Playtech plc

 

("Playtech", or the "Company", or the "Group")

 

Results for the six months ended 30 June 2021

 

Strong online performance

 

Significant progress on strategic priorities

 

Playtech (LSE: PTEC) today announces its results for the six months ended 30 June 2021, together with a trading update for July and August 2021.

Financial summary¹

Numbers in the table below are from continuing operations (excluding Finalto and Casual & Social Gaming)

           

	H1 2021	H1 2020	Change (reported)	Change (const. currency)4
Revenue	€457.4m	€476.7m	-4%	-4%
Adjusted EBITDA2	€124.1m	€109.5m	13%	14%
Adjusted post-tax profit3	€54.6m	€3.5m	1460%	1029%
Reported post-tax profit/(loss)3	€401.9m	-€22.1m	n/a	n/a
Adjusted diluted EPS	17.4 €c	1.1 €c	1482%	1005%
Reported diluted EPS	128.0 €c	-7.4 €c	n/a	n/a

 

 

Summary

 

·      H1 results in line with expectations at the start of the year with online strength offsetting the impact of the longer than expected retail closures in Italy

·      Very strong performance from B2B online, particularly Caliente, as well as Snaitech's online business

·      Americas now the Group's biggest growth driver with revenue growth of 106% at constant currency vs. H1 2020

·   Valuation of the Group's options embedded in Latin America agreements (Caliente, Wplay and others) results in significant unrealised gain of €299.9 million:

o  fair value adjustment has material impact on reported post-tax profit and reported diluted EPS in H1

o  option valuations highlight progress being made and value creation in the region

·      Continued progress on US strategy; launched with Parx in Michigan; new strategic partnerships with Scientific Games and Novomatic; additional licence applications underway  

·    Brian Mattingley joined as Chairman on 1 June 2021; Linda Marston-Weston appointed Non-Executive Director with effect from 1 October 2021; Ian Penrose to be Senior Independent Director  

·    H1 performance, together with the momentum within the business, underpins the Board's confidence of the Company's prospects for the remainder of 2021 and beyond

Divisional highlights

 

B2B Gambling

·    Very strong online performance more than offset the impact of lockdowns and drove B2B revenue growth of 16% to €267.2 million (H1 2020: €229.7 million)

·    Continued expansion in the US and Latin America; revenue from the Americas increased to €46.4 million (H1 2020: €22.9 million); growth of 106% at constant currency

·     Launched with Parx Casino in Michigan; new partnerships with Scientific Games and Novomatic alongside continued progress with bet365 and BetMGM in New Jersey

·    Caliente in Mexico saw significant growth alongside a growing contribution from Wplay in Colombia, with new launches in Costa Rica and Panama to build on presence in Latin America

·     Material gains of €299.9 million in the fair value of Playtech's derivative financial assets driven by the options relating to Caliente and Wplay and others in Latin America

·      New strategic agreement signed with Holland Casino in Europe

·    Continued diversification of B2B business with over 50 further brands added to SaaS offering in H1; 128% revenue growth versus H1 2020; now over 250 new brands added since launch in 2019

·      Very strong growth in Live Casino; significant operational momentum with new signings and product launches

B2C Gambling

·     Snaitech Adjusted EBITDA was €51.6 million (H1 2020: €47.1 million) despite retail closures across the majority of H1; leading retail and online sports betting brand in Italy in H1

·    Snaitech's online business saw excellent revenue growth of 95% to €123.4 million and Adjusted EBITDA growth of 118% to €72.6 million

·    In July 2021, Snaitech agreed the sale of surplus land for €20 million; €1 million was received on signing with the remainder expected to be received in instalments in 2022 following certain regulatory approvals

·      White label (including Sun Bingo) saw 59% growth in Adjusted EBITDA to €5.4 million (H1 2020: €3.4 million)

Finalto

·     The Group remains in discussions with Gopher regarding potential sale of Finalto; Finalto has been presented in these results as a discontinued operation

Current trading and outlook

 

·      Strong start to H2 in July and August

·      B2B and B2C online businesses expected to continue to deliver strong performances

·     The macroeconomic outlook remains uncertain given the ongoing pandemic with the possibility of further unexpected lockdowns in the future

·   Given the strong H1 performance and the momentum within the business into H2 combined with the easing of lockdown restrictions, the Board is confident of the Company's prospects for the remainder of 2021 and beyond

·    Continuing commitment to returning capital to shareholders whilst balancing the needs of the business and taking a prudent approach to capital structure and leverage

 

Mor Weizer, CEO, commented:

 

"I am delighted by our strong strategic and operational progress to date in 2021, despite the ongoing challenges posed by the pandemic. These results demonstrate the quality of our technology and products, the significant progress made against our strategic priorities, and wider momentum across Playtech's operations.

"Significant progress in the US saw Playtech launch for the first time in Michigan, the first step in our long-term multi-state partnership with Parx Casino, and regulatory approvals progressed in key strategic states. Structured agreements continue to deliver in Latin America, with strong growth in H1 in Mexico and Colombia and launches in Panama and Costa Rica. In Europe, we signed a major new software and services agreement with Holland Casino and saw continued growth across a number of existing licensees.

"Snaitech continued to outperform in Italy, cementing its position as the number one retail and online sports betting brand in Italy. The pandemic has structurally grown the higher margin online business and we expect this growth to continue.

"Looking forward, given the strong H1 performance, the momentum in the business and the easing of lockdown restrictions, we are confident of Playtech's prospects for the remainder of 2021 and beyond.

"We have established a new Sustainability and Public Policy Board Committee to consolidate our position as a leader in safer gambling products and strengthen governance around sustainability. Sustainable Success is embedded in our core strategy."

- Ends -

 

 

 

For further information contact:

 

Playtech plc Mor Weizer, Chief Executive Officer Andrew Smith, Chief Financial Officer c/o Headland   Chris McGinnis, Director of Investor Relations and Strategic Analysis James Newman, Director of Corporate Affairs	+44 (0) 20 3805 4822         +44 (0) 20 3805 4822
Headland (PR adviser to Playtech) Lucy Legh, Stephen Malthouse, Jack Gault	+44 (0) 20 3805 4822

 

¹H1 2020 numbers are restated to reflect the discontinued Finalto business for the purposes of comparison. Totals in tables throughout this statement may not exactly equal the components of the total due to rounding. 

²Adjusted numbers relate to certain non-cash and one-off items. The Board of Directors believes that the adjusted results represent more closely the consistent trading performance of the business. A full reconciliation between the actual and adjusted results is provided in Note 9 of the interim financial statements.

³Adjusted Profit refers to post-tax Profit from continuing operations attributable to the owners of the Company after the relevant adjustments as detailed above. Reported Profit refers to post-tax Profit from continuing operations attributable to the owners of the Company before adjustments.

⁴Constant currency numbers exclude the exchange rate impact on the results by using previous period relevant exchange rate and exclude the total cost/income of exchange rate differences recognised in the period.

 

 

Conference call and presentation

 

A presentation will be held today at 9.00 am via a live audio webcast accessible using this link:

 

https://www.investis-live.com/playtech/613f74e26fca31130036c85b/ypww 

 

Analysts and investors can also dial into the call using the following details:

 

United Kingdom: 0800 640 6441

USA: 1 855 9796 654

USA (Local): 1 646 664 1960

All other locations: +44 20 3936 2999

 

Access code: 917384

 

There will also be a replay available after the live conference call at:

 

UK: 020 3936 3001

USA (Local): 1 845 709 8569

All other locations: +44 20 3936 3001

 

Access Code: 205967

 

The presentation slides will be available today from 8.30 am at: http://www.investors.playtech.com/results-centre/presentations/2021.aspx  

 

 

Forward looking statements

 

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". By their nature, forward-looking statements involve risk and uncertainty since they relate to future events and circumstances. Actual results may, and often do, differ materially from any forward-looking statements.

 

Any forward-looking statements in this announcement reflect Playtech's view with respect to future events as at the date of this announcement. Save as required by law or by the Listing Rules of the UK Listing Authority, Playtech undertakes no obligation to publicly revise any forward-looking statements in this announcement following any change in its expectations or to reflect events or circumstances after the date of this announcement. 

 

About Playtech

 

Founded in 1999 and premium listed on the Main Market of the London Stock Exchange, Playtech is a technology leader in the gambling and financial trading industries with over 7,000 employees across 24 countries.

