £30m, initiated in December
2023, as well as the original £150m synergy programme.
Corporate transaction related
costs relate predominantly to the disposal of the Latvia and
Colombia businesses, with prior year costs related to the
acquisition of William Hill.
The Group paid £2.9m during the
period related to a regulatory settlement with the Gibraltar
regulator in relation to the previously disclosed failings that we
identified in our Middle East business. Further to this there were
£0.5m of professional fees incurred relating to this
settlement.
Adjustments reflect items that are
recurring, but which are excluded from internal measures of
underlying performance to provide clear visibility of the
underlying performance across the Group, principally due to their
non-cash accounting nature. They are items that are therefore
excluded from Adjusted EBITDA, Adjusted PAT and Adjusted
EPS.
The amortisation of the specific
intangible assets recognised on acquisitions has been presented as
an adjusted item, totalling £114.3m relating to the William Hill
acquisition. This amortisation is a recurring item that will be
recognised over its useful life.
The other items that have been
presented as adjusted items are fair value gain on financial assets
of £4.1m, foreign exchange gains of £37.6m (foreign exchange loss
of £26.7m in 2022), amortisation of finance fees of £17.2m (£7.4m
in 2022), and share based payment (credit) / charges of £(0.5)m
(£5.2m in 2022).
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
Non-current assets decreased by
£169.9m to £2,298.5m compared to £2,468.4m at 2022, predominantly
due to amortisation of Goodwill and Other intangible assets which
have decreased by £170.0m. Deferred tax
assets have increased by £31.8m to £37.0m compared to £5.2m in
2022, due to the recognition of a previously unrecognised deferred
tax asset related to the Group's intangible assets.
Current assets are £449.1m, a
decrease of £45.3m compared to £494.4m at 2022. Within this, cash
and cash equivalents decreased by £61.4m to £256.2m from £317.6m,
which includes £127.8m of customer deposits compared to £141.3m at
2022. Excluding client funds, cash and cash equivalents decreased
by £47.9m from £176.3m in 2022 to £128.4m in 2023.
Current liabilities decreased by
£49.3m from £703.4m at FY 2022 to £654.1m at 2023. This includes
the reduction in client funds held, offset by an increase in trade
and other payables. Provisions decreased by £33.0m to £78.5m
primarily due to the payment of the regulatory settlement with the
UKGC. Furthermore, there are provisions of £62.8m for gaming tax in
Austria.
Non-current liabilities were
£2,013.6m, a decrease of £86.6m from the balance of £2,100.2m at
2022. This reduction is predominantly due to the movement in
borrowing driven by foreign exchange translations. In addition, the
deferred tax liability decreased by £59.1m, mainly driven by the
unwind of deferred tax on the acquisition accounting. Lease
liabilities have remained broadly in line with prior year.
Additionally, provisions for customer claims of £104.7m, include
£98.8m relating to William Hill and Mr Green brands and £5.9m
relating to 888 are currently recognised as non-current
liabilities.
Net assets of £79.9m was a
decrease of £79.3m compared to £159.2m at 2022.
CASH FLOWS
|
2023
|
2022
|
£'m
|
£'m
|
Cash generated
from operating activities before working capital
|
233.3
|
139.6
|
Working capital
movements
|
(81.9)
|
(169.8)
|
Net cash generated from /
(used in) operating activities
|
151.4
|
(30.2)
|
Acquisitions
|
0.0
|
(386.8)
|
Disposals
|
41.8
|
33.0
|
Capital
expenditure
|
(68.4)
|
(76.8)
|
Net movement in
borrowings incl loan transaction fees
|
(35.8)
|
527.6
|
Proceeds from
equity placing
|
0.0
|
158.5
|
Net interest
paid
|
(138.1)
|
(75.6)
|
Settlement of
derivatives
|
(10.8)
|
0.0
|
Other movements in
cash incl FX
|
(1.5)
|
(21.5)
|
Net cash
(outflow)/inflow
|
(61.4)
|
128.2
|
|
|
|
Cash
balance
|
256.2
|
317.6
|
Gross Debt
|
(1,757.7)
|
(1,815.0)
|
Net Debt
|
(1,716.9)
|
(1,727.7)
|
Overall, the Group had a cash
outflow of £61.4m in the year, compared to an inflow of £128.2m in
2022. This resulted in a cash balance of £256.2m as at 31 December
2023 (£317.6m at 31 December 2022), although this included customer
deposits and other restricted cash of £127.8m such that
unrestricted cash available to the Group was £128.4m compared to
£176.3m in 2022.
Cash flow from operations was a
£151.4m inflow compared to an outflow of £30.2m in 2022. This
increase was partly due to a full year of EBITDA from the enlarged
business in 2023, as well as lower working capital
outflows.
Disposals of £41.8m represented
the proceeds on the sale of non-core assets including the Latvia
business and the sale and leaseback of certain
freeholds.
Capital expenditure was £68.4m in
2023, a reduction from £76.8m reflecting synergies and on-going
cost control.
Payment of lease liabilities
represented £31.8m of lease liability payments in the period, with
the increase over the prior year driven by the acquisition of
William Hill and its associated retail estate, as well as from the
sale and leaseback of freehold properties in the year.
Included within net movement in
borrowings were £4.0m of principal payments, relating to the 1%
annual amortisation on the US$ Term Loan B.
Net interest paid of £138.1m
predominantly related to the borrowings undertaken.
Settlement of derivatives of
£10.8m paid in the year related to hedging instruments.
Other movements included £4.3m
further investment in 888AFRICA, as well as dividend income
received from associates of £5.9m.
NET DEBT
|
31 December
2023
|
31 December
2022
|
£'m
|
£'m
|
Borrowings
|
(1,661.1)
|
(1,702.3)
|
Loan transaction
fees
|
(96.6)
|
(112.7)
|
Gross
Borrowings
|
(1,757.7)
|
(1,815.0)
|
Lease
liability
|
(87.6)
|
(89.0)
|
Cash (excluding
customer balances)
|
128.4
|
176.3
|
Net Debt
|
(1,716.9)
|
(1,727.7)
|
|
|
|
LTM pro forma
Adjusted EBITDA
|
308.3
|
310.6
|
|
|
|
Leverage
|
5.6x
|
5.6x
|
The gross borrowings balance as at
31 December 2023 was £1,757.7m. The earliest maturity of this debt
is in 2026, which is £11m, with most of the debt maturing across
2027 and 2028. In addition to this, the Group has access to a £150m
Revolving Credit Facility maturing in January 2028, which was
undrawn at 31 December 2023, consistent with 31 December
2022.
The debt is across GBP sterling,
Euro and US Dollar; with 49% of the debt in Euro; 43% in GBP and 8%
in USD. The Group has undertaken hedging activities such that 70%
of the interest is at fixed rates and 30% at floating rates with
the hedging relationships in place for three years to 2025. The
Group continues to assess all opportunities to optimise its debt
capital structure and manage its debt facilities.
The net debt balance at 31
December 2023 was £1,716.9m with a net debt to EBITDA ratio of
5.6x. This compares to £1,727.7m and 5.6x respectively as at 31
December 2022. The reduction in net debt is predominantly due to
foreign exchange movements on the USD and EUR denominated debt
principal amounts, together with lower loan transaction fees. This
is partly offset by lower closing cash position following outflow
of cash detailed above.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and
uncertainties that are considered to have a potentially material
impact on the Group's future performance, sustainability and
strategic objectives are set out below. This list is not exhaustive
but encompasses management's assessment of those risks which
require considered response at this time.
Regulatory and Compliance
Risks
Compliance with regulatory
requirements is critical to maintaining the Group's licences,
protecting our customers and driving growth. With most of our
revenue generated from licensed jurisdictions and more countries
looking to regulate, the importance of such licenses to the
business is constantly increasing.
Our strategic focus is on
regulated markets, as these represent the best opportunity for
sustainable growth as regulation drives better outcomes for
customers, for the business, and for wider
stakeholders.
The integrity of our privacy and
data protection framework, including the holding and processing of
personal data, is crucial to ensure compliance with our regulatory
obligations and build customer trust.
888 Holdings accepts that
regulatory compliance risks may be present in the ordinary course
of business, however the enterprise risk management approach allows
us to identify these as they arise and implement mitigations and
controls targeted at removing and reducing these risks and, where
possible, improving player experience, regulatory transparency and
stakeholder engagement. The growing complexity of the Company's
regulatory footprint means a robust understanding of the legal, and
regulatory position in key locations worldwide is crucial to
mitigating this risk combined with strong relationships with
regulators.
Anti-Money Laundering
Risk
Ensuring compliance with
regulatory requirements and the prevention of money laundering is
critical to maintaining our licences. We are committed to combating
financial crime and ensuring that proceeds of crime do not enter
the business.
The EU Supranational Risk
Assessment 2022 estimates the risk level for online gambling is
very high for both money laundering and terrorist financing in the
absence of controls. Therefore, we make every effort to ensure that
controls related to AML and CFT are robust and reviewed regularly
to provide assurance.
Brand & Reputational
Risks
The Group relies on its
world-class brands across its key markets, with brand reputation
being a key driver of customer choice. As such, maintaining a
strong reputation is critical to the ongoing success of the
Group.
In various regions where our
business operates, there is an ongoing trend towards the
enhancement of regulations focused on safer gambling and the
protection of consumers. This trend is particularly aimed at
safeguarding underage individuals and players who are vulnerable or
at heightened risk of harm.
Media reporting on the industry
has seen continuing and increased criticism of how individual
customers have been treated. This has led to further calls for
additional regulation, particularly around responsible gambling,
affordability and advertising, any failure to ensure the business
is fully compliant would result in significant reputational damage,
in addition to sanctions imposed by regulators.
ESG Risks
The Group is dedicated to
implementing and maintaining robust policies, procedures, and
controls that ensure the effective delivery of our Environmental,
Social, and Governance (ESG) objectives.
ESG issues include risks such as
climate change, player protection, diversity & inclusion,
cybersecurity concerns and social responsibility not just to
employees and customers but also to the communities where the
business bases its operations and retail outlets. ESG risks,
particularly those related to climate, often present unique
characteristics distinct from other types of risk. They are
typically marked by a lack of extensive historical data and exhibit
non-linear patterns, complicating their forecasting and management
efforts.
The Group's strategic focus is on
protecting our players from gambling related harm, creating an
engaging and inclusive environment where colleagues can thrive and
protecting the environment by achieving net zero direct carbon
emissions by 2030.
Market
Risks
The acquisition of William Hill
was funded through various means, including significant debt
facilities. The Group has implemented a series of hedging
strategies, securing approximately 70% of our interest costs at
fixed rates for the next two years, while also aligning the
currency composition of our debt more closely with that of the
Group's financial profile. Despite these measures, the Group
remains susceptible to risks associated with changes in interest
rates and currency values. Such fluctuations could elevate our
borrowing costs, potentially diverting financial resources away
from critical areas such as growth initiatives, marketing efforts,
and the development and launch of new products and
projects.
The Group is also exposed to
foreign exchange rate fluctuations and risks in its financial
reporting. A substantial part of the Group's deposits and revenues
are generated in GBP, EUR and other currencies, whilst the Group's
operating expenses are largely incurred in local currencies,
primarily GBP, EUR, ILS and USD with incremental exposure to
operating expenses in Swedish krona and Polish zloty. The Group
also has debt servicing costs which are denominated in USD and EUR,
partially hedged in GBP.
Liquidity & Capital
Management
Liquidity risk is the risk that
the Group has insufficient funds available to settle its
liabilities as they fall due. The Group generates strong operating
cash flows and aims to maintain sufficient cash balances to meet
its anticipated working capital requirements based on regularly
updated cash flow forecasts. Liquidity requirements that cannot be
met from operational cash flow or existing cash resources would be
satisfied by drawings under the Group's revolving credit facility
and overdraft facility.
We fund our investments in people,
product, marketing, and technology with positive cash flows
generated from our trading activities and its available cash
resources. As the business continues to invest in strengthening its
core capabilities there could be increased need to reduce operating
costs and improve liquidity by removing duplications, delivering
best in class and scalable shared functions, and driving efficiency
to reinvest in growth.
People
Risk
Our colleagues across all our
business functions are vital to ensuring our day-to-day operations
are undertaken efficiently and effectively and to the successful
delivery of our strategic business objectives. Competition for
highly qualified personnel is elevated in many of the locations in
which the Group is based. Ensuring our colleagues are well
remunerated, managed and supported is fundamental to the success of
the business.
The integration and operating
model changes following the acquisition of the William Hill have
introduced some uncertainty for our colleagues across the business,
which does carry a risk with regard to staff retention in
particular, but also recruitment in the short term.
Third Party
Risk
To effectively deliver our
products and services to customers the Group has reliance upon
certain critical suppliers of technology, payment services,
marketing, gaming products, sports content and media. The effective
management of critical third-party relationships and performance is
key to delivering our strategic objectives. Any failure of our
suppliers to provide services to us may have a significant adverse
impact on our own operations.
The Group also has certain
strategic partnerships where we supply third party operators with
business to business (B2B) gambling services in the United States.
Any risks to our B2B partnerships or meeting our contractual
obligations with them must be managed to ensure the long-term
viability of our operations linked to these relationships, and to
ensure we can meet our strategic growth
targets.
Information Security
Risks
There is an ongoing risk that
cyber-attacks, such as Distributed Denial of Service (DDoS) by
malicious third parties, could impact our technology systems and,
consequently, our operations. This risk extends to the potential
theft or misuse of customer and business data by both internal and
external entities.
Cyber-attacks leading to data
theft could expose the Group to "ransom" demands or regulatory
sanctions including fines and reputational damage, which could lead
to loss of customer confidence in the business.
The loss of availability of our
technology and communication systems, or those in our key
suppliers' infrastructure could cause significant disruption and
cost to the business, and lead to revenue loss both during the
incident and in the aftermath if customers move their business to
our competitors. Lengthy down-time could also cause us to breach
regulatory obligations.
Product &
Technology
As a company, we acknowledge the
importance of innovation and digital transformation, and we
recognize that these initiatives come with inherent risks. We
recognize that consolidating multiple systems can be complex and
challenging and may lead to potential disruptions in our
operations.
In pursuing our goal of building
one unified global scalable technology platform, we understand that
it requires us to take on higher levels of risk in the short term.
However, we believe that the potential rewards outweigh the risks.
By creating a unified platform, we will be able to streamline our
operations, improve efficiency, and enhance our ability to respond
to changing market conditions.
We recognize the importance of
developing high-quality products to meet the evolving needs of our
customers, however, acknowledge that this comes with inherent
risks. We understand that product and content development require
significant investments in resources, time, and expertise.
Additionally, the fast-paced and constantly changing nature of the
market may require us to take on higher levels of risk in the short
term.