 

Playtech is the gambling industry's leading technology company delivering business intelligence driven gambling software, services, content and platform technology across the industry's most popular product verticals, including, casino, live casino, sports betting, virtual sports, bingo and poker. It is the pioneer of omni-channel gambling technology through its integrated platform technology, Playtech ONE. Playtech ONE delivers data driven marketing expertise, single wallet functionality, CRM and responsible gambling solutions across one single platform across product verticals and across retail and online.

 

Playtech partners with and invests in the leading brands in regulated and newly regulated markets to deliver its data driven gambling technology across the retail and online value chain. Playtech provides its technology on a B2B basis to the industry's leading retail and online operators, land-based casino groups and government sponsored entities such as lotteries. Playtech directly owns and operates Snaitech, the leading sports betting and gaming company in online and retail in Italy.

 

Playtech also owns Finalto, a technology leader in the CFD and financial trading industry that operates both on a B2B and B2C basis. Finalto has been classified as a discontinued operation since 31 December 2020 and remained so as at 30 June 2021.

 

 

Chief Executive Officer's Review

Overview

 

Playtech made excellent progress on its strategic priorities in the first half of the year, leaving the Group well-positioned to capture the exciting market opportunity ahead.

Playtech continued to accelerate its US presence. The US is a highly strategic market for Playtech and creates a significant long-term opportunity across its full product suite. Since launching in New Jersey with bet365 and BetMGM in 2020, Playtech announced strategic agreements with the Greenwood companies in H1 2021 to license its products in four US states and has already launched the Play Gun Lake App with Parx Casino in Michigan. During the period, Playtech signed strategic partnerships with Scientific Games and Novomatic Americas. Playtech has started the licensing process in additional US states and will continue to increase its investment in the US market, to take advantage of a strong pipeline of opportunities with potential new customers and existing customers from other markets.

Playtech continued to strengthen its market leadership in Latin America. In Mexico, Caliente continued to grow impressively and in Colombia, Wplay outperformed expectations. The Group launched in Costa Rica and Panama in H1. Playtech also signed a strategic agreement in Brazil ahead of expected regulation. The Company is progressing on plans to develop a new Live Casino facility in Peru as it continues to expand its addressable market across Latin America. During H1, the Group recognised a significant unrealised gain in relation to fair value of the Group's options in Latin America. The gain relates to holdings in Caliente, Wplay and others and highlights the value of the Group's strategic agreements in Latin America.

In order to continue growing and diversifying its B2B Gambling division, the Group continued to add customers, including attracting new customers in both regulated and soon to be regulated markets, progressing discussions on new strategic agreements and joint ventures, as well as adding over 50 new brands to its SaaS offering. Playtech has now added over 250 new brands since launching the SaaS offering back in 2019.

While impacted by retail closures for most of the first half, Snaitech continued to outperform in online with revenue growth of 95% compared to H1 2020, which helped it to achieve the number one market share position by brand in the Italian sports betting market (retail and online combined measured by GGR) in H1 2021.

As the leading technology company in the gambling industry, Playtech recognises that licensees look to the Group to deliver innovation that changes the way players experience gambling entertainment. Following its launch in 2020, Playtech continued to execute its Sustainable Success strategy in H1 2021, the highlights of which are detailed below and include the establishment of a Sustainability and Public Policy Committee to provide Board-level oversight on key non-financial strategy, commitments, targets, and reporting matters.

The Group's simplification strategy is also progressing. The last remaining Casual Gaming assets were disposed of in early 2021 and the sale process of the Finalto business is ongoing. Once this process is completed, Playtech will be a simpler business, focused on the attractive markets of B2B Gambling and B2C Gambling. 

 

B2B Gambling

 

Core B2B Gambling

 

Regulated markets

 

The strategic focus of Playtech's B2B Gambling business continues to be on opportunities in regulated or soon to be regulated markets, with a focus on high-growth markets such as the US, Latin America and certain parts of Europe.

Regulated markets saw growth of 19% compared to H1 2020, driven by excellent revenue growth from Caliente in Mexico, as well as strong growth in other regulated markets such as Colombia, Poland, Italy, and Greece.

US

Playtech continues to expand its presence in the US market. In February 2021, the Company signed strategic agreements with various subsidiaries of Greenwood Racing Inc. which own and operate the Parx Casino in Pennsylvania. The agreements include the licensing of Playtech products to the Greenwood companies in the states of Michigan, Indiana, New Jersey, and Pennsylvania.

Following the signing of the agreement, Parx launched online casino in Michigan on Playtech's IMS Platform and Player Account Management (PAM) software in April and will continue to launch in further states and with additional products going forward.

Playtech also signed a global iGaming distribution partnership with Scientific Games which will enable both parties to mutually benefit from each other's scale and reach across the US, as well as other regulated markets. The Company also announced a strategic partnership with Novomatic Americas to jointly market, sell and distribute sports betting products in the US.

The launch of Playtech's first Live Casino facility in the US is imminent in Michigan, while further facilities are progressing in New Jersey and Pennsylvania. The Company has significantly expanded its operational and back-office teams in the US in order to accelerate its presence in the region.

The regulatory landscape in the US is ever progressing. Since the repeal of PASPA in 2018, numerous states have approved legislation to legalise sports betting. Many of these markets have already launched in both online and retail channels, with others expected to launch soon. In total, 26 states now offer or have introduced legislation to allow sports betting with further states expected to pass legislation in the coming years.

Online casino, which was not subject to PASPA, is allowed at the discretion of individual states. The tribes of Connecticut most recently received federal approval to operate online casino games, while Michigan launched in early 2021, joining New Jersey, Pennsylvania, Delaware, and West Virginia, while Nevada allows online poker only.

Latin America

In Latin America, Playtech saw outstanding growth from Caliente and this business continues to outperform. Following its migration to Playtech's technology platform in late 2020, Wplay saw very strong growth in H1 and is well-positioned to continue its growth and capitalise on the exciting opportunity in Colombia in the years ahead.  

Playtech has continued to execute on its latest strategic agreements in the region and launched its IMS platform alongside Casino, Live and Sports products in Panama in H1, as well as launching its Bingo product in Costa Rica.

Playtech is also opening a new Live Casino facility in Peru as it continues to extend its presence across the region, in order to better serve its existing clients in Latin America as well as in anticipation of the continued regulation and strong growth expected in the region in the years ahead.

Elsewhere in the region, sports betting legislation has been passed in Brazil, which is expected to be implemented in the near future. Brazil is anticipated to be a significant market given the large population and its access to the mobile channel. The Company has an exciting strategic agreement in place with Galerabet, with economics similar to its other arrangements in Latin America, in anticipation of regulation in this market.

During H1, the Group recognised a significant unrealised gain in relation to fair value of the Group's options in Latin America. The gain relates to holdings in Caliente, Wplay and others and highlight value of the Group's strategic agreements in Latin America.

Europe

In Europe, revenue growth was driven by several licensees including Totalizator Sportowy in Poland, Sisal in Italy as well as various customers in Greece.

Playtech signed a new, extended long-term strategic agreement with Holland Casino, the state-owned land-based casino operator in the Netherlands. Holland Casino operates 14 casinos across the country and will expand into the online betting and gaming space with Playtech's solution. Playtech will provide its full turnkey multichannel offering, consisting of its IMS platform, all product verticals as well as certain operational and marketing capabilities. Furthermore, Playtech will build a Live Casino facility in the immediate vicinity of one of Holland Casino's existing locations as part of the agreement.

Elsewhere in Europe, Playtech's Live Casino business added several new customers including LeoVegas in Spain and went live with, among others, 888 and Betsson each in multiple territories. Playtech's Casino business launched with several new customers across Europe and signed agreements to expand into new territories with its existing customers, for example in Croatia with Fortuna.

Regulation in Europe continues to evolve and regulated markets in the region represent significant growth opportunities. Netherlands and Germany, both top 10 markets in Europe, progressed on their respective regulatory resolutions with the Netherlands initiating its online gambling licensing process on 1 April, ahead of the market's expected opening on 1 October 2021. Playtech is well positioned in the Netherlands through its agreement with Holland Casino.