Condensed Consolidated Income
Statement
For the year ended 31 December 2023
|
|
2023
|
2022
|
|
Note
|
£m
|
£m
|
|
|
|
|
Revenue
|
2
|
1,710.9
|
1,238.8
|
|
|
|
|
Gaming duties
|
|
(372.0)
|
(256.3)
|
Other cost of sales
|
|
(198.0)
|
(188.1)
|
Exceptional items - cost of
sales
|
3
|
-
|
3.9
|
Cost of sales
|
|
(570.0)
|
(440.5)
|
Gross profit
|
|
1,140.9
|
798.3
|
Marketing expenses
|
|
(237.6)
|
(257.8)
|
Operating expenses
|
|
(819.1)
|
(448.5)
|
Share of post-tax profit of equity
accounted associate
|
|
1.4
|
0.3
|
Exceptional items - operating
expenses
|
3
|
(52.6)
|
(97.1)
|
Operating profit/(loss)
|
|
33.0
|
(4.8)
|
|
|
|
|
Adjusted EBITDA
|
|
308.3
|
217.9
|
Exceptional items - cost of sales
and operating expenses
|
3
|
(52.6)
|
(93.2)
|
Fair value gain on financial
assets
|
13
|
4.1
|
-
|
Foreign exchange
gains/(losses)
|
|
1.0
|
(4.0)
|
Share benefit
credit/(charge)
|
|
0.5
|
(5.2)
|
Depreciation and
amortisation
|
|
(228.3)
|
(120.3)
|
Operating profit/(loss)
|
|
33.0
|
(4.8)
|
|
|
|
|
Finance income
|
4
|
41.0
|
0.8
|
Finance expenses
|
5
|
(195.3)
|
(111.7)
|
Loss before tax
|
|
(121.3)
|
(115.7)
|
Taxation
credit/(charge)
|
6
|
64.9
|
(4.9)
|
Loss after tax
|
|
(56.4)
|
(120.6)
|
|
|
|
|
Equity holders of the Parent
|
|
(56.4)
|
(120.5)
|
Non-controlling interests
|
|
-
|
(0.1)
|
|
|
(56.4)
|
(120.6)
|
Loss per share
|
|
|
|
Basic (pence)
|
7
|
(12.6)
|
(28.3)
|
Diluted (pence)
|
7
|
(12.6)
|
(28.3)
|
Condensed Consolidated Statement of Comprehensive
Income
For the year ended 31 December 2023
|
|
2023
|
2022
|
|
Note
|
£m
|
£m
|
Loss for the year
|
|
(56.4)
|
(120.6)
|
Items that may be reclassified subsequently to profit or loss
(net of tax)
|
|
|
|
Exchange differences on
translation of foreign operations
|
|
(22.8)
|
2.5
|
Movement in cash flow hedging
position
|
|
(1.2)
|
(14.4)
|
Items that will not be reclassified to profit or loss (net of
tax)
|
|
|
|
Remeasurement of severance pay
liability
|
|
(0.2)
|
1.7
|
Actuarial remeasurement in defined
benefit pension scheme
|
|
1.8
|
(0.8)
|
Tax on severance pay
liability
|
|
-
|
0.6
|
Movement in hedging
reserve
|
|
-
|
1.0
|
Movement in equity investment designated at fair value through
OCI
|
|
-
|
(1.0)
|
Total other comprehensive loss for the
year
|
|
(22.4)
|
(10.4)
|
Total comprehensive loss for the year
|
|
(78.8)
|
(131.0)
|
Total comprehensive loss for the year attributable to equity
holders of the Parent
|
|
(78.8)
|
(130.9)
|
Total comprehensive loss for the year attributable to
non-controlling interests
|
|
-
|
(0.1)
|
Condensed Consolidated Statement of Financial
Position
At 31 December 2023
|
|
2023
|
20222
|
|
|
Note
|
£m
|
£m
|
|
Assets
|
|
|
|
Non-current assets
|
|
|
|
Goodwill and other intangible
assets
|
9
|
2,038.3
|
2,208.3
|
Right-of-use assets
|
|
78.0
|
81.9
|
Property, plant and
equipment
|
|
91.7
|
110.4
|
Investment in sublease
|
|
1.0
|
1.4
|
Investments in
associates
|
|
33.9
|
38.4
|
Non-current prepayments
|
|
2.8
|
6.2
|
Derivative financial
instruments
|
13
|
15.8
|
16.6
|
Deferred tax assets
|
|
37.0
|
5.2
|
|
|
2,298.5
|
2,468.4
|
Current assets
|
|
|
|
Cash and cash
equivalents1
|
|
256.2
|
317.6
|
Trade and other
receivables
|
|
138.0
|
132.7
|
Income tax receivable
|
|
53.3
|
35.2
|
Derivative financial
instruments
|
13
|
1.6
|
2.0
|
Assets held for sale
|
|
-
|
6.9
|
|
|
449.1
|
494.4
|
Total assets
|
|
2,747.6
|
2,962.8
|
Equity and liabilities
|
|
|
|
Share capital
|
14
|
2.2
|
2.2
|
Share premium
|
14
|
160.7
|
160.7
|
Treasury shares
|
|
(0.6)
|
(0.9)
|
Foreign currency translation
reserve
|
|
1.8
|
24.6
|
Hedging reserves
|
|
(14.6)
|
(13.4)
|
Retained earnings
|
|
(69.6)
|
(14.0)
|
Total equity
|
|
79.9
|
159.2
|
Liabilities
|
|
|
|
Non-current liabilities
|
|
|
|
Borrowings
|
12
|
1,657.2
|
1,697.5
|
Severance pay liability
|
|
0.6
|
1.2
|
Retirement benefit
liability
|
|
-
|
1.2
|
Provisions
|
11
|
104.8
|
101.9
|
Deferred tax liability
|
|
156.9
|
216.0
|
Derivative financial
instruments
|
13
|
29.9
|
17.4
|
Lease liabilities
|
|
64.2
|
65.0
|
|
|
2,013.6
|
2,100.2
|
Current liabilities
|
|
|
|
Borrowings
|
12
|
3.9
|
4.8
|
Trade and other
payables
|
|
374.7
|
368.0
|
Provisions
|
11
|
78.5
|
111.5
|
Derivative financial
instruments
|
13
|
23.5
|
20.8
|
Income tax payable
|
6
|
22.3
|
33.0
|
Lease liabilities
|
|
23.4
|
24.0
|
Customer deposits
|
|
127.8
|
141.3
|
|
|
654.1
|
703.4
|
Total equity and liabilities
|
|
2,747.6
|
2,962.8
|
|
|
|
|
|
|
1 Cash and cash equivalents
includes customer deposits of £127.8m (2022: £141.3m) which
represent bank deposits matched by customer liabilities of an equal
value. Cash and cash equivalents excludes
restricted short‐term deposits of £22.6m which are presented in
Trade and other receivables (2022: £21.6m).
2 Since the disclosure of the provisional fair values for the
acquisition of William Hill on 1 July 2022, an adjustment of £15.7m
has been made to increase the fair value of provisions, with a
related £4.4m reduction in deferred tax liabilities, and an
equivalent movement in goodwill. This adjustment has been made
after the 31 December 2022 year end accounts and during the
measurement period.
Condensed Consolidated Statement of Changes in
Equity
For the year ended 31 December 2023
|
Share
capital
|
Share
premium
|
Treasury
shares
|
Foreign currency translation
reserve
|
Hedging
reserve
|
Retained
earnings
|
Non-controlling
interests
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Balance at 1 January 2022
|
1.9
|
2.5
|
(0.9)
|
22.1
|
-
|
98.8
|
0.1
|
124.5
|
Loss after tax for the
year
|
-
|
-
|
-
|
-
|
-
|
(120.5)
|
(0.1)
|
(120.6)
|
Other comprehensive
income/(expense) for the year
|
-
|
-
|
-
|
2.5
|
(13.4)
|
0.5
|
-
|
(10.4)
|
Total comprehensive income/(expense)
|
-
|
-
|
-
|
2.5
|
(13.4)
|
(120.0)
|
(0.1)
|
(131.0)
|
Issue of shares (equity
placing)
|
0.3
|
158.2
|
-
|
-
|
-
|
-
|
-
|
158.5
|
Equity settled share benefit
charges
|
-
|
-
|
-
|
-
|
-
|
7.9
|
-
|
7.9
|
Acquisition of treasury
shares
|
-
|
-
|
(0.7)
|
-
|
-
|
-
|
-
|
(0.7)
|
Exercise of deferred share bonus
plan
|
-
|
-
|
0.7
|
-
|
-
|
(0.7)
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2022
|
2.2
|
160.7
|
(0.9)
|
24.6
|
(13.4)
|
(14.0)
|
-
|
159.2
|
Loss after tax for the
year
|
-
|
-
|
-
|
-
|
-
|
(56.4)
|
-
|
(56.4)
|
Other comprehensive
(expense)/income for the year
|
-
|
-
|
-
|
(22.8)
|
(1.2)
|
1.6
|
-
|
(22.4)
|
Total comprehensive expense
|
-
|
-
|
-
|
(22.8)
|
(1.2)
|
(54.8)
|
-
|
(78.8)
|
Equity settled share benefit
credit
|
-
|
-
|
-
|
-
|
-
|
(0.5)
|
-
|
(0.5)
|
Exercise of deferred share bonus
plan
|
-
|
-
|
0.3
|
-
|
-
|
(0.3)
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2023
|
2.2
|
160.7
|
(0.6)
|
1.8
|
(14.6)
|
(69.6)
|
-
|
79.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following describes the nature
and purpose of each reserve within equity.
Share capital - represents the nominal value of shares allotted,
called-up and fully paid.
Share premium - represents the amount subscribed for share capital
in excess of nominal value.
Treasury shares -
represents reacquired own equity instruments.
Treasury shares are recognised at cost and deducted from
equity.
Foreign currency translation reserve
- represents exchange differences arising from
the translation of all Group entities that
have functional currency different from £.
Hedging reserve - represents
changes in the fair value of derivative financial instruments
designed in a hedging relationship.
Retained earnings -
represents the cumulative net gains and losses recognised in the
Condensed Consolidated Statement of Comprehensive Income and other
transactions with equity holders.
Condensed Consolidated Statement of
Cash Flows
For the year ended 31 December 2023
|
|
2023
|
2022
|
|
Note
|
£m
|
£m
|
|
|
|
|
Cash flows
from operating
activities
|
|
|
|
Loss before income tax
|
|
(121.3)
|
(115.7)
|
Adjustments for:
|
|
|
|
Depreciation of property plant and
equipment and right-of-use assets
|
|
46.3
|
30.8
|
Amortisation
|
9
|
182.0
|
89.5
|
Interest income
|
4
|
(41.0)
|
(0.8)
|
Interest expenses
|
5
|
195.3
|
111.7
|
Income tax paid
|
|
(30.1)
|
(35.1)
|
Fair value gain on financial
assets
|
|
(4.1)
|
-
|
Share of post-tax loss of equity
accounted associate
|
|
(1.4)
|
(0.3)
|
Non-cash exceptional
items
|
|
5.9
|
52.3
|
Profit on sale of
businesses
|
|
0.3
|
-
|
Movement on Ante-post and other
financial derivatives
|
|
7.6
|
2.3
|
Profit on sale of freehold
properties via sale and leaseback
|
|
(4.6)
|
-
|
Gain on disposal of property,
plant and equipment
|
|
(1.1)
|
(0.3)
|
Share benefit
(credit)/charge
|
|
(0.5)
|
5.2
|
Cash generated from operating activities before working
capital movement
|
|
233.3
|
139.6
|
|
|
|
|
Increase in receivables
|
|
(1.9)
|
(50.3)
|
Decrease in customer
deposits
|
|
(13.4)
|
(9.2)
|
Decrease in trade and other
payables
|
|
(39.6)
|
(100.3)
|
Decrease in provisions
|
|
(27.0)
|
(10.0)
|
Net cash generated from/(used in) operating
activities
|
|
151.4
|
(30.2)
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
Acquisition of intangible
assets
|
|
(62.9)
|
(67.9)
|
Acquisition of property,
plant and
equipment
|
|
(7.4)
|
(8.9)
|
Proceeds from sale of
businesses
|
|
19.2
|
32.5
|
Proceeds on sale and leaseback of
freehold properties
|
|
22.6
|
-
|
Proceeds from sale of property,
plant and equipment
|
|
1.9
|
0.5
|
Loans to related
parties
|
|
(4.3)
|
-
|
Interest received
|
4
|
3.9
|
0.8
|
Dividend received from
associate
|
|
5.9
|
0.9
|
Acquisition of William Hill (net
of cash acquired)
|
10
|
-
|
(386.8)
|
Net cash used in investing activities
|
|
(21.1)
|
(428.9)
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
Payment of lease
liabilities
|
|
(31.8)
|
(21.5)
|
Settlement of
derivatives
|
13
|
(10.8)
|
-
|
Interest paid
|
|
(142.0)
|
(75.6)
|
Repayment of loans
|
12
|
(4.0)
|
(1,503.2)
|
Issue of shares - equity
placing
|
14
|
-
|
158.5
|
Proceeds from loans
|
12
|
-
|
2,163.1
|
Loan transaction fees
|
|
-
|
(132.3)
|
Acquisition of treasury
shares
|
|
-
|
(0.7)
|
Net cash (used in)/generated from financing
activities
|
|
(188.6)
|
588.3
|
|
|
|
|
Net (decrease)/Increase
in cash and cash
equivalents
|
|
(58.3)
|
129.2
|
Net foreign exchange
difference
|
|
|
|
|
(3.1)
|
(1.0)
|
Cash and cash equivalents at the beginning of the
year
|
|
317.6
|
189.4
|
|
|
|
|
Cash and cash equivalents at the end of the
year
|
|
256.2
|
317.6
|
Notes to the condensed consolidated financial
statements
General information
Company
description
888 Holdings PLC (the "Company")
and its subsidiaries (together the "Group") was founded in 1997 in
the British Virgin Islands and since 17 December 2003 has been
domiciled in Gibraltar (Company number 90099). On 4 October 2005,
the Company listed on the London Stock Exchange.
Definitions
In these financial
statements:
The Company
|
888 Holdings PLC.
|
The Group
|
888 Holdings PLC and its
subsidiaries.
|
Subsidiaries
|
Companies over which the Company
has control (as defined in IFRS 10 - Consolidated Financial
Statements) and whose accounts are consolidated with those of the
Company.
|
Related parties
|
As defined in IAS 24 'Related
Party Disclosures.'
|
Associates
|
As defined in IAS 28 'Investments
in Associates and Joint Ventures.'
|
1. Accounting
policies
The material accounting policies
applied in the preparation of the condensed consolidated financial
statements are as follows:
Basis of
preparation
The financial information does not
constitute the Group's statutory accounts for the year ended 31
December 2023 or the year ended 31 December 2022 but is derived
from those accounts. Statutory accounts for the year ended 31
December 2022 have been delivered to the Registrar of Companies in
Gibraltar. Statutory accounts for the year ended 31 December 2023
will be filed with Companies House Gibraltar following the
Company's Annual General Meeting. The auditors have reported on
both the 2023 and 2022 accounts and their reports were unqualified,
did not draw attention to any matters by way of emphasis and did
not contain statements under sections 257(1), 258(2) and 258(2A) of
the Gibraltar Companies Act 2014.
The condensed consolidated
financial statements of the Group have been prepared in accordance
with UK adopted international accounting standards and in
accordance with the requirements of the Gibraltar Companies Act
2014. The condensed consolidated financial statements have been
prepared on a historical cost basis, except where certain assets or
liabilities are held at amortised cost or at fair value as
described in the Group's accounting policies.
All values are rounded to the
closest hundred thousand, except when otherwise
indicated.
The significant accounting
policies applied in the condensed consolidated financial statements
in the prior year have been applied consistently in these condensed
consolidated financial statements, except for the amendments to
accounting standards effective for the annual periods beginning on
1 January 2023. These are described in more detail
below.
As a Company incorporated in
Gibraltar, 888 Holdings plc is not required by UK law or regulation
to prepare the Directors' Remuneration or Strategic reports under
regulation that applies to UK incorporated companies. However, by
virtue of 888's Premium Listing on the London Stock Exchange and
reflecting the Director's approach to good governance and investor
expectation, we have prepared these reports in line with the
requirements under the UK Companies Act 2006.
The Directors' Remuneration
Report, set out within the Annual Report and Accounts 2023, has
been voluntarily prepared in accordance with sections 420 to 422 UK
Companies Act 2006.
The information given in the
Strategic Report, set out within the Annual Report and Accounts
2023, has been voluntarily prepared in accordance with section 414
UK Companies Act 2006.
1.
Accounting
policies (continued)
Going
concern
Background
The financial statements have been
prepared using the going concern basis of accounting. As at the
year end, the Group had net assets of £79.9m (2022: £159.2m) and
incurred a statutory loss before tax of £121.3m during the year
(2022: £115.7m loss). The Group also had net current liabilities of
£205.0m (2022: £209.0m).
A full description of the Group's
business activities, financial position, cash flows, liquidity
position, committed facilities and borrowing position, together
with the factors likely to affect its future development and
performance, is set out in the Strategic Report within the Annual
Report and Accounts 2023, and in notes 12 to 13 to these financial
statements.
Business planning and performance
management
The Group has robust forecasting
and monitoring processes which consist of weekly monitoring and
careful management of liquidity, an annual budget and a long-term
plan, which generates income statement and cash flow projections
for assessment by management and the Board. Forecasts are regularly
compared with prior forecasts and current trading to identify
variances and understand their future impact so management can act
where appropriate. Analysis is undertaken to review, and sense
check the key assumptions, including the integration and
transformation programmes, underpinning the forecasts.
Whilst there are risks to the
Group's trading performance (as summarised in the Risks section of
the Strategic Report within the Annual Report and Accounts 2023,
the Group has established risk management processes to identify and
mitigate risks, and such risks have been considered when
undertaking the going concern evaluation for the period to 30 June
2025.
The Group's future prospects
The Group meets its day-to-day
working capital requirements from the positive cash flows generated
by its trading activities and its available cash resources. The
Group holds cash and cash equivalents excluding customer balances
and restricted cash of £128.4m as at 31 December 2023 (2022:
£176.3m). In addition to this the Group has access, until 31
December 2027, to a £150m Revolving Credit Facility, which was
undrawn as of 31 December 2023.
The Group entered into significant
debt arrangements in the previous year to fund the acquisition of
the William Hill business. Other than an annual $5.0m repayment on
the TLB facility, no borrowings are due within the period of the
going concern evaluation or in the period soon after it. The next
due date on the Group's debt is in 2026 and the majority is
repayable in 2027-28. The Group's Revolving Credit Facility
contains a Net Leverage covenant which is not restrictive in the
base case, downside or reverse stress test scenarios. The remainder
of the Group's debt does not contain any financial
covenants.
The Group's forecasts, for the
going concern evaluation period to 30 June 2025, based on
reasonable assumptions including, in the base case, a 10% increase
in 2024 revenue coupled with higher marketing investment, indicate
that the Group will be able to operate within the level of its
currently available and expected future facilities for this period
to 30 June 2025. Under the base case forecast, the Group has
sufficient cash reserves and available facilities to enable it to
meet its obligations as they fall due, for this going concern
evaluation period to 30 June 2025.
The Group has also assessed a
range of downside scenarios to evaluate whether any material
uncertainty exists relating to the Group's ability to continue as a
going concern. The forecasts and scenarios consider severe but
plausible downsides that could impact the Group, which are linked
to the business risks identified by the Group. These scenarios,
both individually and in combination, have enabled the Directors to
conclude that the Group has adequate resources to continue to
operate for the foreseeable future.
Specifically, the Directors have
given careful consideration to the regulatory and legal environment
in which the Group operates. Downside sensitivities have been run,
individually and in aggregate to assess the impact of the following
scenarios:
· Reductions in revenue reflecting a lower return on marketing
investment than budgeted;
· Reductions in profitability for the Group of 10% to reflect
potential regulatory, macroeconomic and competitive
pressures;
· An
increase in interest expense as a result of higher interest rates
on the Group's remaining floating rate debt;
· The
phasing of cash outflows relating to regulatory and other
provisions and accrual settlements; and
A 10% increase in the Group's
capex spend as a result of execution delays or product
overspends.
1.
Accounting
policies (continued)
Going concern
(continued)
Management has performed a
separate reverse stress test to identify the conditions that would
be required to compromise the Group's liquidity. Having done so,
management has identified further actions to conserve or generate
cash to mitigate any impact of such a scenario occurring.
Management has calculated mitigating cost savings that can be
implemented by reducing variable operating expenditure to offset a
reduction in cash generation resulting from lower profitability.
Following these actions, the Group could withstand a decrease in
forecast adjusted EBITDA of 38%. The Board
considers the likelihood of a decline of this magnitude to be
remote. Other initiatives, not directly in the Group's control at
the date of approval of these financial statements, could be
considered including the disposal of non-core assets and
investments.
Should a more extreme downside
scenario occur, or mitigations and initiatives not be achieved,
further mitigating actions that can be executed in the necessary
timeframe could be taken, such as a temporary reduction of
marketing expenditures.
Conclusion
Based on the above considerations,
the Directors continue to adopt the going concern basis in
preparing the financial statements.
New standards,
interpretations and amendments adopted by the
Group
In preparing the Group financial
statements for the current period, the Group has adopted the
following new IFRSs, amendments to IFRSs and IFRS Interpretations
Committee (IFRIC) interpretations. All standards do not have a
significant impact on the results or net assets of the Group.
Changes are detailed below:
|
|
IFRS 17
|
Insurance Contracts (effective 1
January 2023)
|
IAS 1 (amended)
|
Disclosure of accounting policies
(effective 1 January 2023)
|
IAS 8 (amended)
|
Definition of accounting estimates
(effective 1 January 2023)
|
IAS 12 (amended)
|
Deferred tax related to assets and
liabilities arising from a single transaction (effective 1 January
2023)
|
IAS 12 (amended)
|
International Tax Reform -
Pillar Two Model Rules (effective 1 January 2023)
|
Standards in issue but not effective
At the date of authorisation of
the Group financial statements, the following amendments and
Interpretations, which have not been applied in these Group
financial statements, were in issue but not yet
effective:
Amendments and interpretations
|
IAS 1 (amended)
|
Classification of liabilities as
current or non-current (effective 1 January 2024)
|
IAS 7 and IFRS 17
(amended)
|
Supplier finance arrangements
(effective 1 January 2024)
|
IAS 21 (amended)
|
Lack of exchangeability
(effective 1 January 2024)
|
IFRS 16 (amended)
|
Lease liabilities in a sale
and leaseback (effective 1 January 2024)
|
The Group does not currently
consider that the adoption of these new standards or amendments
would have a material effect on the results or financial position
of the Group.
Critical accounting
judgements and key sources of estimation
uncertainty
In the application of the Group's
accounting policies, which are described below, the Directors are
required to make judgements, estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the
estimate is revised where it affects only that period or in the
period and future periods if it affects both current and future
periods.
1.
Accounting
policies (continued)
Critical accounting
judgements
Internally generated intangible assets
Costs relating to internally
generated intangible assets are capitalised if the criteria for
recognition as assets are met. The initial capitalisation of costs
is based on management's judgement that technological and economic
feasibility criteria are met. In making this judgement, management
considers the progress made in each development project and its
latest forecasts for each project. Other expenditure is charged to
the Condensed Consolidated
Income Statement in the year in which the
expenditure is incurred. Following initial recognition, intangible
assets are carried at cost less any accumulated amortisation and
any accumulated impairment losses. For further information see note
9.
Leases
Management considers the key
judgement to be the assessment of the lease term at the point where
the lessee can be reasonably certain of its right to use the
underlying asset.
Given the number of shop closures
in the Retail estate historically, management determined the lease
term under IFRS 16 across the Retail estate as the next available
break date, as the Group is not 'reasonably certain' that any lease
break will not be exercised. The Group has recognised a lease
liability of £87.6m at 31 December 2023 (31 December 2022:
£89.0m).
Exceptional and adjusted items
The Group classifies and presents
certain items of income and expense as exceptional items. The Group
presents adjusted performance measures which differ from statutory
measures due to exclusion of exceptional items and certain non-cash
items as the Group considers that it allows a further understanding
of the underlying financial performance of the Group. These
measures are described as "adjusted" and are used by management to
measure and monitor the Group's underlying financial performance.
Non-cash items that are excluded from adjusted performance measures
of underlying financial performance include amortisation of
acquired intangibles, amortisation of finance fees, share benefit
charges and foreign exchange differences.
The Group considers any items of
income and expense for classification as exceptional if they are
one off in nature and by virtue of their size. The items classified
as exceptional (and are excluded from the adjusted measures) are
described in further detail in note 3.
Significant accounting
estimates
The following are the Group's
major sources of estimation uncertainty that have a significant
risk of resulting in a material adjustment to the carrying amounts
of assets and liabilities within the next financial
year.
Impairment of goodwill
For the purposes of impairment
testing under IAS 36 Impairment of Assets, CGUs are grouped to
reflect the level at which goodwill is monitored by management. The
key judgement is the level at which the impairment tests are
performed. Management have allocated Goodwill to Retail on a group
of CGUs basis, International on a group of CGUs basis and UK&I
Online as its own CGU as this is the lowest level at which it is
practical to monitor goodwill. These are the levels at which
goodwill is assessed for impairment. Determining whether goodwill is impaired requires an
estimation of the value in use of the cash-generating units to
which the goodwill has been allocated. The value in use calculation
requires the Group to estimate the future cash flows expected to
arise from the cash-generating unit and a suitable discount rate in
order to calculate present value. Cash flows are forecast for
periods up to five years. The key assumptions used in the model are
based on historical experience and other factors that are
considered to be relevant, including growth rates and discount
rates. For further information see note
9.
Provisions, contingent liabilities and regulatory
matters
The Group makes a number of
estimates in respect of the accounting for, and disclosure of,
expenses and contingent liabilities for customer claims. Provisions
are described in further detail in note 11 and contingent
liabilities in note 16.
In common with other businesses in
the gambling sector the Group receives claims from customers
relating to the provision of gambling services. Claims have been
received from customers in a number of (principally European)
jurisdictions and allege either failure to follow responsible
gambling procedures, breach of licence conditions or that
underlying contracts in question are null and void given local
licencing regimes.
The Group has recognised a
provision and contingent liability for customer
claims in Austria and Germany where the business has been subject
to a particular acceleration of claims since 2020 following
marketing campaigns by litigation funders in those jurisdictions.
Customers who have obtained judgement against the Group's entities
in the Austrian and German courts have sought to enforce those
judgements in Malta and Gibraltar. These are being defended on the
basis of a public policy argument. The provisions held for the
Group relating to these claims is £113.0m (2022: £112.3m), mostly
related to the Mr Green brand.
1.
Accounting
policies (continued)
The value of the provision and
contingent liability are both estimates based on
the number and individual size of claims received
to date and assumptions based on such observations as can be
derived from those claims and include an estimate of claims the
Group assess it probable, for the provision, and possible, for the
contingent liability, that it will receive in the future. If these
rates of receipt of claims were to increase by 25% compared to the
Group's expectation, the value across the provision recognised and
contingent liability disclosed would increase by £7.0m before
consideration of potential gaming tax reclaim.
Identification and valuation of William Hill intangible
assets
In the prior year, the Group
acquired the International (non-US) business of William Hill on 1
July 2022 for an enterprise value of £1.73 billion. Since the
disclosure of the provisional fair values in the prior year end
accounts and during the measurement period, an adjustment of £15.7m
has been made to increase the fair value of provisions in relation
to the customer claims in Germany, and an equivalent increase in
goodwill has been recognised. See note 10 for further details of
the change.
As part of the purchase price
allocation the Group recognised separately identifiable acquired
intangible assets comprising brands (£574.4m); customer
relationships (£595.1m) and gambling licences (£8.5m). Goodwill of
£776.6m was recognised on acquisition. The estimate of the value of
each class of asset described above is based on recognised
valuation methodologies such as the "relief from royalty" method
for brands, recognised industry comparative data and the Group's
industry experience and specialist knowledge and is therefore a
significant accounting estimate. A 5%
increase/decrease in estimated customer churn rates would
(decrease)/increase the fair value of customer relationships by
(£123.0m)/£176.0m respectively. Note that
consideration of provisions and contingent liabilities
identification and valuation on acquisition are considered in the
provision, contingent liabilities and regulatory matters section
below. This was an area where the Group made significant accounting
estimates.
Further, the Group exercised
judgement in determining the intangible assets acquired and their
fair value on the William Hill business combination, with the
support of external experts to support the valuation process, where
appropriate. See note 10 for additional information. These
estimates and judgements only relate to the prior year.
Basis of
consolidation
The condensed consolidated
financial statements include the accounts of the Company and its
subsidiaries. The subsidiaries are companies controlled by 888
Holdings PLC. Control exists where the Company has power over an
entity; exposure, or rights, to variable returns from its
involvement with an entity; and the ability to use its power over
an entity to affect the amount of its returns. Subsidiaries are
consolidated from the date the Parent gained control until such
time as control ceases.
The financial statements of
subsidiaries are included in the condensed consolidated financial
statements using the purchase method of accounting. On the date of
the acquisition, the assets and liabilities of a subsidiary are
measured at their fair values and any excess of the fair value of
the consideration over the fair values of the identifiable net
assets acquired is recognised as goodwill.
Intercompany transactions and
balances are eliminated on consolidation.
The financial statements of
subsidiaries are prepared for the same reporting period as the
Parent Company, using consistent accounting policies.
Revenue
Revenue is measured at the fair
value of the consideration received or receivable from customers
and represents amounts receivable for goods and services that the
Group is in business to provide, net of discounts, marketing
inducements and VAT, as set out below.
In the case of licensed betting
offices ("LBO") (including gaming machines), online sportsbook and
telebetting and online casino (including games on the Online arcade
and other numbers bets) revenue represents gains and losses from
gambling activity in the period. This revenue is treated as a
derivative under IFRS 9 'Financial Instruments' and is therefore
out of scope of IFRS 15 'Revenue from Contracts with Customers'.
Open positions are carried at fair value, and gains and losses
arising on this valuation are recognised in revenue, as well as
gains and losses realised on positions that have closed.
Revenue from the Online poker
business is within the scope of IFRS 15 'Revenue from Contracts
with Customers' and reflects the net income (rake) earned when a
poker game is completed, which is when the performance obligation
is deemed to be satisfied.
1.
Accounting
policies (continued)
Revenue from Business to Business
(B2B) is mainly comprised of services provided to business
partners. B2B also includes fees from the
provision of certain gaming related services to partners. Customer
advances received are treated as deferred income within current
liabilities and released as they are earned.
For services provided to business
partners through its B2B unit, the Group examines whether the
nature of its promise is a performance obligation to provide the
defined goods or services itself, which means the Group is a
principal and therefore recognises revenue as the gross amount of
the revenue generated from use of the Group's platform in online
gaming activities with the partners' share of the revenue charged
to marketing expenses; or to arrange that another party provide the
goods or services which means the Group is an agent and therefore
recognises revenue as the amount of the net commission from use of
the Group's platform.
The Group is a principal when it
controls the promised goods or services before their transfer to
the customer. Indicators that the Group controls the goods or
services before their transfer to the customer include, inter alia,
as follows: The Group is the
primary obligor for fulfilling the
promises in the contract; the Group has inventory risk before the
goods or services are transferred to the customer; and the Group
has discretion in setting the prices of the goods or
services.
Cost of
Sales
Cost of sales consists primarily
of gaming duties, payment service providers' commissions,
chargebacks, commission and royalties payable to third parties, all
of which are recognised on an accruals basis.
Operating
expenses
Operating expenses consist
primarily of marketing, staff costs and corporate professional
expenses, all of which are recognised on an accruals
basis.
Retirement benefit
costs
Payments to defined contribution
retirement benefit schemes are charged as an expense as they fall
due.
For defined benefit retirement
schemes, the cost of providing benefits is determined using the
Projected Unit Credit Method, with actuarial valuations being
carried out at each period end date. Actuarial remeasurements are
recognised in full in the period in which they occur. They are
recognised outside profit or loss and presented in the Condensed
Consolidated Statement of Other Comprehensive Income.
The net retirement benefit asset
or obligation recognised in the Condensed Consolidated Statement of
Financial Position represents the present value of the defined
benefit obligation as reduced by the fair value of scheme assets.
Any net asset resulting from this calculation is not recognised on
the balance sheet as this is expected to be used to meet the costs
of eventual wind-up of the Plan rather than refunded to the Company
in practice.
Foreign
currency
Monetary assets and liabilities
denominated in currencies other than the functional currency of the
relevant Company are translated into that functional currency using
year-end spot foreign exchange rates. Non-monetary assets and
liabilities are translated using exchange rates prevailing at the
dates of the transactions. Exchange rate differences on foreign
currency transactions are included in financial income or financial
expenses in the Condensed Consolidated Income Statement, as
appropriate.
The results and financial position
of all Group entities that have a functional currency different
from pound sterling are translated into the presentation currency
at foreign exchange rates as set out below. Exchange differences
arising, if any, are recorded in the Condensed Consolidated
Statement of Comprehensive Income as a component of other
comprehensive income.
(i)
assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance sheet;
and
(ii)
income and expenses for each income statement are translated at an
average exchange rate (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the dates of the transactions).
1.
Accounting
policies (continued)
Finance
income
Finance income relates to interest
income and is accrued on a time basis, by reference to the
principal outstanding and the effective interest rate
applicable.
Finance
costs
Finance costs arising on
interest-bearing financial instruments carried at amortised cost
are recognised in the Condensed Consolidated Income Statement using
the effective interest rate method. Finance costs include the
amortisation of fees that are an integral part of the effective
finance cost of a financial instrument, including issue costs, and
the amortisation of any other differences between the amount
initially recognised and the redemption price.
Taxation
The tax expense represents the sum
of the tax currently payable and deferred tax.
The tax currently payable is based
on taxable profit for the period. Taxable profit differs from net
profit as reported in the Condensed
Consolidated Income Statement because it excludes items of income
or expense that are taxable or deductible in other periods, and it
further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the period end
date.
Deferred tax is the tax expected
to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit and is accounted for using the liability method. Deferred
tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. Such assets
and liabilities are not recognised if the temporary difference
arises from goodwill or from the initial recognition (other than in
a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax liabilities are
recognised for taxable temporary differences arising on investments
in subsidiaries and associates, except where the Group is able to
control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred
tax assets is reviewed at each period end date and reduced to the
extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the
tax rates that are expected to apply in the period when the
liability is settled or the asset is realised based on tax laws and
rates that have been enacted at the period end date. Deferred tax
is charged or credited in the
Condensed Consolidated Income
Statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt
with in equity.
The Group has applied the
exception to recognising and disclosing information about deferred
tax assets and liabilities arising from the implementation of the
global minimum tax rules published by the Organization for Economic
Cooperation and Development ("OECD"), so-called Pillar Two income
taxes, as required under IAS 12.
Goodwill
Goodwill represents the excess of
the fair value of the consideration in a business combination over
the Group's interest in the fair value of the identifiable assets,
liabilities and contingent liabilities acquired. Consideration
comprises the fair value of any assets transferred, liabilities
assumed and equity instruments issued.
Goodwill is capitalised as an
intangible asset with any impairment in carrying value being
charged to the Condensed Consolidated Income Statement and not
subsequently reversed. Where the fair values of identifiable
assets, liabilities and contingent liabilities exceed the fair
value of consideration paid, the excess is credited in full to the
Condensed Consolidated Income Statement on the acquisition. Changes
in the fair value of the contingent consideration and direct costs
of acquisition are charged or credited immediately to the Condensed
Consolidated Income Statement.
1.
Accounting
policies (continued)
Intangible
assets
Acquired intangible assets
Intangible assets arising on
acquisitions are recorded at their fair value.
Amortisation is provided at rates
calculated to write off the valuation, less estimated residual
value, of each asset on a straight-line basis over its expected
useful life, as follows:
Acquired brands
|
- assessed separately for each asset, with lives ranging up to
30 years
|
Customer relationships
|
- between 18 months and 13 years
|
Bookmaking and mobile
technology
|
- between three and five years
|
Licences
|
- 10 to 20 years
|
Amortisation of assets arising on
acquisition is recognised as an adjusted item, please see note 3
for further information.
Internally generated intangible assets
An internally generated intangible
asset arising from the Group's development of computer systems is
recognised only if all of the following conditions are
met:
- an asset is created that can be
identified (such as software and new processes);
- it is probable that the asset
created will generate future economic benefits; and
- the development cost of the
asset can be measured reliably.
Expenditure incurred on
development activities of gaming platforms is capitalised only when
the expenditure will lead to new or substantially improved products
or processes, the products or processes are technically and
commercially feasible and the Group has sufficient resources to
complete development. All other development expenditure is
expensed. Subsequent expenditure on intangible assets is
capitalised only where it clearly increases the economic benefits
to be derived from the asset to which it relates. The Group
estimates the useful life of these assets as between three and five
years.
Property, plant and
equipment
Property, plant and equipment is
stated at historical cost less accumulated depreciation. Assets are
assessed at each balance sheet date for indicators of
impairment.