After many years of uncertainty for online gambling in Germany, the Interstate Treaty became effective on 1 July 2021 and now paves the way for license holders to offer online slots, online poker and sports betting. The main impacts of the Treaty included switching off casino table games (Blackjack and Roulette) until the individual Länder choose to issue licenses under the Treaty, deposit limits of €1,000 per month, €1 maximum stakes per spin on online slots, 5-second minimum duration of slot spins and certain advertising restrictions, while operators could begin applying for licenses.

UK

 

UK revenues saw a decline of 10% compared to H1 2020, largely driven by retail closures as a result of the COVID-19 pandemic. Retail closures, which were in place for the majority of the period, significantly impacted Playtech's B2B sports business which is heavily weighted towards retail via its self-service betting terminals (SSBTs).

On an underlying basis, when excluding the impact of retail and sports and the impact of material changes to customer contracts, the online gaming business increased 7% in the UK.  

Betting shops began to reopen starting in mid-April. Activity levels continued to gradually improve following reopening as various lockdown restrictions were eased.  

Playtech continued to extend its presence in the UK with several new customer signings, including Les Ambassadeurs Online, and numerous go-lives including Sky Vegas and Novibet on its Live Casino product.

The UK remains a key regulated market for Playtech given its ongoing relationships with major operators. Playtech has been actively involved in discussions around safer game design and online advertising and, through the industry trade body the Betting and Gaming Council (BGC), is co-leading a working group on the subject. Playtech expects that its commitment to safer gambling and its use of technology and data to support its licensees in this area will see it remain the go-to platform for regulated markets including the UK.

In December 2020 the UK Government announced a call for evidence to review the existing gambling laws in the UK. Since the initial 16-week call for evidence which ended on 31 March, the Government has been assessing the evidence presented, alongside other data, with the aim of setting out conclusions and any proposals for reform in a white paper later this year. Playtech has submitted data and evidence relating to the call, in line with the Government's request and will continue to support this wherever possible.

Other unregulated (excl. Asia)

 

The Group's strategy to focus on both regulated and regulating markets includes unregulated markets which are likely to regulate in the future. Some of these are classified in the 'Other unregulated' line within B2B Gambling. Other unregulated markets grew 17% versus H1 2020, driven by markets such as Canada and Brazil.

Following the progress in the US, regulation advanced in Canada as parliament approved an amendment to Canadian law to allow single-game sports betting at the discretion of individual provinces. As of 27 August 2021, seven provinces including the country's largest province, Ontario, began allowing bets to be placed on single-game sporting events. As regulation progresses across Canada, it will continue to add to the size of the North America market opportunity.

Unregulated Asia

 

Unregulated Asia saw revenue growth of 6% compared to H1 2020, delivering a trading performance in line with H2 2020. This was driven by the contribution from the new distributor the Company added in 2020, as well as a favourable comparator in H1 2020 given the impacts of COVID-19 in Asia during the peak of the pandemic.

Reflecting the actions taken over recent periods, the Asia business is now more diversified in terms of both distributors as well as geographically compared to recent years.  

 

B2B - Product Developments

Playtech continues to support existing licensees with new technologies and tools and provide them with greater flexibility in their operations. In order to diversify its B2B Gambling division, the Group continued to add customers depending on commercial suitability and market dynamics, including attracting new customers in both regulated and soon to be regulated markets, progressing discussions on new strategic agreements and joint ventures, as well as adding new SaaS brands. Using its SaaS model, first introduced in 2019, Playtech added over 50 new brands in H1 2021 including 888 and Kindred and has now added over 250 new brands since launching the SaaS offering in 2019.

Playtech completed key strategic partnership product deliveries, including a Mystery Parcel game feature with real-time bonusing that can be used with any Playtech Casino content. Mystery Parcel was rolled out exclusively with Entain at first, with several other licensees now enjoying the feature.

Among various new product developments, Playtech launched its latest online casino 'power suite' with Cash Collect™. The Company launched Sahara Riches™ as the first game within the Cash Collect™ suite, with the game's performance in its first week since release being Playtech's second strongest game performance in its history.  

Within Live Casino, Playtech continued to roll out new products with existing licensees, including a 'Who Wants To Be A Millionaire' trivia game, which broke the record for the most concurrent players on a Live table in Playtech's history. This game was notably successful in the UK, Greece, and Italy, and continues to attract traffic to our licensees' sites.

As a continuation of the Company's successful FireBlaze suite of games, the Live Casino team also launched Mega Fire Blaze™ Roulette. In its first month since launch, Mega Fire Blaze™ Roulette significantly outperformed any previous Playtech Live Casino product in both gross gaming revenue (GGR) and wagering terms.

 

B2C Gambling

 

Snaitech

Italy

Snaitech revenue was down 27% in H1 2021 compared to H1 2020 while Adjusted EBITDA was up 10%, highlighting the attractiveness of its business model and growing strength in online.

Retail shops were closed in Italy throughout H1 2021 against a comparative in H1 2020 which saw retail open as normal in January and February. Despite this, Snaitech continued to generate revenues from betting and gaming online throughout H1 2021.

Although Snai's online betting business was severely impacted by the lack of sporting events in H1 2020, in H1 2021 the business saw sporting events continue largely as planned including around two weeks of the UEFA Euro 2020 championships at the end of June 2021. The continuation of sporting events helped the online business to perform well despite the prolonged retail closures.

At the start of this year, Snaitech's expectation was that the retail closures in Italy would ease from approximately mid-March. However, given the continuing impact of the pandemic retail shops were forced to remain closed for much longer and did not begin to reopen until mid-June. The reopening towards the end of H1 positions the business well for H2.

Despite the loss of significant revenue from retail closures, Snai's double-digit Adjusted EBITDA growth was driven by the strong performance of online betting and gaming and supported by its franchise operating model with a low fixed cost base, as well as the actions taken by management to reduce costs.

On an Adjusted EBITDA level, the online business grew 118% to €72.6 million (H1 2020: €33.3 million) during the period.

Furthermore, Snaitech achieved the number one market share position (retail and online combined measured by GGR) across Italian sports betting brands in H1 2021, demonstrating its operational and brand strength.

Germany & Austria

HPYBET revenues were flat versus H1 2020, driven by retail closures in Germany and Austria for significant parts of H1 2021. This business is now operated by Snaitech management and during the retail closures due to governmental lockdowns, management began upgrading the technology infrastructure in this business with a view to both drive retail performance and improve online performance in the future. The Snaitech betting platform was activated in HPYBET shops in May and the integration of HPYBET operations into Snaitech is progressing well.

As discussed in the B2B section above, Germany's Interstate Treaty has regulated online slots, online poker and sports betting from 1 July 2021. Playtech is well positioned to enter this market and was awarded one of the few available online sports betting licenses in Germany through its B2C division HPYBET in October 2020.

Safer gambling and sustainability

During H1, Playtech continued to progress with delivering its sustainability strategy and commitments, which were launched in 2020. The Group will publish an H1 sustainability progress update on its corporate website shortly. Some of the highlights are listed below.

ESG Governance and Engagement

The Board has established a new Sustainability and Public Policy Committee, which is responsible for reviewing, monitoring, and advising on Playtech's sustainability, responsible business, and public policy matters. This includes oversight of a wide range of responsible business topics including ethics, safer gambling, diversity and inclusion, wellbeing, human rights, and the Company's climate change strategy. The Committee will also oversee the Company's key non-financial commitments, strategy, targets, and reporting from Board level. In H1 Playtech established an external stakeholder advisory panel to challenge and strengthen the Company's approach to sustainability. The panel has met twice in 2021 and has two further meetings scheduled this year.  

Enhancing Playtech Protect and Safer Gambling Standards

In H1, Playtech continued to grow its Playtech Protect offering across research, partnerships, and innovation and expanded its support for its licensees. Playtech is proud to have secured the first B2B GamCare Safer Gambling Standard in the UK and Snaitech once again secured the G4 certification at the end of 2020. Playtech also published four research papers covering safer game design, real time messaging, customer interaction, and the impact of auto-play on player behaviours.

Carbon Reduction

During H1, the Company strengthened its approach to carbon reduction. Playtech established a new environmental working group to direct and oversee its environmental and carbon reduction strategy. This included mapping the Company's scope 3 emissions which make up a significant portion of overall emissions. This mapping will also support our efforts to identify carbon reduction opportunities and to establish a carbon target aligned with science.