Depreciation is calculated using
the straight-line method, at annual rates estimated to write off
the cost of the assets less their estimated residual values over
their expected useful lives. The annual depreciation rates are as
follows:
Freehold buildings
|
50 years
|
Long leasehold
properties
|
50 years
|
Short leasehold
properties
|
over the unexpired period of the
lease
|
Short leasehold
improvements
|
the shorter of ten years or the
unexpired period of the lease
|
Fixtures, fittings and equipment
and motor vehicles
|
at variable rates between three
and ten years
|
Right-of-use asset
|
reasonably certain lease
term
|
Impairment of non-financial
assets
An intangible asset with an
indefinite useful life is tested for impairment annually and
whenever there is an indication that the asset may be impaired. At
each period end date, the Group reviews the carrying amounts of its
goodwill, property plant and equipment and intangible assets to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where the asset does
not generate cash flows that are independent from other assets, the
Group estimates the recoverable amount of the cash-generating unit
to which the asset belongs.
The recoverable amount is the
higher of fair value less costs to sell and value in use. In
assessing value in use, the estimated future pre-tax cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted. This process is described
in more detail in note 9 to the financial statements.
1.
Accounting
policies (continued)
If the recoverable amount of an
asset (or cash-generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognised as an expense immediately.
Other than for goodwill, where an
impairment loss subsequently reverses, the carrying amount of the
asset (or cash-generating unit) is increased to the revised
estimate of its recoverable amount, but only to the point that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior periods. A
reversal of an impairment loss is recognised as income
immediately.
Fair value
measurement
The Group measures certain
financial instruments at fair value at each balance sheet date. The
fair value related disclosures are included in notes 24 and 25 of
the Annual Report and Accounts 2023. Fair value is the price that
would be received or paid in an orderly transaction between market
participants at a particular date, either in the principal market
for the asset or liability or, in the absence of a principal
market, in the most advantageous market for that asset or liability
accessible to the Group.
The Group uses valuation
techniques that are appropriate in the circumstances and for which
sufficient data is available to measure fair value, maximising the
use of relevant observable inputs and minimising the use of
unobservable inputs.
IFRS 13 'Fair Value Measurement'
emphasises that fair value is a market-based measurement, not an
entity-specific measurement. Therefore, fair value
measurements under IFRS 13 should be determined based on the
assumptions that market participants would use in pricing the asset
or liability. As a basis for considering market participant
assumptions in fair value measurements, IFRS 13 establishes a fair
value hierarchy that distinguishes between market participant
assumptions based on market data obtained from sources independent
of the reporting entity (observable inputs that are classified
within Levels 1 and 2 of the hierarchy) and the reporting entity's
own assumptions about market participant assumptions (unobservable
inputs classified within Level 3 of the hierarchy).
- Level 1 inputs utilise quoted prices (unadjusted) in active
markets for identical assets or liabilities that the Company has
the ability to access.
- Level 2 inputs are inputs other than quoted prices included in
Level 1 that are observable for the asset or liability, either
directly or indirectly. Level 2 inputs may include quoted prices
for similar assets and liabilities in active markets, as well as
inputs that are observable for the asset or liability (other than
quoted prices), such as interest rates, foreign exchange rates, and
yield curves that are observable at commonly quoted
intervals.
- Level 3 inputs are unobservable inputs for the asset or
liability, which are typically based on an entity's own
assumptions, as there is little, if any, related market activity.
In instances where the determination of the fair value measurement
is based on inputs from different levels of the fair value
hierarchy, the level in the fair value hierarchy within which the
entire fair value measurement falls is based on the lowest level
input that is significant to the fair value measurement in its
entirety. The Company's assessment of the significance of a
particular input to the fair value measurement in its entirety
requires judgment and considers factors specific to the asset or
liability.
Assets held for
sale
Assets categorised as held for
sale are held on the Condensed Consolidated Statement of Financial
Position at the lower of the book value and fair value less costs
to sell. This assessment is carried out when assets are transferred
to held for sale. The impact of any adjustment as a part of this
assessment is booked through the Condensed Consolidated Income
Statement.
Cash and cash
equivalents Cash comprises cash in
hand, balances with banks and on-demand
deposits. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash.
They include short-term deposits originally purchased with
maturities of three months or less.
1.
Accounting
policies (continued)
Trade
receivables
Trade receivables are initially
recognised at fair value and subsequently measured at amortised
cost and principally comprise amounts due from credit card
companies and from e-payment companies. The Group has applied IFRS
9's simplified approach and has calculated the 'expected credit
losses' ('ECLs') based on lifetime of expected credit losses. Bad
debts are written off when there is objective evidence that the
full amount may not be collected.
Equity
Equity issued by the Company is
recorded as the proceeds received from the issue of shares, net of
direct issue costs.
Treasury
shares
Own equity instruments that are
reacquired (treasury shares) are recognised at cost and deducted
from equity. No gain or loss is recognised in profit or loss on the
purchase, sale, issue or cancellation of the Group's own equity
instruments. Any difference between the carrying amount and the
consideration, if reissued, is recognised in the share premium
account.
Dividends
Dividends are recognised when they
become legally payable. In the case of interim dividends to equity
shareholders, this is when declared by the Board of Directors and
paid. In the case of final dividends, this is when approved by the
shareholders at the Annual General Meeting.
Equity-settled Share benefit
charges
Where the Company grants its
employees or contractors shares or options, the cost of those
awards, recognised in the Condensed Consolidated Income Statement
over the vesting period with a corresponding increase in equity, is
measured with reference to the fair value at the date of grant.
Market performance conditions are taken into account in determining
the fair value at the date of grant. Non-market performance
conditions, including service conditions, are taken into account by
adjusting the number of instruments expected to vest at each
balance sheet date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of
instruments that eventually vest.
Cash-settled
transactions
A liability is recognised for the
fair value of cash-settled transactions. The fair value is measured
initially and at each reporting date up to and including the
settlement date, with changes in fair value recognised within
employee benefits expenses. The fair value is expensed over the
period until the vesting date with recognition of a corresponding
liability. The approach used to account for vesting conditions when
measuring equity-settled transactions also applies to cash-settled
transactions.
Severance pay
schemes
The Group operates two severance
pay schemes:
Defined benefit severance pay scheme
The Group operates a defined
benefit severance pay scheme pursuant to the Severance Pay Law in
Israel. Under this scheme Group employees are entitled to severance
pay upon redundancy or retirement. The liability for termination of
employment is measured using the projected unit credit
method.
Severance
pay scheme surpluses and deficits are measured as:
·
the fair value of plan assets at the reporting
date; less
·
plan liabilities calculated using the projected
unit credit method, discounted to its present value using yields
available for the appropriate government
bonds that have maturity dates appropriate to the terms of the
liabilities.
Remeasurements of the net
severance pay scheme assets and liabilities, including actuarial
gains and losses on the scheme liabilities due to changes in
assumptions or experience within the scheme and any differences
between the interest income and the actual return on assets, are
recognised in the Condensed Consolidated Statement of Comprehensive
Income in the period in which they arise.
1.
Accounting
policies (continued)
Defined contribution severance pay scheme
In 2017 the Group introduced a
defined contribution plan pursuant to section 14 to the Severance
Pay Law. Under this scheme the Group pays fixed monthly
contributions. Payments to defined contribution plans are charged
as an expense as they fall due.
Borrowings
The Group records bank and other
borrowings initially at fair value, which equals the proceeds
received, or acquired in a business transaction, net of direct
issue costs, and subsequently at amortised cost. The Group accounts
for finance charges, including premiums payable on settlement or
redemption and direct issue costs, using the effective interest
rate method.
Derivatives and hedging
activities
The Company enters into a variety
of derivative financial instruments to manage its exposure to
interest rate and foreign exchange rate risks.
Derivatives are initially
recognised at fair value at the date the derivative contracts are
entered into and are subsequently remeasured to their fair value at
the end of each reporting period. The accounting for subsequent
changes in fair value depends on whether or not the derivative is
designated for hedge accounting.
Hedge
accounting
The Company designates certain
derivatives as hedging instruments as either:
- hedges of a particular risk associated with the cash flows of
recognised assets and liabilities and highly probable forecast
transactions (cash flow hedges); or
- hedges of the fair value of recognised assets or liabilities
or a firm commitment (fair value hedges);
At the inception of the hedge
relationship, the Company documents the relationship between the
hedging instrument and the hedged item along with its risk
management objectives and its strategy for undertaking various
hedge transactions. Furthermore, at the inception of the hedge, and
on an ongoing basis, the Company documents whether a hedging
relationship meets the hedge effectiveness requirements under IFRS
9 and whether there continues to be an economic relationship
between the hedged item and the hedging instrument.
Cash flow hedges
The effective portion of changes
in the fair value of derivatives that are designated and qualify as
cash flow hedges is recognised in other comprehensive income and
accumulated under the heading of cash flow hedge reserve. The gain
or loss relating to the ineffective portion is recognised
immediately within profit and loss.
Amounts previously recognised in
other comprehensive income are reclassified to earnings in the
periods when the hedged item is recognised in profit and loss.
These earnings are included within the same line of the Condensed
Consolidated Income Statement as the recognised hedged item.
However, when the hedged forecast transaction results in the
recognition of a non-financial asset or a non-financial liability,
the gains and losses previously recognised in other comprehensive
income and accumulated in equity are transferred from equity and
included in the initial measurement of the cost of the
non-financial asset or non-financial liability.
Hedge accounting is discontinued
when the hedging instrument expires or is sold, terminated, or
exercised, or when it no longer meets the criteria for hedge
accounting. Any gain or loss recognised in the cash flow hedge
reserve remains in equity and is recognised in profit or loss when
the forecast transaction is ultimately recognised in profit or
loss. When a forecast transaction is no longer expected to occur,
the gain or loss accumulated in equity is recognised immediately in
profit or loss.
Derivatives that do not qualify for hedge
accounting
Certain derivative instruments do
not qualify for hedge accounting. Changes in the fair value of any
derivative instrument that does not qualify for hedge are
recognised immediately in profit or loss and are included in
"finance income/expense".
1.
Accounting
policies (continued)
Leasing
At inception of a contract, the
Group considers whether the contract is, or contains, a lease. A
contract is, or contains, a lease if the contract conveys the right
to control the use of an identified asset for a period of time in
exchange for consideration.
The Group recognises a
right-of-use asset and a lease liability at the lease commencement
date. The lease liability is initially measured at the present
value of the lease payments that have not been paid at the
commencement date, discounted using an appropriate discount rate.
The discount rate used to calculate the lease liability is the rate
implicit in the lease, if it can be readily determined, or the
lessee's incremental borrowing rate if not. The Group uses an
incremental borrowing rate for its leases, which is determined
based on the margin requirements of the Group's revolving credit
facilities as well as country specific adjustments. A right-of-use
asset is also recognised equal to the lease liability and
depreciated over the period from the commencement date to the
earlier of, the end of the useful life of the right-of-use asset or
the lease term. The Group has assessed the lease term of properties
within its retail estate to be up to the first available
contractual break within the lease. The Group has deemed that it
cannot be reasonably certain that it will continue beyond this time
given the continued uncertainty surrounding the Group's retail
business.
The Group has also applied the
below practical expedients:
· exclude
leases from measurement and recognition where the lease term ends
within 12 months from the date of initial application and account
for those leases as short-term leases;
·
exclude low value leases for lease values less
than £5,000;
·
apply a single discount rate to a portfolio of
leases with similar characteristics;
·
use hindsight to determine the lease term if the
contract contains options to extend or terminate; and
·
exclude initial direct lease costs in the
measurement of the right-of-use asset.
The Group has a small number of
sublet properties. In these instances, leases are classified as
finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases. Where the
Group is an intermediate lessor, the sublease classification is
assessed with reference to the head lease right-of-use asset.
Amounts due from lessees under finance leases are recorded as
receivables at the amount of the Group's net investment in the
lease. Finance lease income is allocated to accounting periods to
reflect a constant periodic rate of return on the Group's net
investment in the lease. Rental income from operating leases is
recognised on a straight-line basis over the term of the lease.
IFRS 16 requires lessees to recognise right-of-use assets and lease
liabilities for most leases.
Trade and other
payables
Trade and other payables are
initially recognised at fair value and subsequently measured at
amortised cost.
Provisions
Provisions are recognised when the
Group has a present or constructive obligation as a result of a
past event from which it is probable that it will result in an
outflow of economic benefits that can be reasonably
estimated.
Liabilities to
customers
Liabilities to customers comprise
the amounts that are credited to customers' bankroll (the Group's
electronic "wallet"), including provision for bonuses granted by
the Group, less fees and charges applied to customer accounts,
along with full progressive provision for jackpots. These amounts
are repayable in accordance with the applicable terms and
conditions.
2.
Segment
information
The Board has reviewed and
confirmed the Group's reportable segments in accordance with the
requirements of IFRS 8 'Operating Segments'. The segments disclosed
below are aligned with the reports that the Group's Chief Executive
Officer and Chief Financial Officer as Chief Operating Decision
Makers review to make strategic decisions.
The Retail segment comprises all
activity undertaken in LBOs including gaming machines. The UK&I
Online segment comprises all online activity, including sports
betting, casino, poker and other gaming products along with
telephone betting services that are incurred within the UK and
Ireland. The International segment comprises all online activity,
including sports betting, casino, poker and other gaming products
along with telephone betting services that are incurred within all
territories excluding the UK and Ireland. There are no
inter-segmental sales within the Group.
Segment performance is shown on an
adjusted EBITDA basis, with a reconciliation from adjusted EBITDA
to statutory results for clarity. Information for the year ended 31
December 2023 is as follows:
2023
|
Retail
|
UK&I
Online
|
International
|
Corporate
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
Revenue1
|
535.0
|
658.5
|
517.4
|
-
|
1,710.9
|
Gaming duties and other cost of
sales
|
(115.4)
|
(246.6)
|
(207.2)
|
-
|
(569.2)
|
Adjusted Gross Profit
|
419.6
|
411.9
|
310.2
|
-
|
1,141.7
|
Marketing
|
(6.5)
|
(134.5)
|
(96.8)
|
-
|
(237.8)
|
Contribution
|
413.1
|
277.4
|
213.4
|
-
|
903.9
|
Operating
expenses
|
(314.2)
|
(125.1)
|
(114.0)
|
(43.7)
|
(597.0)
|
Associate income
|
-
|
-
|
-
|
1.4
|
1.4
|
Adjusted EBITDA
|
98.9
|
152.3
|
99.4
|
(42.3)
|
308.3
|
Depreciation
|
|
|
|
|
(46.3)
|
Amortisation (excluding acquired
intangibles)
|
|
|
|
|
(67.7)
|
Amortisation of acquired
intangibles
|
|
|
|
|
(114.3)
|
Exceptional items
|
|
|
|
|
(52.6)
|
Fair value gain on financial
assets
|
|
|
|
|
4.1
|
Share benefit credit
|
|
|
|
|
0.5
|
Foreign exchange
|
|
|
|
|
1.0
|
Finance expenses
|
|
|
|
|
(195.3)
|
Finance income
|
|
|
|
|
41.0
|
Loss before tax
|
|
|
|
|
(121.3)
|
1
Revenue recognised under
IFRS 9 is £535.0m in Retail, £658.5m in UK&I Online and £486.9m
in International. Revenue recognised under IFRS 15 is £nil in
Retail, £nil in UK&I Online and £30.5m in
International.
|
|
Retail
|
UK&I
Online
|
International
|
Corporate
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
Total segment assets
|
|
516.2
|
1,292.4
|
759.3
|
89.4
|
2,657.3
|
Total segment liabilities
|
|
173.3
|
265.7
|
219.6
|
1,829.9
|
2,488.5
|
Included within total segment
assets:
|
|
|
|
|
|
|
Goodwill
|
|
99.4
|
357.9
|
306.0
|
-
|
763.3
|
Interests in
associates
|
|
-
|
-
|
-
|
33.9
|
33.9
|
Capital
additions
|
|
4.6
|
11.2
|
66.3
|
2.2
|
84.3
|
2.
Segment
information (continued)
2022
|
Retail
|
UK&I
Online
|
International
|
Other2
|
Corporate
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Revenue1
|
255.5
|
455.5
|
508.3
|
19.5
|
-
|
1,238.8
|
Gaming duties and other cost of
sales
|
(55.0)
|
(163.7)
|
(184.7)
|
(10.5)
|
-
|
(413.9)
|
Adjusted Gross Profit
|
200.5
|
291.8
|
323.6
|
9.0
|
-
|
824.9
|
Marketing
|
(3.3)
|
(148.1)
|
(105.2)
|
(2.5)
|
-
|
(259.1)
|
Contribution
|
197.2
|
143.7
|
218.4
|
6.5
|
-
|
565.8
|
Operating
expenses
|
(156.0)
|
(82.1)
|
(100.1)
|
(4.8)
|
(5.2)
|
(348.2)
|
Associate income
|
-
|
-
|
-
|
-
|
0.3
|
0.3
|
Adjusted EBITDA
|
41.2
|
61.6
|
118.3
|
1.7
|
(4.9)
|
217.9
|
Depreciation
|
|
|
|
|
|
(30.8)
|
Amortisation (excluding
acquired intangibles)
|
|
|
|
|
|
(32.8)
|
Amortisation of acquired
intangibles
|
|
|
|
|
|
(56.7)
|
Exceptional items - cost of
sales and operating expenses
|
|
|
|
|
|
(93.2)
|
Share benefit
charge
|
|
|
|
|
|
(5.2)
|
Foreign exchange
|
|
|
|
|
|
(4.0)
|
Finance expenses
|
|
|
|
|
|
(111.7)
|
Finance income
|
|
|
|
|
|
0.8
|
Loss before tax
|
|
|
|
|
|
(115.7)
|
1 Revenue recognised under IFRS 9 is £255.5m in Retail,
£455.5m in UK&I Online, £502.7m in International and £10.9m in
Other. Revenue recognised under IFRS 15 is £nil in Retail, £nil in
UK&I Online, £5.6m in International and £8.6m in
Other.
2 'Other' represents the Bingo business that was
disposed of during 2022. See note 10 for further
information.
|
Retail
|
UK&I
Online
|
International
|
Corporate
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
Total segment assets
|
542.6
|
1,394.9
|
973.2
|
11.7
|
2,922.4
|
Total segment
liabilities
|
176.3
|
341.6
|
578.0
|
1,458.7
|
2,554.6
|
Included within total
assets:
|
|
|
|
|
|
Goodwill
|
99.4
|
359.8
|
338.1
|
-
|
797.3
|
Interests in
associates
|
-
|
-
|
-
|
38.4
|
38.4
|
Capital
additions
|
13.4
|
24.6
|
68.3
|
1.1
|
107.4
|
3.
Exceptional
items and adjustments
In determining the classification
and presentation of exceptional items we have applied consistently
the guidelines issued by the Financial Reporting Council ('FRC')
that primarily addressed the following:
· Consistency and even-handedness in classification and
presentation;
· Guidance on whether and when recurring items should be
considered as part of underlying results; and
· Clarity in presentation, explanation and disclosure of
exceptional items and their relevance.
In preparing the Annual Report and
Accounts, we also note the European Securities and Markets
Authority ('ESMA') guidance on Alternative Performance Measures
(APM), including:
· Clarity of presentation and explanation of the
APM;
· Reconciliation of each APM to the most directly reconcilable
financial statement caption;
· APMs
should not be displayed with more prominence than statutory
financials;
· APMs
should be accompanied by comparatives; and
· The
definition and calculation of APMs should be consistent over
time.
We are satisfied that our policies
and practice conform to the above guidelines.
3.
Exceptional
items and adjustments (continued)
Adjusted
results
The Group reports adjusted
results, both internally and externally, that differ from statutory
results prepared in accordance with IFRS. These adjusted results,
which include our key metrics of adjusted EBITDA and adjusted EPS,
are considered to be a useful reflection of the underlying
performance of the Group and its businesses, since they exclude
items which impair visibility of the underlying activity in each
segment. More specifically, visibility can be impaired in one or
both of the following instances:
- a
transaction is of such a material or infrequent nature that it
would obscure an understanding of underlying outcomes and trends in
revenues, costs or other components of performance (for example, a
significant impairment charge); or
- a
transaction that results from a corporate activity that has neither
a close relationship to the Group's operations nor any associated
operational cash flows (for example, the amortisation of
intangibles recognised on acquisitions).
Adjusted results are used as the
primary measures of business performance within the Group and align
with the results shown in management accounts, with the key uses
being:
- management and
Board reviews of performance against expectations and over time,
including assessments of segmental performance (see note 2 and the
Strategic Report in the Annual Report and Accounts
2023);
- in support
of business decisions by the Board and by management, encompassing
both strategic and operational levels of decision-making
The Group's policies on adjusted
measures are consistently applied over time, but they are not
defined by IFRS and, therefore, may differ from adjusted measures
as used by other companies.
The Condensed Consolidated Income
Statement presents adjusted results alongside statutory measures,
with the reconciling items being itemised and described below. We
discriminate between two types of reconciling items: exceptional
items and adjusted items.
Exceptional
items
Exceptional items are those items
the Directors consider to be one-off or material in nature that
should be brought to the reader's attention in understanding the
Group's financial performance.
Exceptional items are as
follows:
|
2023
|
2022
|
|
£m
|
£m
|
Cost of sales
|
|
|
Retroactive duties and associated
credit
|
-
|
(3.9)
|
Exceptional items - cost of sales
|
-
|
(3.9)
|
Operating expenses
|
|
|
Corporate transaction related
(income)/costs
|
(0.1)
|
36.2
|
Integration and transformation
costs
|
49.3
|
14.4
|
Regulatory provisions and other
associated costs
|
3.4
|
-
|
Impairment of US Goodwill and
other assets
|
-
|
55.7
|
Revaluation of contingent
consideration
|
-
|
(9.2)
|
Exceptional items - operating expenses
|
52.6
|
97.1
|
Finance expenses
|
|
|
Senior Unsecured Notes early
redemption fees
|
-
|
14.1
|
Gain on settlement of Senior
Unsecured Notes
|
-
|
(7.1)
|
Exceptional items - finance expenses
|
-
|
7.0
|
Total exceptional items before tax
|
52.6
|
100.2
|
Tax on exceptional
items
|
(9.0)
|
2.8
|
Total exceptional items
|
43.6
|
103.0
|
Total exceptional items in the
year were £43.6m in 2023 compared to £103.0m in 2022.
Exceptional items are defined as
those items which are considered to be one-off or material in
nature to be brought to attention to better understand the Group's
financial performance. Comparatives are included even when not
individually material to aid comparability.
3.
Exceptional
items and adjustments (continued)
Retroactive gaming duties
and associated charges
The industry in which the Group
operates is subject to continuing scrutiny by regulators and other
governmental authorities, which may, in certain circumstances, lead
to enforcement actions, sanctions, fines and penalties or the
assertion of private litigations, claims and damages. In 2022, a
net credit of £3.9m was recognised in respect to exceptional
provision for retroactive duties and associated charges following a
reassessment of potential gaming duties relating to activity in
prior years.
Corporate transaction
related costs
The Group has incurred legal and
M&A costs, including in relation to the disposal of its Latvia
and Colombia businesses of £0.8m. During 2023, income relating to
the acquisition of William Hill was received from Caesars,
amounting to £2.0m. During 2022, the Group incurred £24.5m of costs
associated with the acquisition of the international (non-US)
business of William Hill and recognised an impairment loss of
£11.7m in relation to the disposal of 888 Bingo.
Integration and
transformation costs
The Group has incurred a total of
£49.3m of costs relating to the integration programme, including
£14.7m of platform integration costs, £8.3m of legal and
professional costs, £10.8m of redundancy costs, £5.3m of relocation
and HR related expenses, £4.7m of employee incentives as part of
the integration of William Hill and 888, and £3.8m of technology
integration costs. During 2022, the Group
incurred £14.4m, including £5.8m of redundancy costs, £3.0m of
legal and consultancy fees and £3.7m of platform separation and
other integration costs.
Regulatory provisions and
other associated costs
The Group has paid £2.9m during
the period related to a regulatory settlement with the Gibraltar
regulator in relation to the previously disclosed failings that we
identified in our Middle East business. Further to this there was
£0.5m of professional fees incurred relating to this
settlement.
Impairment of US Goodwill
and other assets
During the prior year, as a part
of the annual impairment review, management performed a value in
use calculation to assess the recoverable amount of the Group's US
business, using that business's underlying cash flow forecasts. The
recoverable amount was lower than the book value of its net assets
and, as such, the Group impaired the goodwill on the US business in
full, totalling £25.7m. Additionally as part of the integration,
the business intends to use the existing 888 technology platform as
the basis for the future platform of the Group which led to a write
off of the Unity platform, a proprietary technology system
William Hill was building that is no longer needed, at a cost of
£28.1m. A further £1.4m of smaller technology assets were written
off and £0.5m of 39 freehold assets were written off when
reclassified to held for sale at the prior year end, due to the
assets being tested for impairment as a result of the
transfer.
Revaluation of contingent
consideration
As a part of the transaction
agreement with Caesars for the purchase of William Hill, an amount
of up to £100.0m consideration was contingent subject to the
enlarged group hitting specific EBITDA metrics. This was assessed
at fair value on acquisition at £9.6m and revalued at 31 December
2022 to £0.4m, leading to a release in this contingent
consideration of £9.2m in the prior period.
Senior Unsecured Notes early
redemption fees
As part of the William Hill
acquisition, the Group acquired certain Senior Unsecured Notes,
£350.0m 4.875% due May 2023 and £350.0m 4.75% due May 2026.
Subsequent to the acquisition, the £350.0m Note due May 2023 was
fully redeemed as well as a partial redemption amounting to £339.5m
of the Note due May 2026. The total cost to the Group of settling
the Notes consisted of £12.2m in early redemption fees together
with a combined £1.9m of unamortised finance fees, which were
written off to the income statement immediately in the prior period
on redemption of each note. All of the costs were considered as
exceptional due to their one-off nature.
Gain on settlement of Senior
Unsecured Notes
The Senior Unsecured Notes
acquired in the acquisition of William Hill were accounted for at
fair value. These Notes were settled in the prior period, and as
such the gain on settlement of these Notes of £7.1m was recognised
in the prior period.
3.
Exceptional
items and adjustments (continued)
Adjusted
items
Adjusted items are recurring items
that are excluded from internal measures of underlying performance
and which are not considered by the Directors to be exceptional.
This relates to the amortisation of specific intangible assets
recognised in acquisitions, amortisation of finance fees, fair
value gain of financial assets, foreign exchange and share benefit
charges. These items are defined as adjusted items as it is
believed it would impair the visibility of the underlying
activities across each segment as it is not closely related to the
businesses' or any associated operational cash flows. Each of these
items are recurring and occur in each reporting period and will be
consistently adjusted in future periods. Adjusted items are all
shown on the face of the Condensed Consolidated Income Statement in
the reconciliations of adjusted EBITDA and note 7 in the
reconciliation of adjusted profit after tax.
4.
Finance
income
|
|
2023
|
2022
|
|
|
£m
|
£m
|
Interest income
|
|
4.6
|
0.8
|
Foreign exchange on financing
activities
|
|
36.4
|
-
|
Total finance income
|
|
41.0
|
0.8
|
5.
Finance
expenses
|
|
|
2023
|
2022
|
|
|
Note
|
£m
|
£m
|
Interest expenses related to lease
liabilities
|
|
|
6.9
|
3.0
|
Bank loans and bonds
|
|
|
175.8
|
74.9
|
Amortisation of finance
fees
|
|
|
-
|
0.1
|
Hedging activities
|
|
|
12.1
|
3.3
|
Foreign exchange on financing
activities
|
|
|
-
|
22.7
|
Other finance charges and
fees
|
|
|
0.5
|
0.7
|
Finance expenses - underlying
|
|
|
195.3
|
104.7
|
Senior Unsecured Notes early
redemption fees
|
|
3
|
-
|
14.1
|
Gain on settlement of Senior
Unsecured notes
|
|
3
|
-
|
(7.1)
|
Finance expenses - exceptional
|
|
|
-
|
7.0
|
Total finance expenses
|
|
|
195.3
|
111.7
|
6.
Taxation
Corporate
taxes
|
|
2023
|
|
|
|
£m
|
|
Current taxation
|
|
|
|
UK corporation tax charge at
23.5%
|
|
0.7
|
|
Other jurisdictions
taxation
|
|
22.0
|
|
Adjustments in respect of prior
years
|
|
(21.0)
|
|
|
|
1.7
|
|
Deferred taxation
|
|
|
|
Origination and reversal of
temporary differences
|
|
(37.7)
|
|
Recognition of previously
unrecognised deductible temporary differences
|
|
(30.2)
|
|
Adjustments in respect of prior
years
|
|
1.3
|
|
|
|
(66.6)
|
|
|
|
|
|
Taxation credit
|
|
(64.9)
|
|
|
|
|
|
Deferred taxation related to items recognised in
OCI
|
|
|
|
Remeasurement of severance pay
liability
|
|
-
|
|
6.
Taxation
(continued)
|
|
2022
|
|
|
£m
|
Current taxation
|
|
|
UK corporation tax charge at
19.0%
|
|
6.5
|
Other jurisdictions
taxation
|
|
17.8
|
Adjustments in respect of prior
years
|
|
1.3
|
|
|
25.6
|
Deferred taxation
|
|
|
Origination and reversal of
temporary differences
|
|
(3.0)
|
Adjustments in respect of prior
years
|
|
(17.7)
|
|
|
(20.7)
|
|
|
|
Taxation expense
|
|
4.9
|
|
|
|
Deferred taxation related to items recognised in
OCI
|
|
|
Remeasurement of severance pay
liability
|
|
0.6
|
The UK tax rate increased from 19%
to 25% on 1 April 2023 giving an average UK tax rate for the year
of 23.5%.
The effective tax rate in respect
of ordinary activities before exceptional items for the year ended
31 December 2023 is 81.4% (2022: 20.0%). The effective tax rate in
respect of ordinary activities after exceptional items is 53.5% (31
December 2022: -4.2%).
Pillar Two legislation has been
acted, or substantively enacted, in certain jurisdictions in which
the Group operates. The legislation will be effective for the
Group's financial year beginning 1 January 2024. The Group is in
scope of the enacted or substantively enacted legislation and has
performed an assessment of the Group's potential exposure to Pillar
Two income taxes.
The assessment of the potential
exposure to Pillar Two income taxes is based on the information
available regarding the financial performance of the constituent
entities in the Group for the year ended 31 December 2023 and
forecasts for the year ended 31 December 2024. Based on the
assessment, the Group has identified potential exposure to Pillar
Two income taxes in respect of profits earned in Gibraltar, Malta,
and Spain. The potential exposure comes from the constituent
entities (mainly licensed operating subsidiaries) in these
jurisdictions where the expected Pillar Two effective tax rate is
below
15%.
The Pillar Two effective tax rate
is lower in these jurisdictions due to the Group being subject to
tax at effective rates lower than 15% in those countries (Gibraltar
at 12.5%, Spain at 12.5%, and Malta at 5% after the distribution of
profits).
Had the Pillar Two legislation
been effective for the current year ending 31 December 2023, the
restated effective tax rate under IFRS would be approximately
49.5-51.5% which would have been 2-4% lower than the reported
effective rate under IFRS of 53.5%. The rate would be lower because
the Group reports a tax credit on a loss and the tax credit would
be reduced due to the Pillar Two income tax charge. The impact on
the effective tax rate under IFRS for the Group is mainly driven by
top up taxes arising on profits earned in Gibraltar, Malta, and
Spain where the Pillar Two effective tax rate is lower than 15%.
The impact on the effective tax rate in 2024 will depend on factors
such as revenues and costs.
The difference between the total
tax charge shown above and the amount calculated by applying the
standard rate of UK corporation tax to the (loss)/profit before tax
is as follows:
|
|
|
2023
|
|
|
£m
|
Loss before taxation
|
|
(121.3)
|
Standard tax rate in UK
(23.5%)
|
|
(28.5)
|
Difference in effective tax rate
in other jurisdictions
|
|
(15.4)
|
Expenses not allowed for
taxation
|
|
13.6
|
Accrual of liabilities for
uncertain tax positions
|
|
(1.8)
|
Deferred tax not
recognised
|
|
26.5
|
Recognition of previously
unrecognised deductible temporary differences
|
|
(30.3)
|
Difference in current and deferred
tax rate
|
|
0.2
|
Tax on share of result of
associate
|
|
(0.3)
|
Non-taxable income
|
|
(8.8)
|
Adjustments to prior years' tax
charges
|
|
(19.7)
|
Losses utilised previously not
recognised for deferred tax
|
|
(0.4)
|
Total tax credit for the year
|
|
(64.9)
|
|
6.
Taxation
(continued)
|
2022
|
|
£m
|
Loss before taxation
|
(115.7)
|
Standard tax rate in UK
(19.0%)
|
(22.0)
|
Difference in effective tax rate
in other jurisdictions
|
2.5
|
Expenses not allowed for
taxation
|
32.9
|
Accrual of liabilities for
uncertain tax positions
|
5.2
|
Tax on share of result of
associate
|
0.1
|
Deferred tax not
recognised
|
0.4
|
Difference in current and deferred
tax rate
|
5.1
|
Non-taxable income
|
(2.9)
|
Adjustments to prior years' tax
charges
|
(16.4)
|
Total tax charge for the year
|
4.9
|
The difference in effective tax
rates in other jurisdictions primarily reflects the lower effective
tax rate in Gibraltar, Spain and Malta. Expenses not allowed
for tax purposes mainly relate to reduced availability of tax
relief arising on costs incurred in the period. Deferred tax not
recognised mainly relates to restricted interest in the UK in
respect of which no deferred tax asset can be recognised.
Recognition of previously unrecognised deductible temporary
differences relates to recognition of a deferred tax asset for the
Group's intangible assets. The prior year adjustments mainly relate
to additional claims being made for tax allowances in Gibraltar for
2021. Non-taxable income mainly relates to fair value and
accounting gains not taxable in Gibraltar and the UK.
7.
Earnings per
share
Basic earnings per share
Basic earnings per share (EPS) has
been calculated by dividing the profit attributable to ordinary
shareholders by the weighted average number of shares in issue and
outstanding during the year.
Diluted earnings per share
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.
Potential ordinary shares are excluded from the weighted average
diluted number of shares when calculating IFRS diluted loss per
share because they are anti-dilutive. The number of equity
instruments included in the diluted EPS calculation consist of
2,789,783 Ordinary Shares (2022: 6,235,340) and no market-value options (2022: nil).