Diverse and Inclusive Culture

In H1, the Company initiated a refresh of its diversity and inclusion objectives, targets and strategy to accelerate progress on gender diversity in leadership levels of the organisation. Further, Playtech is also delighted to have joined the All-In Diversity project as a founding member. This is an industry-driven initiative to accelerate diversity, equality and inclusion for the global betting and gaming sector.

Mental Health Impacts of COVID-19

Recognising the significant impact of the pandemic on mental health, Playtech launched a £3 million COVID Recovery and Resilience Fund, in partnership with the Charities Aid Foundation (CAF).  The Company is pleased to have approved funding for 44 organisations in 9 countries to date. A second round of funding has been launched in September 2021.

Group simplification

At 31 December 2020, the Group's financial trading division, Finalto, was classified as a discontinued operation, as the Board formally decided on its disposal in order to focus on the Group's core B2B and B2C gambling businesses.

In May 2021, the Group announced the proposed sale of Finalto to a consortium led by Barinboim Group and backed by Leumi Partners Limited and Menora Mivtachim Insurance Limited, together with key members of Finalto's management team (together "the Consortium"). The sale for up to US$210 million was subject to shareholder approval. Prior to the shareholder vote, the Group received a non-binding offer received for the Finalto Group from Gopher Investments ("Gopher"). Shareholders voted against the Consortium deal so that the Group could pursue the higher offer from Gopher.

The Company continues to engage with Gopher on the potential sale of Finalto.

As announced on 18 August 2021, since the resolution to approve the disposal of Finalto to the Consortium was not passed, the Consortium agreed with Playtech to terminate its SPA which allowed the Company to immediately engage with Gopher to progress a potential disposal of Finalto.

Discussions with Gopher remain ongoing and, while the Company is pleased with the considerable progress made to date on what has been a very concentrated timetable, there can still be no certainty that any transaction will be forthcoming.

Although the Consortium agreed to terminate the SPA, as announced on 18 August 2021 it indicated to Playtech that it intended to maintain the Consortium for the next 30 days, such that it would be in a position to re-enter into the SPA if the parties so agree. That 30 day period has now expired, and as such there can be no certainty that the Consortium will remain as a potential buyer for Finalto.

The Company will provide an update in due course as appropriate.

 

Chief Financial Officer's Review¹

 

Overview

 

Group performance

 

The Group had a solid performance which was in line with its Adjusted EBITDA expectations set at the start of the year, albeit with a different contribution blend. Adjusted EBITDA from our online business, which performed exceptionally well, driven by B2B and in particular Caliente, as well as the Snaitech online business, offset the impact of the longer than expected retail closures in Italy. The online performance was further bolstered by the sporting events during the period, compared to Q2 2020 when all major sporting events were cancelled.

Overall, Adjusted EBITDA from continuing operations was €124.1 million (H1 2020: €109.5 million), an actual period-on-period increase of 13% and 14% on a constant currency basis. Total reported revenue from continuing operations was €457.4 million (H1 2020: €476.7 million), representing only a 4% actual and on a constant currency basis period-on-period decline.

The Group continues to present the Finalto division under discontinued operations at 30 June 2021, as despite the Consortium deal being rejected by the shareholders as further discussed in the Chief Executive Officer's report, it remains the Board's intention to dispose of this unit as part of the Group's simplification strategy.

Reported and Adjusted Profit

 

Adjusted profit before tax from continuing operations increased by 246% to €27.0 million (H1 2020: €7.8 million), driven by the rise in Adjusted EBITDA and a decrease in amortisation.

 

Reported profit before tax from continuing operations is €278.1 million (H1 2020 reported loss: €19.2 million), mainly due to the €299.9 million of unrealised fair value gains on derivative financial assets (H1 2020: €Nil). This gain is discussed further down in this report, and also in Note 15E of the interim financial statements.

 

The Group implemented an internal restructuring in January 2021, which resulted in Playtech plc migrating its tax residency to the UK and the Group's key operating entity transferring its business to a UK company. Reported tax credit from continuing operation increased by €126.8 million to €123.8 million in H1 2021 (H1 2020: tax expense of €3.0 million) which mainly relates to the €128.1 million increase in the deferred tax credit to €130.2 million (H1 2020: tax credit of €2.1 million). This increase consists mainly of €90.3 million relating to the recognition of the benefit of future tax deductions for goodwill and intangible assets resulting from the Group restructuring in 2021, as well as €34.0 million relating to the recognition of the benefit of tax losses available to use against taxable profits in future periods.

 

This led to a total post-tax reported profit from continuing operations of €401.9 million (H1 2020: reported loss €22.1 million).

 

Balance sheet and liquidity

 

From the start of the global pandemic, which was declared as such by the World Health Organisation in March 2020, the Group took decisive action to ensure the health and wellbeing of its employees and to preserve cash flow, while also benefitting from heightened activity in its online businesses which continued into 2021. As a precautionary measure, following the announcement of the first lockdown in Q1 2020 and the uncertainty surrounding this, the Group drew down €245.8 million against its revolving credit facility ("RCF"). After careful consideration of the Group's cash position and future liquidity, €100 million was repaid in June 2021 against the RCF with a further €50 million repaid in July 2021. This supports the confidence the Board has on the Group's future performance, despite COVID-19, and whilst factoring in any potential further lockdowns in our scenario planning.

The Group continues to maintain a strong balance sheet with total cash and cash equivalents, excluding cash held for sale, of €540.8 million at 30 June 2021 (31 December 2020: €683.7 million). Adjusted gross cash, which excludes the cash held on behalf of clients, progressive jackpots and security deposits, decreased to €410.5 million as at 30 June 2021 (31 December 2020: €554.6 million), owing in large part to the repayment of €100 million of its RCF, as well as paying €89.6 million of gaming tax in Italy which related to 2020 (noting it was a government-led approved payment deferral as part of the assistance offered to companies during the pandemic) as previously announced.

 

The Group's total gross debt decreased to €1,088.4 million at 30 June 2021 (31 December 2020: €1,182.0 million), with Net Debt, after deducting adjusted gross cash, increasing to €677.9 million (31 December 2020: €627.4 million).

 

In the prior period, Playtech took a prudent and disciplined approach to its banking relationships. Despite being comfortably within its covenants, Playtech proactively approached its lenders and agreed to amend the covenants in its RCF for the 31 December 2020 and 30 June 2021 tests. The leverage covenant was amended to 5x Net Debt / Adjusted EBITDA for the 31 December 2020 test and 4.5x for the 30 June 2021 test. The interest cover covenant was amended to 3x for the 31 December 2020 test and 3.5x for the 30 June 2021 test. The covenants will return to the previous levels of 3x Net Debt / Adjusted EBITDA and 4x Adjusted EBITDA / interest from the 31 December 2021 test onwards. 

 

Playtech's swift actions and assured navigation of the pandemic has left the Group in strong financial health as in now looks ahead to the rest of the financial year and beyond, which is benefitting from the full reopening of retail shops in its main markets.

 

Group Summary (continuing operations)³

 

	H1 2021 €'m	H1 20204 €'m
B2B Gambling	267.2	229.7
B2C Gambling	196.6	253.4
Intercompany	(6.4)	(6.4)
Total Group Revenue from continuing operations	457.4	476.7
Adjusted costs	(333.3)	(367.2)
Adjusted EBITDA from continuing operations	124.1	109.5
Reconciliation from EBITDA to Adjusted EBITDA:
EBITDA	109.8	91.8
Employee stock option expenses	7.0	7.1
Professional fees	2.2	1.7
Additional consideration payable put/call option	0.9	4.5
Movement in contingent consideration and redemption liability	-	1.2
Charitable donation	1.9	3.2
Settlement of legal matters	2.3	-
Adjusted EBITDA	124.1	109.5
Adjusted EBITDA margin	27%	23%
Adjusted EBITDA on a constant currency basis	124.5	109.5
Adjusted EBITDA margin on a constant currency basis	27%	23%

 

The ongoing pandemic impacted both periods being presented, however in different ways. Whereas during H1 2020, we had retail in Italy fully operational for the first two months, this was severely disrupted by both retail closures in March and in the second quarter, as well as the lack of significant worldwide sporting events. Due to lockdowns in Italy, there was no retail activity for almost the entire H1 2021 period, however, all major sporting events took place (including UEFA EURO2020 in June/July 2021) which boosted online sports performance. Therefore, the Group's total reported revenues from continuing operation decreased by just 4% to €457.4 million (H1 2020: €476.7 million), driven by the strength of its online business, where revenue increased by 40%, offset by a 65% decrease in retail revenue, both excluding Asia.