The number of equity instruments
excluded from the diluted EPS calculation is 2,294,080 (2022:
1,986,155).
|
|
2023
|
2022
|
Loss for the period attributable
to equity holders of the Parent (£m)
|
|
(56.4)
|
(120.5)
|
Weighted average number of
Ordinary Shares in issue and outstanding
|
|
448,166,792
|
426,536,392
|
Effect of dilutive Ordinary Shares
and Share options
|
|
2,789,783
|
6,235,340
|
Weighted average number of
dilutive Ordinary Shares
|
|
450,956,575
|
432,771,732
|
|
|
|
|
Basic loss per share
(pence)
|
|
(12.6)
|
(28.3)
|
Diluted loss per share
(pence)
|
|
(12.6)
|
(28.3)
|
The diluted loss per share in the
current and prior year is the same as the basic loss per share as
the potentially dilutive share options are considered antidilutive
as they would reduce the loss per share and therefore, they are
disregarded in the calculation.
Adjusted earnings per
share
The Directors believe that EPS
excluding exceptional and adjusted items, tax on exceptional and
adjusted items ("Adjusted EPS") allows for a further understanding
of the underlying performance of the business and assists in
providing a clearer view of the performance of the
Group.
7.
Earnings per
share (continued)
|
|
2023
|
2022
|
|
|
|
|
Adjusted profit after tax
(£m)
|
|
48.1
|
64.2
|
Weighted average number of
Ordinary Shares in issue
|
|
448,166,792
|
426,536,392
|
Weighted average number of
dilutive Ordinary Shares
|
|
450,956,575
|
432,771,732
|
|
|
|
|
Adjusted basic earnings per share
(pence)
|
|
10.7
|
15.1
|
Adjusted diluted earnings per
share (pence)
|
|
10.7
|
14.8
|
The table below highlights the
measures used to achieve Adjusted profit after tax:
|
Note
|
2023
£m
|
2022
£m
|
Adjusted profit after tax
|
|
48.1
|
64.2
|
Exceptional items - cost of sales
and operating expenses
|
3
|
(52.6)
|
(93.2)
|
Exceptional items - finance
expenses
|
3,5
|
-
|
(7.0)
|
Fair value gain on financial
assets
|
13
|
4.1
|
-
|
Amortisation of finance
fees
|
|
(17.2)
|
(7.4)
|
Amortisation of acquired
intangibles
|
|
(114.3)
|
(56.7)
|
Tax on exceptional and adjusted
items
|
|
37.4
|
11.4
|
Foreign exchange
gains/(losses)
|
|
37.6
|
(26.7)
|
Share benefit
credit/(charge)
|
|
0.5
|
(5.2)
|
Loss attributable to
non-controlling interests
|
|
-
|
0.1
|
Loss after tax
|
|
(56.4)
|
(120.5)
|
8.
Dividends
The Board of Directors does not
recommend a final dividend to be paid in respect of the year ended
31 December 2023. No final dividend was recommended as at 31
December 2022.
9.
Goodwill and
other intangibles
|
|
Goodwill
|
Brands, customer
relationships and licences
|
Software
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
Cost or valuation
|
|
|
|
|
|
At 31 December
20221
|
|
823.0
|
1,230.8
|
403.3
|
2,457.1
|
Acquisition related
adjustment2
|
|
(20.3)
|
-
|
-
|
(20.3)
|
Additions
|
|
-
|
2.0
|
58.9
|
60.9
|
Disposals
|
|
(13.7)
|
(10.7)
|
-
|
(24.4)
|
Effect of foreign exchange
rates
|
|
-
|
(3.0)
|
(10.4)
|
(13.4)
|
At 31 December 2023
|
|
789.0
|
1,219.1
|
451.8
|
2,459.9
|
|
|
|
|
|
|
Amortisation and impairments:
|
|
|
|
|
|
At 31 December 2022
|
|
25.7
|
73.5
|
149.6
|
248.8
|
Amortisation charge for the
year
|
|
-
|
90.8
|
91.2
|
182.0
|
Impairment charge for the
year
|
|
-
|
-
|
0.6
|
0.6
|
Disposals
|
|
-
|
(1.3)
|
-
|
(1.3)
|
Effect of foreign exchange
rates
|
|
-
|
(1.6)
|
(6.9)
|
(8.5)
|
At 31 December 2023
|
|
25.7
|
161.4
|
234.5
|
421.6
|
|
|
|
|
|
|
Carrying amounts
|
|
|
|
|
|
At 31 December 2023
|
|
763.3
|
1,057.7
|
217.3
|
2,038.3
|
At 31 December 2022
|
|
797.3
|
1,157.3
|
253.7
|
2,208.3
|
|
|
|
|
|
|
1
Since the disclosure of the provisional fair
values for the acquisition of William Hill on 1 July 2022, an
adjustment of £15.7m has been made to increase the fair value of
provisions, with a related £4.4m reduction in deferred tax
liabilities, and an equivalent movement in goodwill. This
adjustment has been made after the 31 December 2022 year end
accounts and during the measurement period. See note 10 for further
details.
2
In the current year, but outside of the
measurement period, management have identified £20.3m of additional
deferred tax balances which were present at acquisition. Management
have deemed the adjustment to be qualitatively immaterial for
restatement of prior year figures, as it does not impact the profit
or loss, net assets, cash flow, remuneration, the Group's key
performance indicators or any of the Group's covenants. As such,
the deferred tax balances have been adjusted in the current year,
with a corresponding adjustment to the acquisition
goodwill.
Goodwill
Including the adjustment made in
the current year, goodwill recognised on the acquisition of William
Hill was £776.6m as outlined in note 10. Based on the estimated
synergies from the combination, management has allocated this
goodwill between Retail (£99.4m), UK&I Online (£357.9m) and
International (£319.3m). This represents the lowest level at which
goodwill is monitored for internal management purposes.
Brands, customer
relationships and licences
This category of assets includes
brands, customer relationships and licences primarily recognised in
business combinations. As outlined in note 10, in 2022 the Group
acquired William Hill and recognised brands of £574.4m, customer
relationships of £595.1m and licences of £8.5m. These assets are
being amortised over 20-30 years for brands, 7-13 years for
customer relationships and 20 years for licences.
Software
This category relates to the cost
of both acquired software, through purchase or acquisition, as well
as the capitalisation of internally developed software where the
recognition criteria are met. Capitalised costs on projects that
are works in progress amount to £44.8m at year end (2022: £42.0m).
On the acquisition of William Hill, the Group acquired software
with a fair value of £226.2m. The software acquired primarily
consisted of proprietary software platforms owned by William Hill.
Subsequent to the acquisition, the decision was made to migrate a
number of William Hill platforms onto the existing 888 platforms,
resulting in an asset impairment of £29.5m in 2022. These assets
are being amortised over 3-5 years.
9.
Goodwill and
other intangibles (continued)
Impairment
reviews
The Group performs an annual
impairment review for goodwill, by comparing the carrying amount of
goodwill and other relevant assets with their recoverable
amount. This is an area where the directors exercise judgement and
estimation, as noted within the Annual
Report and Accounts 2023.
For the purposes of impairment testing under IAS
36, CGUs are grouped in order to reflect the level at which
goodwill is monitored by management. In the prior year, the Group
completed the acquisition of William Hill and disposed of the
Group's Bingo business, which changed the groups of CGUs to which
goodwill is allocated and monitored. The goodwill generated from
the acquisition of William Hill is monitored in line with the
Group's segments, being Retail, UK&I Online and
International.
Testing is carried out by
allocating the carrying value of the assets to CGUs or group of
CGUs and determining the recoverable amount of those CGUs through
value in use calculations. Where the recoverable amount exceeds the
carrying value of the assets, the assets are considered as not
impaired.
Value in use calculations
are based upon estimates
of future cash flows derived from the Group's profit forecasts by
segments. Profit forecasts are derived from the Group's annual
strategic planning or similarly scoped exercise.
The principal assumptions
underlying our cash flow forecasts are as follows:
- management assumes that the underlying business model will
continue to operate on a comparable basis, as adjusted for known
regulatory or tax changes and planned business initiatives; this
does not include any capex projects or the benefits that arise from
them in line with IAS 36;
- management's forecasts anticipate the continuation of recent
growth or decline trends in staking, gaming net revenues and
expenses, as adjusted for changes in our business model or expected
changes in the wider industry or economy
- management assumes that the Group will achieve its target
sports betting gross win margins as set for each territory, which
management bases upon its experience of the outturn of sports
results over the long term, given the tendency for sports results
to vary in the short term but revert to a norm over a longer term;
and
- in
management's annual forecasting process, expenses incorporate a
bottom-up estimation of the Group's cost base. For employee
remuneration, this takes into account staffing numbers and models
by segment, while other costs are assessed separately by category,
with principal assumptions including an extrapolation of recent
cost inflation trends and the expectation that the Group will incur
costs in line with agreed contractual rates.
The Board approved the 2024 budget
for each segment in January 2024. Management prepared a 3-year
strategic forecast covering years 2025 to 2027 using the same basis
as the four-year strategic forecast covering years 2024 to 2027
that was approved by The Board in the prior year. Additionally,
management has prepared a separate
forecast for the year 2028, incorporating long-term growth projections based on the year
2027. These five
years form the basis of our value in use calculation.
Cash flows beyond that five-year
period were extrapolated using long-term growth rates as estimated
for each group of CGUs separately.
The other
assumptions incorporated into the Group's
impairment reviews are those relating to discount rates and
long-term growth assumptions, as noted below separately for each
CGU or group of CGUs:
CGUs
|
|
|
2023 Discount
rate
|
2023 Long-term growth
rate
|
2022 Discount
rate
|
2022 Long-term growth
rate
|
|
|
|
%
|
%
|
%
|
%
|
Retail
|
|
|
13.0
|
0.0
|
13.3
|
0.0
|
UK&I Online
|
|
|
13.0
|
2.5
|
12.1
|
2.5
|
International
|
|
|
14.7
|
5.0
|
13.8
|
5.0
|
Discount rates are applied to each
CGU or group of CGUs' cash flows that reflect both the time value
of money and the risks that apply to the cash flows of that CGU or
group of CGUs. Discount rates are calculated using the weighted
average cost of capital formula based on the CGU's or group of
CGUs' leveraged beta. The leveraged beta is determined by
management as the mean unleveraged beta of listed gaming and
betting companies, with samples chosen where applicable from
comparable markets or territories as the CGU or group of CGUs,
leveraged to the Group's capital structure. Further risk premia and
discounts are applied, if appropriate, to this rate to reflect the
risk profile of the specific CGU or the group of CGUs relative to
the market in which it operates.
9.
Goodwill and
other intangibles (continued)
Our discount rates are calculated
on a post-tax basis and converted to a pre-tax basis using the tax
rate applicable to each CGU or group of CGUs. Discount rates
disclosed below are pre-tax discount rates.
The long-term growth rates
included in the impairment review do not exceed the observed
long-term growth rate for each respective CGU or group of
CGUs.
Results of impairment
reviews
The recoverable amount and
headroom above carrying amount or impairment below carrying amount
based on the impairment review performed at 31 December 2023 for
each CGU or group of CGUs are as follows:
CGUs
|
|
|
2023 Recoverable
amount
|
2023 Headroom
|
2022 Recoverable
amount
|
2022 Headroom/ (impairment)
|
|
|
|
£m
|
£m
|
£m
|
£m
|
Retail
|
|
|
559.4
|
71.1
|
668.6
|
165.5
|
UK&I Online
|
|
|
1,551.8
|
419.6
|
1,534.5
|
359.3
|
International
|
|
|
1,119.0
|
493.6
|
1,725.2
|
996.2
|
US B2C
|
|
|
n/a
|
n/a
|
19.4
|
(25.7)
|
Within the US CGU, specifically in
the US B2C business, there is goodwill from a previous acquisition
in the 888 Group, however this was fully impaired in the previous
financial year and therefore no longer requires an impairment
assessment.
Sensitivity of impairment
reviews
For the Retail group of CGUs, the
following reasonably possible changes in assumptions upon which the
recoverable amount was estimated, would lead to the following
changes in the recoverable amount of the CGU or group of
CGUs:
|
|
|
10% fall in cash
flows
|
1% increase in discount
rate
|
CGUs
|
|
|
Reduction in recoverable
amount
|
Remaining
headroom
|
Reduction in recoverable
amount
|
Remaining
headroom
|
|
|
|
£m
|
£m
|
£m
|
£m
|
Retail
|
|
|
(55.9)
|
15.1
|
(37.1)
|
34.0
|
Retail cash flows would have to
fall by more than 12.7% before the value in use fell below the CGU
carrying value. For the UK&I Online and International group of
CGUs, no impairment would occur under any reasonable possible
changes in assumptions upon which the recoverable amount was
estimated.
10.
Acquisition
& disposals
Acquisitions
On 1 July 2022, the Group acquired
all of the equity interests in William Hill. Total consideration
for the transaction was £554.3m, consisting of £544.7m cash
consideration and up to £100.0m of contingent consideration, fair
valued on acquisition date at £9.6m.
Identifiable assets acquired
and liabilities assumed
|
Final
Fair Value
|
Intangible assets
|
1,404.2
|
Property, plant and
equipment
|
109.5
|
Right-of-use assets
|
72.3
|
Investment in sublease
|
1.4
|
Investments and investments in
associates
|
40.0
|
Cash and cash
equivalents
|
157.9
|
Trade and other
receivables
|
32.9
|
Income tax asset
|
10.8
|
Assets held for sale
|
0.2
|
Trade and other
payables
|
(399.3)
|
Provisions and contingent
liabilities1
|
(194.5)
|
Derivative financial
instruments
|
(3.5)
|
Lease liabilities
|
(76.6)
|
Retirement benefit
liability
|
(0.4)
|
Deferred tax
liabilities
|
(211.5)
|
Long term debt
|
(1,165.7)
|
Total net identifiable liabilities
|
(222.3)
|
Goodwill
|
776.6
|
Consideration transferred
|
554.3
|
1
Since the disclosure of the provisional fair
values in the 31 December 2022 year end accounts, and during the
measurement period, an adjustment of £15.7m has been made to
increase the fair value of provisions, with a related £4.4m
reduction in deferred tax liabilities, and an equivalent movement
in goodwill. In the current year but outside of the measurement
period, management have identified £20.3m of additional deferred
tax balances which were present at acquisition. Management have
deemed the adjustment to be qualitatively immaterial for
restatement of prior year figures, as it does not impact the profit
or loss, net assets, cash flow, remuneration, the Group's key
performance indicators or any of the Group's covenants. As such,
the deferred tax balances have been adjusted in the current year,
with a corresponding adjustment to the acquisition
goodwill.
Intangible assets
Acquired identifiable intangible
assets include £574.4m in respect of brands, £595.1m in respect of
customer relationships and £8.5m in respect of licences. Software
and technology of £226.2m, inclusive of a fair value uplift of
£70.6m has also been recognised on acquisition in the prior year.
Management considers the residual goodwill of £776.6m to represent
a number of factors including the future growth of the William Hill
business and the potential to achieve buyer specific synergies and
workforce.
The fair value of the brand assets
was assessed by considering the benefit to the Group's future
revenue of the acquired brand and assessing the royalty costs that
would be incurred in deriving the same benefit. The key assumptions
in the assessments are the forecast revenue growth and royalty cost
applied. A royalty cost of 5.0% of revenue was applied. The fair
value of the customer relationships was assessed using the
multi-period excess earnings methodology. The key assumption in the
assessments is customer retention rates. The fair value of the
licences has been derived by calculating a replacement cost for
each individual licence. A 5% increase/(decrease) in estimated
customer churn rates would (decrease)/increase the fair value of
customer relationships by £(123.0)m/£176.0m
respectively.
10.
Acquisition
& disposals (continued)
Provisions and contingent liabilities
A contingent liability with a fair
value of £80.6m has been recognised in the prior year on
acquisition to reflect the possible future economic outflow
resulting from customer claims in Austria. The contingent liability
has been fair valued in line with IFRS 3 based on the expected cash
outflow of settled claims and recognised on the basis that it is a
possible future liability. Additional provisions of £115.2m have
been recognised based on pre-existing provisions within William
Hill. The carrying amount at acquisition was assessed to be the
fair value. Refer to note 11 for further details on these acquired
provisions.
Following receipt of updated
advice, the development of case law in Germany indicates that the
courts may apply a more customer-friendly approach to the
application of the three-year limitation period and link the
commencement of the limitation period to the player's first
positive knowledge of a claim to recover his gambling losses. The
law permits a maximum limitation period of 10 years in this
scenario. As such, during 2023 and within the purchase price
accounting measurement period, we have re-assessed the value of the
provision for customer claims in Germany as at the acquisition
date. This has led to an increase in the provision of £15.7m to a
total value of £23.4m. This has been recognised through the opening
balance sheet on acquisition, leading to an equivalent increase in
goodwill on acquisition.
Other fair value adjustments
A fair value uplift of £1.1m has
been recognised on property, plant and equipment, representing the
depreciated replacement cost of the assets in comparison to their
pre-acquisition net book value.
A fair value uplift of £0.8m has
been recognised on the acquired right-of-use assets, representing
favourable market positions on William Hill's portfolio of leases.
This has been offset by a £6.8m reduction to the right-of-use asset
and £6.4m reduction to the lease liability that reflects matching
the right-of-use asset to the new fair value of the lease
liability, based on a new discount rate for the liability at the
acquisition date.