 

The Group's Adjusted EBITDA from continuing operations increased to €124.1 million (H1 2020: €109.5 million), a period-on-period increase of 13% and 14% on a constant currency basis. Adjusted EBITDA increasing, which contradicts the decrease seen in revenue, is due to the strong performance of the higher margin online business both under B2B and B2C, which also resulted in the period-on-period increase in the Adjusted EBITDA margin from 23% in 2020 to 27% in 2021. The Group's total reported EBITDA also increased by 20% to €109.8 million (H1 2020: €91.8 million).

 

Divisional performance

 

B2B Gambling

 

B2B Gambling Revenue

 

 

	H1 2021 €'m	H1 2020 €'m	Change
Regulated - Americas	46.4	22.9	103%
Regulated - Europe (excluding UK)	66.5	56.1	19%
Regulated - UK	59.6	66.1	-10%
Regulated - Rest of the World	1.9	1.5	27%
Total Regulated B2B revenue	174.4	146.6	19%
Unregulated excluding Asia	49.0	41.9	17%
Total Core B2B revenue	223.4	188.5	19%
Asia	43.8	41.2	6%
Total B2B Gambling revenue	267.2	229.7	16%

 

Core B2B Gambling revenues² increased by 19% which was driven by the increase in regulated markets in the Americas and Europe (excluding the UK) of 103% (106% on a constant currency basis) and 19% respectively and a 17% increase in revenues from unregulated markets excluding Asia. This was offset by a 10% decrease in UK revenues driven by the previously announced impact of changes to the contract with Entain.

 

The biggest contributors to the increase in both the Americas and Europe (excluding the UK) were Mexico, driven by revenue growth in Mexico, as well as Colombia, Poland and Italy. The growth in revenues from unregulated markets excluding Asia came from Canada and Brazil. Asian revenue increased by 6%. 

 

Overall, B2B Gambling revenues increased by 16% and 17% on a constant currency basis, largely due to the increase in online performance, which was also heightened during retail closure periods, as well as the fact that, despite the lockdowns, major sporting events were still taking place (including UEFA EURO2020 in June/July 2021), as opposed to the prior period where these were cancelled during the majority of the second quarter. Underlying Core B2B revenue from online only and excluding sports and the previously announced material changes to the Entain contract increased by 30%.

 

B2B Gambling Costs and Margins

 

In order to better reflect the way we manage the business, we have split out those costs which are charged through to licensee with an insignificant or no margin and the related revenue. Furthermore, the revenue and costs associated with retail hardware sales, where the margins significantly vary with each transaction and therefore distort the margin of the rest of the B2B business, were also split out.

 

In addition to this, the underlying B2B costs were split into categories that best reflect how these costs are managed and specifically showing the strategic expenditure which relate to the Latin America expansion, live operations and ongoing entry costs into the US. 

 

 

	H1 2021 €'m	H1 2020 €'m	2020 to 2021 %
Revenue and costs relating to live dedicated tables, dedicated teams, hosting, B2B white label and hardware sales
Revenue	44.3	40.3	10%
Costs	40.9	31.1	32%
Adjusted EBITDA	3.4	9.2	-63%
Margin	8%	23%	NA
B2B Underlying Gambling Revenue and Costs
B2B Underlying Gambling Revenue*	222.9	189.4	18%
Research and Development	36.1	38.5	-6%
General and Administrative	30.3	30.0	1%
Sales and marketing	5.8	9.5	-39%
Operations	28.5	27.6	3%
Total costs (excluding Asia and strategic expenditure)	100.7	105.6	-5%
Asia related costs	25.2	11.1	127%
Strategic expenditure	28.3	18.7	51%
B2B Underlying Gambling Costs	154.2	135.4	14%
B2B Underlying Gambling Adjusted EBITDA	68.7	54.0	27%
Margin	31%	29%	NA
Total B2B Revenue and Costs
B2B revenue	267.2	229.7	16%
B2B Costs	195.1	166.5	17%
Total B2B Adjusted EBITDA	72.1	63.2	14%
Margin	27%	28%	NA

 

* To reflect the underlying activity of the B2B Gambling division, B2B revenues include the software and services charges generated from the relevant B2C activity with fellow Group companies, which is then eliminated to show the consolidated gambling division revenues.

 

Revenue and Costs excluded from Underlying EBITDA

 

The costs being excluded from underlying EBITDA include costs which are passed directly to licensee at a small margin or no margin at all, such as live dedicated tables, dedicated teams and hosting fees, as well as the cost of retail hardware sales, where margins can fluctuate significantly depending on each deal. Although revenue generated from this expenditure increased by 10%, the respective costs increased by 32% indicating their volatile nature and further supporting the reason for excluding these from the underlying B2B revenue and costs. Furthermore, margins also decreased accordingly from 23% in H1 2020, to 8% in the current period.

 

B2B Underlying Gambling costs

 

B2B Underlying Gambling costs increased by 14%, driven by the increase in both Asia related and strategic expenditure costs. Both are further discussed below.

 

Research and Development ("R&D") costs include, among others, employee-related costs and proportional office expenses. Expensed R&D costs decreased by 6% to €36.1 million (H1 2020: €38.5 million), driven by a reduction in office expenses and travel costs. Capitalised development costs were 39% of total B2B Underlying R&D costs in the period, compared to 38% in the prior period.  

 

General and Administrative costs include employee-related costs, proportion of office expenses, consulting and legal fees, and corporate costs such as audit and tax fees and listing expenses. These costs remained in line period-on-period at €30.3 million (H1 2020: €30.0 million) with the small 1% increase caused by an increase in charitable donations.

 

Sales and marketing costs decreased significantly to €5.8 million (H1 2020: €9.5 million), mainly due to the fact that the ICE conference did not take place in February 2021 with the last one taking place in February 2020, right before the onset of the COVID-19 global pandemic.

 

Operations costs includes costs relating to infrastructure and other operational projects, IT and security and generally day to day operational costs, including employee and office apportioned costs and branded content fees. These costs increased by just 3% from €27.6 million in H1 2020 to €28.5 million in H1 2021, driven by an increase in branded games fees, especially in the territory of Poland.

 

Asia costs increased by 127% to €25.2 million (H1 2020: €11.1 million) largely due to the previously announced restructuring of the relationship with our largest distributor.

 

Strategic expenditure includes revenue driven costs relating to structured agreements, US expansion costs, and all costs relating to live operations (excluding live dedicated table costs). These costs have increased by 51% to €28.3 million (H1 2020: €18.7 million) which is in line with the increase in revenue under our structured agreements and in particular Caliente, as well as the increase in employee costs within our live division. Furthermore, we have made progress in our US entry plans, and as such these costs have also increased period-on-period.

 

B2B Adjusted EBITDA

 

Total B2B Adjusted EBITDA increased by 14% to €72.1 million (H1 2020: €63.2 million) with a small 1% decrease in margin period-on-period. However, Underlying Adjusted EBITDA has increased by 27% to €68.7 million (H1 2020: €54.0 million). The increase was driven by the higher margin online overperformance, especially from specific licensees such as Caliente, as well as increase in Casino, Live and Sports (with latter driven by major sporting events taking place during the entire period as opposed to the prior period were there were major cancellations). Furthermore, B2B underlying Adjusted EBITDA margins have improved, increasing to 31% from 29% in the prior period.

 

B2C Gambling

 

	H1 2021 €'m	H1 2020 €'m	Change
Snaitech
Gambling Revenue	157.9	215.5	-27%
Gambling Costs	106.3	168.4	-37%
Adjusted EBITDA	51.6	47.1	10%
White Label (incl. Sun Bingo)
Gambling Revenue	30.2	29.4	3%
Gambling Costs	24.8	26.0	-5%
Adjusted EBITDA	5.4	3.4	59%
Sports B2C
Gambling Revenue	8.5	8.5	0%
Gambling Costs	13.5	12.7	6%
Adjusted EBITDA	-5.0	-4.2	-19%
Total B2C
Gambling Revenue	196.6	253.4	-22%
Gambling Costs	144.6	207.1	-30%
B2C Adjusted EBITDA	52.0	46.3	12%

 

Snaitech

 

Snaitech revenues decreased by 27% to €157.9 million (H1 2020: €215.5 million), owing to the effects of the COVID-19 pandemic which resulted in the closure of retail betting shops in Italy for almost the entire duration of H1 2021 versus last year when closures only affected half of the period. However, Snaitech's revenue was supported by a 95% increase in online revenues. This increase was also due to the fact that major sporting events were cancelled for part of H1 2020, as opposed to H1 2021 where these were taking place as normal, including UEFA EURO 2020 taking place in June/July 2021 after it was postponed last year.