The fair value of the Group's
investment in SIS was increased by £27.4m to a fair value of
£39.0m, reflecting the Group's holding and the estimated market
value of the entity at the acquisition date.
The fair value of the Group's
outstanding listed debt was increased by £7.1m, reflecting the
current market price of the debt at acquisition date.
Deferred tax liabilities of
£192.2m have been recognised on the resultant fair value uplifts to
assets.
The fair value of all other assets
and liabilities acquired are considered to be equal to their net
book value as at the acquisition date.
Disposals
2023
On 22 May 2023, the Group agreed
to sell its Latvian business to Paf Consulting Abp. On 13 June
2023, the deal with Paf Consulting Abp completed. The cash
consideration for the Latvian business was £19.5m, of which £0.9m
is a working capital adjustment. As a part of the deal, the Group
agreed an earn out with Paf Consulting Abp, under which the Group
would receive further consideration of up to €4.25m. As this is
deemed to hold a fair value of £nil this has not been recorded in
these financial statements. The Group sold net assets totalling
£20.2m, leading to a loss on disposal of £0.7m. These net assets
were made up of goodwill and other intangible assets of £23.1m,
other net assets totalling £1.0m, non-controlling interests of
£0.5m offset by deferred tax liabilities totalling
£4.4m.
On 1 August 2023, the Group sold
its 90% holding in its Colombian business Alfabet S.A.S to Vivo
Aladdin Online S.A.S for £0.6m, recognising a gain of £0.4m on
disposal.
10.
Acquisition
& disposals (continued)
2022
On 7 July 2022, the Group disposed
of its entire Bingo business to Saphalata Holdings Ltd., a member
of the Broadway Gaming group, for a total cash consideration of
£37.4m (US$45.25m), out of which £35.7m was paid on completion and
a further £1.7m will unconditionally be paid in one year. As at 30
June 2022, the Group reclassified the Bingo business assets and
liabilities as 'Held for sale', at which time an impairment loss of
£11.2m was recognised on the Bingo goodwill, representing the
difference between the carrying value of the businesses net assets
and the fair value at the date of reclassification to held for
sale.
|
|
|
£m
|
Consideration received
|
|
|
35.7
|
Deferred consideration
|
|
|
1.7
|
Less:
|
|
|
|
Cash disposed of
|
|
|
(3.2)
|
Net proceeds on disposal
|
|
|
34.2
|
Less:
|
|
|
|
Net assets disposed of (excluding
cash):
|
|
|
|
Intangible assets
|
|
|
(37.6)
|
Trade and other
receivables
|
|
|
(0.5)
|
Trade and other
payables
|
|
|
3.3
|
Net assets disposed of (excluding cash)
|
|
|
(34.7)
|
Loss on disposal
|
|
|
(0.5)
|
11.
Provisions
|
|
Indirect tax
provision
|
Legal and
regulatory
|
Shop closure
provision
|
Other restructuring
costs
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
At 31 December
20221
|
|
61.7
|
143.2
|
4.8
|
3.7
|
213.4
|
Charged/(credited) to income statement:
|
|
|
|
|
|
|
Additional provisions
recognised
|
|
5.1
|
8.9
|
1.3
|
-
|
15.3
|
Provisions released to
income statement
|
|
-
|
(3.8)
|
-
|
-
|
(3.8)
|
Utilised during the
year
|
|
(2.3)
|
(27.8)
|
(2.5)
|
(1.3)
|
(33.9)
|
Transfers to trade and other
payables2
|
|
-
|
(3.6)
|
-
|
(1.9)
|
(5.5)
|
Foreign exchange
differences
|
|
(1.7)
|
(0.5)
|
-
|
-
|
(2.2)
|
At 31 December 2023
|
|
62.8
|
116.4
|
3.6
|
0.5
|
183.3
|
1
Since the disclosure of the provisional fair
values in the 31 December 2022 year end financial statements and
during the measurement period, an adjustment of £15.7m has been
made to increase the fair value of provisions, and an equivalent
increase in goodwill.
2
During the year, a £1.9m provision which was
previously categorised as other restructuring costs and a provision
of £3.6m within legal and regulatory have been transferred to
accruals to better reflect the nature of the liability.
Customer claims provisions of
£104.8m (2022: £101.9m) within legal and regulatory are classified
as non-current. The remaining provisions are all classified as
current.
Indirect tax
provision
As part of the acquisition of
William Hill, the Group acquired a provision relating to a gaming
tax liability in Austria, where the Austrian tax authority believes
that foreign gaming companies should be liable to pay gaming taxes
in Austria. Post-acquisition, the Group has continued to provide
for the gaming taxes including interest, as management considers
that an outflow is probable. The Group is in constructive
discussions with the Austrian tax authority over the timing of
settlement.
11.
Provisions
(continued)
Legal and regulatory
provisions
The Group has recorded a provision
in respect of legal and regulatory matters, including customer
claims, and updated it to reflect the Group's revised assessment of
these risks in light of developments arising during 2023 such that
this represents management's best estimate of probable cash
outflows related to these matters.
The industry in which the Group
operates is subject to continuing scrutiny by regulators and other
governmental authorities, which may, in certain circumstances, lead
to enforcement actions, sanctions, fines and penalties or the
assertion of private litigations, claims and damages.
Within the opening provision, there is a
provision acquired relating to a periodic
compliance assessment undertaken by the UK Gambling Commission
("UKGC") in July and August 2021 of the William Hill business.
William Hill has been subject to an ongoing licence review and has
addressed certain action points raised by the UKGC in relation to
William Hill's social responsibility and anti-money laundering
obligations. The Group has agreed a regulatory settlement of
£19.2m, including divestments of £0.7m. This provision was acquired
at 1 July 2022 and was settled during the year.
In common with other businesses in
the gambling sector, the Group receives claims from consumers
relating to the provision of gambling services. Claims have been
received from consumers in a number of (principally European)
jurisdictions and allege either failure to follow responsible
gambling procedures, breach of licence conditions or that
underlying contracts in question are null and void given local
licencing regimes.
Consumers who have obtained
judgement against the Group's entities in the Austrian courts have
sought to enforce those judgements in Malta and Gibraltar. These
are being defended on the basis of a public policy argument. The
provisions held for the Group relating to these claims is £86.2m,
which includes a provision of £80.6m relating to the William Hill
and Mr Green brands and £5.6m relating to 888.
The calculation of the customer
claims liability includes provision for both legal fees and
interest but, does not include any gaming taxes that have already
been paid on these revenues. Management have assessed that it is
probable as opposed to virtually certain that the tax will be
reclaimed and therefore a contingent asset of up to £28.0m has been
disclosed but not recognised for the tax reclaims.
The timing and amount of the
outflows is ultimately determined by the settlement reached with
the relevant authority.
Following receipt of updated
advice, the development of case law in Germany indicates that the
courts may apply a more customer-friendly approach to the
application of the three-year limitation period and link the
commencement of the limitation period to the player's first
positive knowledge of a claim to recover his gambling losses. The
law permits a maximum limitation period of 10 years in this
scenario. As such, during 2023 and within the purchase price
accounting measurement period, we have re-assessed the value of the
provision for customer claims in Germany as at the acquisition
date. This has led to an increase in the provision of £15.7m to a
total value on acquisition of £23.4m. This has been recognised
through the opening balance sheet on acquisition, leading to an
equivalent increase in goodwill on acquisition.
During the year, the Group has
utilised £3.5m of the overall provision as claims have been
settled. In addition, a further charge of £6.2m has been recognised
to reflect the receipt of new claims.
Shop closure
provisions
The Group holds provisions
relating to the associated costs of closure of 713 shops in 2019,
119 shops in 2020, and certain shops that ceased to trade as part
of normal trading activities.
Other restructuring
costs
The Group has recognised certain
provisions for staff severance as a result of restructuring
announced during the current and prior year.
12.
Borrowings
|
Interest
rate
|
Maturity
|
2023
|
2022
|
|
%
|
|
£m
|
£m
|
Borrowings at amortised cost
|
|
|
|
|
Bank facilities
|
|
|
|
|
€473.5m term loan
facility
|
EURIBOR
+ 5.25%
|
2028
|
385.6
|
392.6
|
$575.0m term loan
facility
|
CME term
SOFR + 5.35%
|
2028
|
401.6
|
420.7
|
£150.0m Equivalent Multi-Currency
Revolving Credit Facility
|
Benchmark rate + 3.5%
|
2028
|
-
|
-
|
Loan Notes
|
|
|
|
|
€582.0m Senior Secured Fixed Rate
Notes
|
7.56
|
2027
|
489.6
|
498.6
|
€450.0m Senior Secured Floating
Rate Notes
|
EURIBOR
+ 5.5%
|
2028
|
373.8
|
379.9
|
£350.0m Senior Unsecured
Notes
|
4.75%
|
2026
|
10.5
|
10.5
|
Total Borrowings
|
|
|
1,661.1
|
1,702.3
|
Less: Borrowings as due for
settlement in 12 months
|
|
|
3.9
|
4.8
|
Total Borrowings as due for settlement after 12
months
|
|
|
1,657.2
|
1,697.5
|
Bank
facilities
Term Loan Facilities
In July 2022, the Group entered
into a Senior Facilities Agreement in connection with the William
Hill Group acquisition, under which the following term loan
facilities were made available:
· a 6-year euro-denominated bullet term facility of €473.5m, of
which €6.4m was repaid in September 2022.
· a 6-year sterling-denominated delayed-draw bullet term
facility of £351.8m which was partially drawn in September 2022
("GBP Term Loan") and used to partially prepay the William Hill
Group's £350m 4.75% Senior Unsecured Notes due 2026 and partially
prepay the Group's euro-denominated bullet term
facility.
· a 6-year US Dollar-denominated term facility of
$500.0m.
In December 2022, the GBP Term
Loan was repaid and partially replaced with an increase of $75.0m
under the Group's 6-year US Dollar-denominated term facility, with
the remaining amount replaced with senior secured note
issuances.
At 31 December 2023, the following
amounts were outstanding under the term facilities made available
to the Group under the Senior Facilities Agreement:
- €467.1m (2022: €467.1m) under the Group's 6-year
euro-denominated term facility.
- $568.8m (2022: $573.5m) under the Group's 6-year US
Dollar-denominated term facility.
Loan Notes
Senior Secured Notes
(i) €582m 7.558% Senior Secured Fixed Rate Notes due July
2027
In July 2022, as part of the
William Hill Group acquisition funding, the Group issued €400m of
guaranteed senior secured fixed rate notes and used the net
proceeds to finance the William Hill Group acquisition. The notes,
which are guaranteed by certain members of the Group and certain of
the Group's operating subsidiaries, mature in July 2027.
In December 2022, a further €182m
in principal amount was issued under the same terms as the initial
€400m issuance and used to partially refinance the GBP Term
Loan.
(ii) €450m Senior Secured Floating Rate Notes due July
2028
In July 2022, the Group issued
€300m of guaranteed senior secured floating rate notes and used the
net proceeds to partially finance the William Hill Group
acquisition. The notes, which are guaranteed by certain members of
the Group and certain of the Group's operating subsidiaries, mature
in July 2028.
In December 2022, a further €150m
in principal amount was issued under the same terms as the initial
€300m issuance to partially refinance the GBP Term Loan.
12.
Borrowings
Senior Unsecured Notes
£350m 4.875% Senior Unsecured Fixed Rate Notes due 2023 &
£350m 4.75% Senior Unsecured Fixed Rate Notes due
2026
The Group acquired two separate
listed Senior Unsecured notes, due 2023 and 2026 respectively as at
1 July 2022. The acquisition triggered a
change in control and the exercise of a put option by a number of
Noteholders (refer below). The £350m
4.875% Senior Unsecured Notes due 2023 were settled in full and,
on 22 September 2022, Noteholders of
£339.5m out of £350.0m 4.75% Senior Unsecured Notes due 2026 took
the option to exercise. As a result, this reduced the £350.0m 4.75%
Senior Unsecured Notes due 2026 to £10.5m at 31 December 2023
(2022: £10.5m). The cash purchase price of both notes was equal to
101 per cent of the principal amount together with the interest
accrued.
Finance fees and associated costs
incurred on the issue of both notes were held in the William Hill
Statement of Financial Position at acquisition, which were
subsequently fair valued which led to an
increase of £7.1m, reflecting the current market price of the debt
at acquisition date. This is being amortised over the life of the respective notes using the
effective interest rate method. On redemption of the Notes, any
unamortised fees were written off to the income statement as
exceptional costs in the 2022 financial year (see note
3).
Change of control
Following the occurrence of a
change of control, either (i) each lender under the Senior
Facilities Agreement shall be entitled to require prepayment of
outstanding amounts and cancellation of its commitments within a
prescribed time period or (ii) the Group may elect that all
outstanding undrawn commitments of each lender shall be cancelled
and outstanding drawn commitments shall become due and
payable.
In addition, the Group will be
required to make an offer to purchase all of the Fixed Rate Notes,
the Floating Rate Notes and the 4.75% senior unsecured notes due
2026 as a result of such change of control at a price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest.
Undrawn credit
facilities
At 31 December 2023, the Group had
the following undrawn credit facilities:
£150m Equivalent Multi-Currency Revolving Credit
Facility
In July 2022, as part of the
William Hill Group acquisition, the Group entered into a new Senior
Facilities Agreement under which its £50m revolving credit facility
was replaced with a multi-currency revolving credit facility. The
replacement facility has an aggregate principal amount of £150m
with a five-and-a-half-year maturity (maturing in January 2028).
The drawn balance on this facility at 31 December 2023 was £nil
(2022: nil).
Financial
Covenant
The Revolving Credit Facilities
are subject to a Senior Facilities Agreement whereby any applicable
revolving Incremental Senior Facilities (together the "Financial
Covenant Facilities") are tested at every reporting period to
ensure that they do not exceed a pre-agreed threshold to be agreed
with the Mandated Lead Arrangers prior to the entry into the Senior
Facilities Agreement.
There are no other covenants on
the group debt, therefore the directors are satisfied that, at the
year-end, the net leverage ratio has not exceeded the pre-agreed
threshold and, as a consequence, the Financial Covenants have not
been breached.
Overdraft facility
In July 2022, as part of the
William Hill Group acquisition, the Group acquired an overdraft
facility with National Westminster Bank plc of £5.0m. The balance
on this facility at 31 December 2023 was £nil (2022:
£nil).
Weighted average interest
rates
The weighted average interest
rates paid, including commitment fees, were as follows:
|
|
2023
|
2022
|
|
|
%
|
%
|
€473.5m term loan
facility
|
|
10.01
|
7.25
|
$575.0m term loan
facility
|
|
13.49
|
11.47
|
€582.0m Senior Secured Fixed Rate
Notes
|
|
8.44
|
8.47
|
€450.0m Senior Secured Floating
Rate Notes
|
|
9.95
|
7.58
|
£350.0m Senior Unsecured Fixed
Rate Notes
|
|
4.75
|
4.75
|
12.
Borrowings
Borrowings
reconciliation
2023
Debt
|
Opening
|
Repayments
|
Non-cash
|
FX
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
2026 Senior Unsecured
Notes
|
10.5
|
-
|
-
|
-
|
10.5
|
€473.5m term loan
facility
|
392.6
|
-
|
2.9
|
(9.8)
|
385.7
|
$575.0m term loan
facility
|
420.6
|
(4.0)
|
7.4
|
(22.3)
|
401.7
|
€582.0m Senior Secured Fixed Rate
Notes
|
498.7
|
-
|
2.9
|
(12.4)
|
489.2
|
€450.0m Senior Secured Floating
Rate Notes
|
379.9
|
-
|
3.6
|
(9.5)
|
374.0
|
|
1,702.3
|
(4.0)
|
16.8
|
(54.0)
|
1,661.1
|
2022
Debt
|
Opening
|
Inflows
|
Acquired
|
Repayments
|
Fees on
debt
|
Non-cash
|
FV
adjustment
|
FX
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
2023 Senior Unsecured
Notes
|
-
|
-
|
352.3
|
(349.0)
|
-
|
-
|
(3.3)
|
-
|
-
|
2026 Senior Unsecured
Notes
|
-
|
-
|
351.9
|
(339.0)
|
-
|
-
|
(2.4)
|
-
|
10.5
|
£358.1 term loan
facility
|
-
|
347.0
|
-
|
(347.0)
|
-
|
-
|
-
|
-
|
-
|
£461.5m asset bridge
loan
|
-
|
-
|
461.5
|
(461.5)
|
-
|
-
|
-
|
-
|
-
|
€473.5m term loan
facility
|
-
|
420.4
|
-
|
(5.7)
|
(23.5)
|
1.7
|
-
|
(0.3)
|
392.6
|
$575.0m term loan
facility
|
-
|
479.1
|
-
|
(1.0)
|
(57.4)
|
3.5
|
-
|
(3.6)
|
420.6
|
€582.0m Senior Secured Fixed Rate
Notes
|
-
|
517.0
|
-
|
-
|
(18.9)
|
0.9
|
-
|
(0.3)
|
498.7
|
€450.0m Senior Secured Floating
Rate Notes
|
-
|
399.6
|
-
|
-
|
(20.3)
|
0.9
|
-
|
(0.3)
|
379.9
|
|
-
|
2,163.1
|
1,165.7
|
(1,503.2)
|
(120.1)
|
7.0
|
(5.7)
|
(4.5)
|
1,702.3
|
13.