 

Snaitech operating costs decreased by 37% to €106.3 million (H1 2020: €168.4 million). Given the high variable costs in the business, the fall in operating costs was driven by the decrease in retail revenues and mainly consisted of a decrease in franchise commission, gaming concession fees, platform charges, maintenance of the retail network and costs relating to data feeds.

 

Snaitech's Adjusted EBITDA increased by 10%, as opposed to revenue which overall decreased, due to its low fixed cost base, effective cost reduction and the strong performance of its higher-margin online business, which saw exceptional growth in online EBITDA of 118%. As a result, Snaitech's EBITDA margin improved to 33% (H1 2020: 22%) and its underlying margin, which excludes the distribution costs paid to franchisees, improved to 45% (H1 2020: 41%).

 

White label (including Sun Bingo)

 

Revenue from the white label business increased by 3% in total, driven by a 7% increase in Sun Bingo revenue to €30.2 million (H1 2020: €28.2 million). Operating costs within Sun Bingo increased by 4% to €24.8 million (H1 2020: €23.9 million), in line with increase in revenue, whereas Adjusted EBITDA  increased by 26% to €5.4 million (2020: H1 €4.3 million). Adjusted EBITDA includes the unwinding of the minimum guarantee prepayment over the new period of the contract which was renegotiated in 2019.

 

Other White label revenue decreased to almost nothing (H1 2020: €1.2 million), as part of an ongoing effort to cease other white label operations. Similarly other white label costs decreased by 100%, resulting in an Adjusted EBITDA of €Nil million (H1 2020: loss of €0.9 million).

 

Sport B2C

 

The Sport B2C business, which has now officially moved under the Snaitech management team, is currently at an early stage of growth, therefore, despite the retail closures in Germany and Austria resulting from COVID-19 which impacted both periods, revenues remained flat at €8.5 million (H1 2020: €8.5 million), with costs increasing by 6%. The business remains loss making, with the Adjusted EBITDA loss increasing by 19% to €5.0 million (H1 2020: loss of €4.2 million).

 

Below EBITDA items

 

Depreciation and amortisation

 

Reported and Adjusted depreciation decreased by 8% to €21.8 million (H1 2020: €23.7 million). Adjusted amortisation, after deducting amortisation of acquired intangibles of €18.9 million (2020: €19.5 million) decreased by 15% to €34.5 million (H1 2020: €40.4 million). The decrease mainly relates to the fact that the Italian betting licenses were fully amortised by December 2020 and renewal is not expected until later this year.  The remainder of the balance under depreciation and amortisation of €8.8 million (H1 2020: €8.8 million) relates to IFRS 16 Leases, being the right-of-use asset amortisation.

 

Impairment of tangible and intangible assets

 

The impairment of tangible and intangible assets of  €15.1 million (H1 2020: €7.2 million) mainly relates to the €12.3 million impairment resulting from the disposal of some real estate in Milan.  The recoverable amount (being net sales proceeds as per the binding sale agreement) was compared to the property's net book value which led to the impairment. H1 2020 included an impairment charge of €5.4 million relating to Retail B2C Sport.

 

Finance costs

 

Reported finance costs increased by just 2% to €33.8 million (H1 2020: €33.1 million), while adjusted finance costs increased by 8% to €32.5 million (H1 2020: €30.2 million). The latter was driven by the increase in interest expense due to the additional drawdown from the RCF in March 2020. The difference between adjusted and reported finance costs is the movement of the contingent consideration and redemption liability of €1.3 million (H1 2020: €3.0 million).

 

Unrealised fair value changes on derivative financial assets

 

The unrealised fair value changes to derivative financial assets of €299.9 million (H1 2020: €Nil) is due to the recognition of the fair value of the various call options held by the Group in Latin America which fall under the definition of derivates within IFRS 9 Financial Instruments.

 

Given the growth in Latin America, especially in Mexico (Caliplay) and Colombia (Wplay), the value of the options have exponentially increased and, coupled with the changes to the framework agreements and amendments to certain exercise conditions discussed in Note 15, these options have been fair valued.

 

Playtech's valuations of each of the options is derived from a discounted cash flow in the first instance and then contains a number of assumptions and estimates, including the likelihood of each of the call options being exercised, and with a number of different scenarios as to timing of exercise and Playtech's likely percentage shareholding, as well as taking into account the maturity curve of each business. These are further discussed in Note 15E. The value that could be realised should the option be exercised in the future could be materially higher than the resulting fair value of the options recognised as at 30 June 2021. 

 

Taxation

 

In H1 2021, the Group's underlying adjusted effective tax rate from continuing operations increased to 23% (H1 2020: 55%). The high tax rate is mainly due to the Group generating tax losses during the period in certain territories which cannot be offset against taxable profits arising in different territories. The benefit of the tax losses which are available to utilise in future periods is not reflected in the current period adjusted effective tax rate. The adjusted tax rate is impacted by the geographic mix of profits and reflects a combination of higher headline rates of tax in the various jurisdictions in which the Group operates when compared with the United Kingdom standard rate of corporation tax of 19%.

 

The total adjusted tax credit in H1 2021 is €27.6 million (H1 2020: tax charge of €4.4 million) of which €6.4 million (H1 2020: €4.4 million) relates to income tax expenses (including prior year adjustments) and deferred tax credit of €34.0 million (H1 2020: €Nil). The total adjusted deferred tax credit mainly consists of €8.2 million relating to UK tax losses and €26.1 million relating to Snaitech tax losses arising in prior years which were recognised in the period.

 

The reported tax credit in H1 2021 was €123.8 million (H1 2020: tax charge of €3.0 million), which excludes the impact of the future tax deductions resulting from the Group restructuring which have a tax benefit of €90.3 million. This amount has been excluded from adjusted earnings in the period and in each period after the transaction, with the benefit added to the adjusted income tax charge as this more accurately aligns the adjusted tax charge with the expected rate of cash tax payments.

 

The aforementioned restructuring, implemented by the Group in January 2021, resulted in Playtech plc migrating its tax residency to the UK and the Group's key operating entity transferring its business to a UK company. This restructuring is not expected to have a significant impact on the Group's underlying effective tax rate.

 

Discontinued operations

 

Casual and Social Gaming segment

 

Following the reclassification of the Casual and Social Gaming business in 2019 as a discontinued operation, the Group entered into an agreement for the partial disposal of the business, namely "FTX", for a total consideration of €0.9 million on 29 June 2020. As a result of this transaction, the Group realised a profit of €0.6 million.

 

On 11 January 2021, the Group entered into an agreement for the disposal of the remainder of the business, namely "YoYo", for a total consideration of $9.5 million resulting in a profit on disposal of €7.6 million.

 

This business has now been fully disposed.

 

The Adjusted EBITDA relating to the Casual and Social Gaming business was €nil in the period (H1 2020: €0.5 million) as operations were completely wound down in 2020. Reported profit after tax of €7.6 million (H1 2020: €0.8 million) was simply the aforementioned profit on disposal.

 

Finalto (formerly TradeTech Group) 

 

The assets and liabilities of the division continue to be shown as held for sale at 30 June 2021 and the financial results of this division in both periods being presented are included in discontinued operations. At 31 December 2020 an impairment charge of €221.3 million was recognised against this CGU as a result of comparing its carrying value to expected proceeds from the disposal, less expected costs. Following a review of the net assets of the unit at 30 June 2021, when compared to the expected proceeds, €2.0 million of the previously recognised impairment was reversed in the current period.

 

Finalto, had an outstanding H1 2020 where the business significantly benefitted from increased market volatility and trading volumes, particularly in March and April 2020 as the effect of the pandemic created large price movements in major instruments. Market conditions normalised in H1 2021. In terms of performance, revenues decreased by 63% to €31.9 million (H1 2020: €87.3 million). Adjusted and reported EBITDA both decreased to a loss of €0.1 million (H1 2020: profit of €52.8 million) and €0.5 million (H1 2020: profit of €46.3 million) respectively.

 

Adjusted profit

 

	H1 2021 €'m	H1 2020 €'m
Reported profit/(loss) from continuing operations attributable to the owners of the Company	401.9	(22.1)
Employee stock option expenses	7.0	7.1
Professional fees	2.2	1.7
Additional consideration payable for put/call option	0.9	4.5
Movement in contingent consideration and redemption liability	1.3	4.1
Charitable donation	1.9	3.2
Settlement of legal matters	2.3	-
Fair value change of equity investments	(0.8)	(0.4)
Fair value change of derivative financial assets	(299.9)	-
Deferred tax on acquisitions	(5.9)	(5.8)
Deferred tax	(90.3)	-
Amortisation of intangibles on acquisitions	18.9	19.5
Impairment of tangible and intangible assets	15.1	7.2
Fair value change on acquisition of associate	-	(6.5)
Tax on disposal of asset classified as held for sale	-	4.4
Profit on disposal of asset classified as held for sale	-	(13.4)
Adjusted Profit from continuing operations attributable to the owners of the Company	54.6	3.5
Constant currency impact	1.8	1.6
Adjusted profit for the year attributable to owners of the Company on constant currency	56.4	5.1

 

The reconciling items in the table above are further explained in Note 9 of the interim financial statements. Reported profit from continuing operations increased significantly to €401.9 million in H1 2021 from a loss of €22.1 million in the prior period, due to the recognition of the fair value of the derivative financial assets as explained above.

 

Adjusted EPS (in Euro cents)

 

	H1 2021 €'m	H1 2020 €'m
Adjusted basic EPS from continuing operations	18.3	1.2
Adjusted diluted EPS from continuing operations	17.4	1.1
Basic EPS from profit attributable to owners of the Company	139.3	1.8
Diluted EPS from profit attributable to owners of the Company	132.2	1.8
Basic EPS from profit/(loss) attributable to the owners of the Company from continuing operations	134.9	(7.4)
Diluted EPS from profit/(loss) attributable to the owners of the Company from continuing operations	128.0	(7.4)

 

Basic EPS is calculated using the weighted average number of equity shares in issue during H1 2021 of 297.9 million (H1 2020: 297.5 million). Diluted EPS also includes the dilutive impact of share options and is calculated using the weighted average number of shares in issue during H1 2021 of 314.0 million (H1 2020: 307.5 million).

 

Cashflow

 

Playtech continues to be cash generative and delivered operating cash flows of €38.7 million (H1 2020: €244.8 million). The reason for the decline in cash generated from operations period on period is because it includes:

·      Finalto which had an exceptional H1 2020 (refer to discontinued operations section above) with high cash conversion; and

·      Deferred payment of gaming tax duties of €89.6 million in Italy, which was due in Q4 2020 but payment was instead made in installments in H1 2021 (noting it was a government approved payment deferral as part of the assistance offered to companies during the pandemic).

 

Cash conversion (including Finalto and Casual)

 

	H1 2021 €'m	H1 2020 €'m
Adjusted EBITDA	124.0	162.8
Net cash provided by operating activities	38.7	244.8
Cash conversion	31%	150%
Change in jackpot balances	(4.7)	(0.7)
Change in client deposits and client equity	(6.1)	(26.3)
Dividends payable	-	(0.2)
Professional expenses on acquisitions	2.2	3.8
ADM security deposit	(10.7)	(26.1)
Deferred payment of gaming duties	89.6	-
Adjusted net cash provided by operating activities	109.0	195.3
Adjusted cash conversion	88%	120%

 

Adjusted cash conversion at 88% (H1 2020: 120%) is shown after adjusting for the deferred payment of gaming duties, as well as jackpots, security deposits and client equity, dividends payable and professional costs on acquisitions. Adjusting the above cash fluctuations is essential in order to truly reflect the quality of revenue and cash collection. This is because the timing of cash inflows and outflows for jackpots, security deposits, client equity and payable dividends only impacts the reported operating cashflow and not EBITDA, while professional expenses and costs relating to acquisitions are excluded from Adjusted EBITDA but impact operating cashflow.

 

The adjusted net cash provided by operating activities also excluded the security deposit repayment from Italy's online betting and gaming regulator (ADM) for 2021 and 2020.

 

Cashflow statement analysis

 

Net cash outflows used in investing activities totaled €45.7 million (H1 2020: €63.6 million) of which:

·      €13.9 million (H1 2020: €19.2 million) was used in the acquisition of property, plant and equipment;

·      €2.2 million (H1 2020: €15.7 million) was used on the acquisition of intangible assets;

·     In 2020, €11.3 million relates to consideration paid in relation to acquisitions of subsidiaries in the period, net of cash; there were no such payments in 2021; 

·      €27.8 million (H1 2020: €27.8 million) was spent on capitalised development costs;

·     €5.8 million (H1 2020: €4.4million) relates to the part payment for the call option held for Ocean  88 Holdings Ltd of €1.7 million and contingent consideration paid to Wplay of €4.1 million. In H1 2020 the full €4.4 million related to cash paid to acquire 10% of equity holding in Tenlot Guatemala (refer to Note 15D of the interim financial statements for more details); and

·     €10.1 million (H1 2020: €14.1 million) is cash received on the disposal of assets held for sale of which €7.5 million relates to final proceeds from the disposal of the casual business in 2021 and €2.2 million to the disposal of investment in associate; in 2020 €13.8 million relates to cash proceeds from the disposal of Area Sud in Milan.

 

The remainder related to loans granted in 2021 (repaid in 2020) and small amounts of proceeds from the disposal of property plant and equipment in both years.

 

Net cash outflows from financing activities totaled €134.9 million (H1 2020: €175.6 million inflow) of which:

·      €100 million was due to the part repayment of the RCF (H1 2020: €245.8 million was drawn down);

·      €20.3 million (H1 2020: €19.6 million) relates to interest payments on bond loans and bank borrowings;

·      €13.8 million (H1 2020: €14.1million) is principal and interest lease liability payments;

·      €0.8 million (H1 2020: €26.2 million) are payments of contingent consideration and redemption liability; and

·   In H1 2020 €10.1 million related to the repurchasing of Playtech shares. The share buyback scheme was cancelled soon after the pandemic begun and therefore there was no Playtech share repurchasing in 2021.

 

Balance sheet, liquidity and financing

 

	30 June 2021 €'m	31 December 2020 €'m
Cash and cash equivalents	540.8	683.7
Cash held on behalf of clients, progressive jackpots and security deposits	(130.3)	(129.1)
Adjusted gross cash and cash equivalents (excluding assets and liabilities held for sale)	410.5	554.6
Loans and borrowings (RCF)	214.3	308.9
Bonds	874.1	873.1
Gross debt (excluding liabilities held for sale)	1,088.4	1,182.0
Net debt (excluding assets and liabilities held for sale)	677.9	627.4

 

Cash

 

Excluding cash classified within assets held for sale, the Group continues to maintain a strong balance sheet with cash and cash equivalents of €540.8 million (31 December 2020: €683.7 million) and adjusted gross cash, which excludes the cash held on behalf of clients, progressive jackpots and security deposits, of €410.5 million (31 December 2020: €554.6 million). The decline is due to the €100 million RCF repayment and the repayment of the previously announced 2020 gaming tax liability in Italy of €89.6 million, both made in the six months ended 30 June 2021. After careful consideration of the Group's current and forecasts cash position, the Group repaid a further €50 million of the RCF in July 2021. The Board keeps Playtech's capital structure under continuous review and is cognisant of the level of cash on its balance sheet.

 

Financing

 

The Group holds 5-year senior secured notes to the value of €530 million (3.75% coupon, maturity 2023), which were raised in October 2018 to support the acquisition of Snaitech.

 

The Group also holds 7-year senior secured notes to the value of €350 million (4.25% coupon, maturity 2026), which were raised in March 2019. The net proceeds of this bond were used to fully repay the €297 million convertible bond which matured in H2 2019, and for general corporate purposes, including payment of contingent consideration.