Financial
instruments
On acquisition, under IFRS 3
'Business Combinations', the assets and liabilities of William Hill
were recorded at fair value. Refer to note 10 for details of values
and valuation methods used.
The hierarchy (as defined in IFRS
13 'Fair Value Measurement') of the Group's financial instruments
carried at fair value as at 31 December 2023 was as
follows:
|
Contractual / notional
amount
|
Level 1
|
Level 2
|
Level 3
|
|
£m
|
£m
|
£m
|
£m
|
Financial assets
|
|
|
|
|
888 Africa convertible
loan
|
6.8
|
-
|
-
|
11.3
|
Cross-currency swaps
|
385.9
|
-
|
6.1
|
-
|
Interest rate swaps
|
130.1
|
-
|
-
|
-
|
|
522.8
|
-
|
6.1
|
11.3
|
Financial liabilities
|
|
|
|
|
Cross-currency swaps
|
351.9
|
-
|
45.0
|
-
|
Interest rate swaps
|
-
|
-
|
1.4
|
-
|
Ante post bet
liabilities
|
-
|
-
|
-
|
7.0
|
|
351.9
|
-
|
46.4
|
7.0
|
The hierarchy (as defined in IFRS
13 'Fair Value Measurement') of the Group's financial instruments
carried at fair value as at 31 December 2022 was as
follows:
|
Contractual / notional
amount
|
Level 1
|
Level 2
|
Level 3
|
|
£m
|
£m
|
£m
|
£m
|
Financial assets
|
|
|
|
|
Cross-currency swaps
|
397.1
|
-
|
17.7
|
-
|
Interest rate swaps
|
132.2
|
-
|
0.9
|
-
|
|
529.3
|
-
|
18.6
|
-
|
Financial liabilities
|
|
|
|
|
Cross-currency swaps
|
365.3
|
-
|
45.0
|
-
|
Ante post bet
liabilities
|
-
|
-
|
-
|
7.8
|
Contingent consideration (note
10)
|
100.0
|
-
|
-
|
0.4
|
|
465.3
|
-
|
45.0
|
8.2
|
Ante post
bets
Ante post bets are a liability
arising from an open position at the period end date in accordance
with the Group's accounting policy for derivative financial
instruments. Ante post bets at the period end totalled £7.0m (2022:
£7.8m) and are classified as current liabilities.
Ante post bet liabilities are
valued using methods and inputs that are not based upon observable
market data and all fair value movements are recognised in revenue
in the Income Statement. Although the final value will be
determined by future betting outcomes, there are no reasonably
possible changes to assumptions or inputs that would lead to
material changes in the fair value determined. The principal
assumptions relate to the Group's historical gross win margins by
betting markets and segments. Although these margins vary across
markets and segments, they are expected to stay broadly consistent
over time, only varying in the short term. The gross win margins
are reviewed annually at period end. As at 31 December 2023, the
gross win margins ranged from 2%-25%.
A reconciliation of movements in
the ante post bets liability in the year is provided
below.
|
Ante post bet
liabilities
|
|
£m
|
At 31 December 2022
|
7.8
|
Movement through income
statement
|
(0.8)
|
At 31 December 2023
|
7.0
|
13.
Financial
instruments (continued)
888 Africa convertible
loan
On 22 March 2022 the Group entered
into a joint venture agreement as 19.9% owners of 888 Africa
Limited ("888 Africa").
Whilst the Group's equity
contribution was not material, as part of the joint venture
shareholder agreement, the Group agreed to lend 888 Africa $8.0m
(£7.2m) as a senior secured convertible loan that can be converted
into 60.1% of 888 Africa issued and outstanding shares at the
Group's discretion. Because of the conversion option, the loan is
deemed to be a derivative financial asset under IFRS 9 'Financial
Instruments' and is held at fair value through profit and
loss.
As at 31 December 2023 the
convertible loan has been fair valued using the market approach
based on forecast 2024 revenue in proven African markets. The
non-cash, fair value uplift of £4.1m is recorded within operating
profit in the Condensed Consolidated Income Statement. In the prior
year fair value was deemed approximate to the carrying value of the
convertible loan due to the early stage of the
investment.
Hedging
activities
The table below illustrates the
effects of hedge accounting on the Condensed Consolidated Statement
of Financial Position and Condensed Consolidated Income Statement
by disclosing separately by risk category each type of hedge and
the details of the associated hedging instrument and hedge item.
These are for items designated as in a cash flow hedging
relationship.
2023
|
Carrying
amount
|
Change in fair value in
period for calculating ineffectiveness (hedging
instrument)
|
Cash settlements and
accruals in the period (hedging instrument)
|
Change in fair value in
period for calculating ineffectiveness (hedged
item)
|
Cash settlements and
accruals in the period (hedged item)
|
Hedge ineffectiveness in the
period
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Interest rate swaps
|
|
|
|
|
|
|
EUR trades
|
(0.8)
|
(1.7)
|
0.3
|
(1.7)
|
0.3
|
-
|
Total
|
(0.8)
|
(1.7)
|
0.3
|
(1.7)
|
0.3
|
-
|
Cross-currency swaps
|
|
|
|
|
|
|
EUR trades
|
(4.7)
|
(9.8)
|
(9.1)
|
(9.8)
|
(9.1)
|
-
|
USD trades
|
(34.8)
|
(17.0)
|
(2.0)
|
(17.0)
|
(2.0)
|
-
|
Total
|
(39.5)
|
(26.8)
|
(11.1)
|
(26.8)
|
(11.1)
|
-
|
2022
|
Carrying
amount
|
Change in fair value in
period for calculating ineffectiveness (hedging
instrument)
|
Cash settlements and
accruals in the period (hedging instrument)
|
Change in fair value in
period for calculating ineffectiveness (hedged
item)
|
Cash settlements and
accruals in the period (hedged item)
|
Hedge ineffectiveness in the
period
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Interest rate swaps
|
|
|
|
|
|
|
EUR trades
|
1.0
|
1.0
|
-
|
0.9
|
-
|
(0.1)
|
Total
|
1.0
|
1.0
|
-
|
0.9
|
-
|
(0.1)
|
Cross-currency swaps
|
|
|
|
|
|
|
EUR trades
|
5.1
|
5.1
|
(1.4)
|
4.7
|
(1.4)
|
(0.4)
|
USD trades
|
(17.8)
|
(17.8)
|
(2.3)
|
(18.7)
|
(2.3)
|
(0.9)
|
Total
|
(12.7)
|
(12.7)
|
(3.7)
|
(14.0)
|
(3.7)
|
(1.3)
|
13.
Financial
instruments (continued)
Contractual maturity
analysis
The tables below analyse the
Group's financial liabilities into relevant maturity groupings
based on their contractual maturities for net and gross settled
derivative financial instruments.
The amounts disclosed in the table
are the contractual undiscounted cash flows:
2023
|
On Demand
|
Less than 1
year
|
1 to 5
years
|
More than 5
years
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
Interest rate swaps
|
-
|
0.8
|
(1.5)
|
-
|
(0.7)
|
Cross currency swaps
|
|
|
|
|
|
EUR trades
|
-
|
(8.2)
|
(7.7)
|
-
|
(15.9)
|
USD trades
|
-
|
(6.6)
|
(30.7)
|
-
|
(37.3)
|
Total
|
-
|
(14.0)
|
(39.9)
|
-
|
(53.9)
|
2022
|
On Demand
|
Less than 1
year
|
1 to 5
years
|
More than 5
years
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
Interest rate swaps
|
-
|
-
|
-
|
-
|
-
|
Cross currency swaps
|
|
|
|
|
|
EUR trades
|
-
|
(6.2)
|
316.9
|
-
|
310.7
|
USD trades
|
-
|
(8.0)
|
(43.6)
|
-
|
(51.6)
|
Total
|
-
|
(14.2)
|
273.3
|
-
|
259.1
|
14.
Share
capital
Share capital comprises the
following:
|
|
Authorised
|
|
|
31
December
|
31
December
|
31
December
|
31
December
|
|
|
|
2023
|
2022
|
2023
|
2022
|
|
|
|
Number
|
Number
|
£m
|
£m
|
|
|
|
|
|
|
|
|
Ordinary Shares of £0.005
each
|
|
1,026,387,5001
|
1,026,387,500
|
5.1
|
5.1
|
|
1 including 297,501 treasury shares held by the Group as at 31
December 2023 (2022: 447,020)
|
|
Allotted, called up and
fully paid
|
|
|
31
December
|
31
December
|
31
December
|
31
December
|
|
|
|
2023
|
2022
|
2023
|
2022
|
|
|
|
Number
|
Number
|
£m
|
£m
|
|
Ordinary Shares of £0.005 each at
beginning of year
|
|
446,331,656
|
372,759,202
|
2.2
|
1.9
|
|
Issue of Ordinary Shares of £0.005
each
|
|
2,713,601
|
73,572,454
|
-
|
0.3
|
|
Ordinary Shares of £0.005 each at
end of year
|
|
449,045,257
|
446,331,656
|
2.2
|
2.2
|
|
The narrative below includes
details on issue of Ordinary Shares of £0.005 each as part of the
Group's employee share option plan during 2023 and 2022.
On 7 April 2022 the Company issued
70.8m new ordinary shares to partly fund the acquisition of the
international (non-US) business of William Hill, representing
approximately 19% of its issued capital, at £2.30 per share. After
issue costs of £4.3m, the net proceeds were £158.5m. Issue costs
directly attributable to the transaction were accounted for as a
deduction from share premium in the prior period.
15.
Related party
transactions
Transactions between the Company
and its subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note.
Transactions between the Group and its associate are disclosed
below.
Trading
transactions
Associates and joint ventures
As part of the William Hill
acquisition in the prior year, the Group acquired Sports
Information Services (Holdings) Limited, an associate of the
William Hill Group. For the year to 31 December 2023, the Group
made purchases of £36.6m (1 July 2022 to 31 December 2022: £15.8m)
from Sports Information Services Limited, a subsidiary of Sports
Information Services (Holdings) Limited. At 31 December 2023, the
amount payable to Sports Information Services Limited by the Group
was £nil (31 December 2022: £nil).
During the year the Group made loans
totalling £2.4m (2022: £4.5m) to 888 Africa as part of the joint
venture shareholder agreement. These loans incur interest at 12%
per annum. For the year ended 31 December 2023 the Group received
£0.7m in revenue from 888 Africa for the use of the 888 brand.
During the year the Group also made loans totalling £1.8m to 888
Emerging limited, a joint venture of the Group.
Remuneration of key
management personnel
The aggregate amounts payable to
key management personnel, as well as their share benefit charges,
are set out below:
|
|
2023
|
2022
|
|
|
£m
|
£m
|
Short-term benefits
|
|
1.6
|
2.9
|
Post-employment
benefits
|
|
0.3
|
0.1
|
Share benefit charges -
equity-settled
|
|
0.1
|
2.4
|
|
|
2.0
|
5.4
|
16.
Contingent
assets and liabilities
Legal claims
As at 31 December 2023, potential
legal claims of £4.5m related to the Austria and Germany provisions
(see note 11 for further details) are deemed to give rise to a
possible future cash outflow, as such no provision was required at
the balance sheet date.
The calculation of the customer
claims liability includes provision for both legal fees and
interest but does not include any gaming taxes that have already
been paid on these revenues. Management have assessed that it is
probable as opposed to virtually certain that the tax will be
reclaimed and therefore a contingent asset of up to £28.0m (31
December 2022: £24.3m) has been disclosed for the tax reclaims.
Refer to note 11 for further details.
17.
Events after the
reporting date
On 6 March 2024, the Group
announced its decision to conclude its partnership with Authentic
Brands Group as part of the strategic review of its B2C business.
This partnership had granted exclusive use of the Sports
Illustrated brand for online betting and gaming. As part of the
termination agreement, the Group has agreed to pay a total
termination fee of $50.0m, $25.0m of which will be paid
upfront in cash from available resources. The
remaining $25.0m will be paid between 2027 and
2029.
On 22 March 2024, the GB Gambling
Commission ("GBGC") informed the Group that it had concluded its
review into the Group's operating licences that was announced by
the Group on 14 July 2023. The GBGC concluded the review without
imposing any licence conditions, financial penalties or other
remedies on the Group.
Appendix 1 - Alternative Performance
Measures
In reporting financial
information, the Board uses various alternative performance
measures (APMs) which it believes provide useful additional
information for understanding the financial performance and
financial health of the Group. These APMs should be considered in
addition to IFRS measures and are not intended to be a substitute
for them. Since IFRS does not define APMs, they may not be directly
comparable to similar measures used by other companies.
The Board uses APMs to improve the
comparability of information between reporting periods by adjusting
for non-recurring or uncontrollable factors which affect IFRS
measures, to aid users in understanding the Group's
performance.
Consequently, the Board and
management use APMs for performance analysis, planning, reporting
and incentive-setting.
APM
|
|
Closest equivalent IFRS measure
|
Definition/purpose
|
Reconciliation/calculation
|
Adjusted EBITDA
|
|
Operating profit/ loss
|
Adjusted EBITDA is defined as
operating profit or loss excluding share benefit charges, foreign
exchange, depreciation and amortisation, fair value gains and any
exceptional items which are typically non-recurring in
nature.
|
A reconciliation of this measure
is provided on the face of the condensed consolidated income
statement.
|
Adjusted EBITDA margin
|
|
No direct equivalent
|
Adjusted EBITDA margin is defined
as adjusted EBITDA divided by revenue. It is a measure of the
business' profitability, and also measures how much revenue the
business converts into underlying profitability. Improving Adjusted
EBITDA margin is a key strategic priority for the
business.
|
See note A.
|
Adjusted EPS
|
|
Earnings per share
|
Adjusted EPS represents basic and
diluted EPS based on adjusted profit before tax.
|
Reconciliations of these measures
are provided in note 7 of the condensed financial
statements.
|
Adjusted profit after
tax
|
|
Profit after tax
|
Adjusted profit after tax is
defined as profit after tax before amortisation of acquired
intangibles and finance fees, foreign exchange, share benefit
charges, exceptional items and tax on exceptional items.
|
A reconciliation of this measure
is disclosed in note 7 of the condensed financial
statements.
|
Exceptional and adjusted
items
|
|
No direct equivalent
|
Exceptional items are those items
the Directors consider to be one-off or material in nature that
should be brought to the reader's attention in understanding the
Group's financial performance. Adjusted
items are recurring items that are excluded from internal measures
of underlying performance, and which are not considered by the
Directors to be exceptional. This relates to the amortisation of
specific intangible assets recognised in acquisitions, foreign
exchange and share benefit charges.
|
Exceptional items and adjusted
items are included on the face of the consolidated income statement
with further detail provided in note 3 of the condensed financial
statements.
|
Effective tax rate
|
Income tax expense
|
This measure is the tax charge for
the year expressed as a percentage of profit before tax.
|
Effective tax rate is disclosed in
note 6 of the condensed financial statements.
|
Adjusted effective tax
rate
|
No direct equivalent
|
This measure is the tax charge for
the year as a percentage of profit before tax adjusted for the
items disclosed in adjusted profit after tax above.
|
Adjusted effective tax rate is
disclosed in note 6 of the condensed financial
statements.
|
Leverage ratio
|
No direct equivalent
|
Leverage ratio is calculated as
net debt divided by the previous 12-months adjusted pro forma
EBITDA. Net debt comprises the principal outstanding balance of
borrowings, accrued interest on those borrowings and lease
liabilities less cash and cash equivalents (excluding customer
deposits).
|
See note B.
|
Pro forma revenue and pro forma
adjusted EBITDA
|
No direct
equivalent
|
Pro forma metrics, which are
unaudited, reflect the results as if 888 had owned William Hill for
each of the periods and excludes the results of the 888 Bingo
business for all periods. This enables measurement of the
performance of the divisions on a comparable year-on-year
basis.
|
Reconciled in the CFO
report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note A
|
|
|
|
|
|
|
|
Retail
|
UK&I
Online
|
International
|
Other
|
Corporate
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External revenue from continuing businesses
|
535.0
|
658.5
|
517.4
|
-
|
-
|
1,710.9
|
|
Adjusted EBITDA
|
98.9
|
152.3
|
99.4
|
-
|
(42.3)
|
308.3
|
|
Adjusted EBITDA margin %
|
18.5%
|
23.1%
|
19.2%
|
-
|
N/A
|
18.0%
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
|
|
|
|
|
External revenue from continuing businesses
|
255.5
|
455.5
|
508.3
|
19.5
|
-
|
1,238.8
|
|
Adjusted EBITDA
|
41.2
|
61.6
|
118.3
|
1.7
|
(4.9)
|
217.9
|
|
Adjusted EBITDA margin %
|
16.1%
|
13.5%
|
23.3%
|
8.7%
|
N/A
|
17.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note B
|
|
|
|
|
|
|
|
2023
|
2022
|
|
|
£m
|
£m
|
Borrowings
|
|
(1,661.1)
|
(1,702.3)
|
Add back loan transaction
fees
|
|
(96.6)
|
(112.7)
|
Gross borrowings
|
|
(1,757.7)
|
(1,815.0)
|
Lease liability
|
|
(87.6)
|
(89.0)
|
Cash (excluding customer
balances)
|
|
128.4
|
176.3
|
Net debt
|
|
(1,716.9)
|
(1,727.7)
|
Adjusted EBITDA
|
|
308.3
|
310.6
|
Financial leverage ratio
|
|
5.6
|
5.6
|
|
|
|
|
|