 

In November 2019 the Group signed an amendment to its previous RCF, increasing it to €317.0 million and extending its term by an additional four years, ending in November 2023. The Group has an option to extend for an additional year. Interest payable on the loan is based on Euro Libor and Libor rates based on the currency of each withdrawal.  Playtech acted promptly following the announcement of the first lockdown in the first quarter of 2020 and the uncertainty surrounding this, to secure its liquidity position by drawing down €245.8 million against the RCF as a precautionary measure during the period. In June 2021 and July 2021 the Group repaid €100 million and €50 million of its RCF respectively. The RCF balance at 30 June 2021 was €214.3 million (31 December 2020: €308.9 million).

 

The Group's total gross debt amounted to €1,088.4 million at 30 June 2021 (31 December 2020: €1,182.0 million) and Net Debt, after deducting adjusted gross cash, amounted to €677.9 million (31 December 2020: €627.4 million).

 

Contingent consideration

 

Contingent consideration and redemption liability decreased by €2.6 million to €7.1 million (31 December 2020: €9.7 million) mostly due to the completed payment relating to Wplay. The existing liability as at 30 June 2021 comprised the following:

 

Acquisition	Maximum payable earnout (per terms of acquisition)	Contingent consideration and redemption liability as at 30 June 2021	Payment date (based on maximum payable earnout)
HPYBET Austria GmbH	€15.0 million	Nil	Q3 2021
Eyecon Limited	€23.3 million	Nil	Q3 2021
Wplay	€0.9 million	€0.8 million	Q1 2022
Statscore	€15.0 million	€5.6 million	€5.0 million Q1 2023 €10.0 million in Q1 2026
Other	€6.8 million	€0.7 million	Q3 2021
Total	€61.0 million	€7.1 million

 

 

Shareholder returns

 

The Board suspended shareholder distributions in March 2020 until further notice due to the uncertainty relating to COVID-19. Playtech remains committed to returning capital to shareholders whilst balancing the needs of the business and taking a prudent approach to its capital structure and leverage.

 

 

Going concern

 

In adopting the going concern basis in the preparation of the interim financial statements, the Group has considered the current trading performance, financial position and liquidity of the Group, the principal risks and uncertainties together with scenario planning and reverse stress tests completed for a period of no less than 12 months from the approval of these interim financial statements. The outbreak of the COVID-19 pandemic, the measures adopted by governments in countries worldwide to mitigate the pandemic's spread, including the impact of the last lockdowns and potentially another wave of lockdowns and COVID-19 vaccine announcements, were also taken into consideration in our assessment.

 

At 30 June 2021, the Group held total cash (excluding cash included in assets held for sale) of €540.8 million (31 December 2020: €683.7 million) and adjusted gross cash, which excludes the cash held on behalf of clients, progressive jackpots and security deposits, of €410.5 million (31 December 2020: €554.6 million). The decline is due to €100 million RCF repayment and as previously announced the repayment of the 2020 gaming tax liability in Italy of €89.6 million, both made in the six months ended 30 June 2021. Further, the Group has long-term debt facilities totaling €1,088.4 million (31 December 2020:  €1,182.0 million). Management has secured a covenant relaxation at 31 December 2020 and 30 June 2021 relating to the RCF, as discussed in Note 19 of the interim financial statements, and further, has considered future projected cash flows under a number of scenarios to stress-test any risk of covenant breaches.

 

Management concluded that the risk of a covenant breach over the next twelve-month period from the date of releasing this report is low and as such, has a reasonable expectation that the Group will have adequate financial resources to continue in operational existence. It has, therefore, considered it appropriate to adopt the going concern basis of preparation for these interim financial statements.

 

 

¹Adjusted numbers relate to certain non-cash and one-off items. The Board of Directors believes that the adjusted results represent more closely the consistent trading performance of the business. A full reconciliation between the actual and adjusted results is provided in Note 9 of the interim financial statements.

²Core B2B Gambling refers to the Company's B2B Gambling business excluding unregulated Asia.

³Totals in tables throughout this statement may not exactly equal the components of the total due to rounding.

4Due to the classification of a discontinued operation, the comparative information for 2020 has been restated. Please refer to Note 7 of the financial statements for further details.

 

Directors' responsibilities

 

The Directors of Playtech plc confirm that, to the best of their knowledge:

 

·      the unaudited condensed consolidated financial statements have been prepared in accordance with IAS 34 as adopted by the United Kingdom; and

 

·      the interim management report as required by rules 4.2.7 and 4.2.8 of the Disclosure Guidance and Transparency Rules, includes a fair review of:

 

o  important events during the six months ended 30 June 2021 and their impact on the condensed consolidated financial statements;

 

o  a description of the principal risks and uncertainties for the second half of the year; and

 

o  related parties' transactions and changes therein.

 

The names and functions of the Directors of Playtech plc are available on the Group's website: http://www.investors.playtech.com/

 

INDEPENDENT REVIEW REPORT TO Playtech PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 which comprises the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of and has been approved by the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the group will be prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this interim financial report has been prepared in accordance with UK adopted International Accounting Standard 34, ''Interim Financial Reporting''.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Financial Reporting Council for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

 

 

BDO LLP

Chartered Accountants

London

 

 

 

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

 

 

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

		Six months ended		Six months ended
		30 June 2021		30 June 2020
	Note	Actual	Adjusted*	Actual	Adjusted*
		€'m	€'m	€'m	€'m
				Restated**	Restated**
Continuing operations
Revenue	8	457.4	457.4	476.7	476.7
Distribution costs before depreciation and amortisation		(284.9)	(281.4)	(318.9)	(315.8)
Administrative expenses before depreciation and amortisation		(56.6)	(45.8)	(58.9)	(44.3)
Impairment of financial assets		(6.1)	(6.1)	(7.1)	(7.1)
EBITDA	9	109.8	124.1	91.8	109.5
Depreciation and amortisation		(84.0)	(65.1)	(92.4)	(72.9)
Impairment of tangible and intangible assets	10	(15.1)	-	(7.2)	-
Finance income	11	0.4	0.4	0.7	0.7
Finance costs	11	(33.8)	(32.5)	(33.1)	(30.2)
Share of profit from joint ventures and associates		0.1	0.1	0.7	0.7
Fair value change on acquisition of associate		-	-	6.5	-
Unrealised fair value changes on equity investments	15D	0.8	-	0.4	-
Unrealised fair value changes of derivative financial assets	15E	299.9	-	-	-
Profit on disposal of asset classified as held for sale	17A	-	-	13.4	-
Profit/(loss) before taxation		278.1	27.0	(19.2)	7.8
Income tax credit/(expense)	12	123.8	27.6	(3.0)	(4.4)
Profit/(loss) from continuing operations	9	401.9	54.6	(22.2)	3.4
Discontinued operations
Profit from discontinued operation, net of tax	7	13.2	4.0	27.5	41.3
Profit for the period - total	9	415.1	58.6	5.3	44.7
Other comprehensive income
Items that are or may be classified subsequently to profit or loss
Exchange loss arising on translation of foreign operations		(0.5)	(0.5)	(0.9)	(0.9)
Items that will not be classified to profit or loss
Gain/(loss) on re-measurement of employee termination indemnities		0.2	0.2	(0.1)	(0.1)
Other comprehensive loss for the period		(0.3)	(0.3)	(1.0)	(1.0)
Total comprehensive income for the period		414.8	58.3	4.3	43.7
Profit attributable to:
Owners of the Company		415.1	58.6	5.4	44.8
Non-controlling interests		-	-	(0.1)	(0.1)
		415.1	58.6	5.3	44.7
Total comprehensive income attributable to:
Owners of the Company		414.8	58.3	4.4	43.8
Non-controlling interests		-	-	(0.1)	(0.1)
		414.8	58.3	4.3	43.7
Earnings per share attributable to the ordinary shareholders of the Company
Profit or loss - total
Basic (cents)	13	139.3	19.7	1.8	15.0
Diluted (cents)	13	132.2	18.6	1.8	14.6
Profit or loss from continuing operations
Basic (cents)	13	134.9	18.3	(7.4)	1.2
Diluted (cents)	13	128.0	17.4	(7.4)	1.1

 

*Adjusted numbers relate to certain non-cash and one-off items. The Board of Directors believes that the adjusted results represent more closely the consistent trading performance of the business. A full reconciliation between the actual and adjusted results is provided in Note 9.

 

** Comparative information has been restated due to a discontinued operation. Refer to Note 7.