Playtech PLC Half-year Report (8419O)

TIDMPTEC

RNS Number : 8419O

Playtech PLC

24 August 2017

Playtech plc

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

Results for the six months ended 30 June 2017

A proven platform for growth: strong H1 driven by underlying growth and recent acquisitions

Playtech (LSE: PTEC) today announces its results for the six months ended 30 June 2017, together with a trading update for the period to 22 August 2017.

Financial summary

 
                         H1 2017     H1 2016        Change          Change 
                                                (reported)         (const. 
                                                              currency)(3) 
--------------------  ----------  ----------  ------------  -------------- 
 Revenues              EUR421.6m   EUR337.7m           25%             30% 
 Adjusted EBITDA(1)    EUR170.9m   EUR143.8m           19%             24% 
 Adjusted Net 
  Profit(2)            EUR125.5m    EUR78.3m           60%             20% 
 Reported Net 
  Profit(2)             EUR89.6m    EUR48.8m           84%             21% 
 Adjusted diluted 
  EPS                  36.2 EURc   22.6 EURc           60%             21% 
 Total dividend 
  per share            12.1 EURc   11.0 EURc           10%              NA 
 

Group financial highlights

-- Total revenues up 25% vs H1 2016 on a reported basis:

- 30% revenue growth at constant currency

- 10% revenue growth excluding acquisitions and at constant currency

-- 50% of Group revenues were regulated in H1 2017 (FY 2016: 48%)

-- Adjusted EBITDA up 19% on a reported basis and 24% at constant currency

-- Adjusted Group EBITDA margin of 40.5% (H1 2016: 42.6%)

- in line with guidance given at FY 2016 results

- "core" Gaming margin (excluding acquisitions / white-label / Casual) of 51% (H1 2016: 49%)

-- Adjusted diluted EPS up 21% at constant currency

-- Gross cash at period end of EUR536 million (December 2016: EUR545 million) and EUR376 million when adjusted(4) (December 2016: EUR392 million)

-- Interim dividend per share up 10%

Operational highlights

Gaming Division

-- Strong revenue performance with 28% growth at constant currency led by flagship Casino offering

- double-digit underlying growth, with a particularly strong performance in Asia

- recent acquisitions integrated and performing in line with expectations

-- Regulated Gaming revenues of 44% (H1 2016: 39%)

-- Online software revenues from mobile of 38% in H1 2017 (H1 2016: 29%)

-- Significant contracts renewed including with Paddy Power Betfair, Sky Bet and Betfred in H1 2017

-- Landmark Sports contract signed with Greek operator OPAP

-- Industry leading LIVE offering launched with world's largest Live Casino in Riga

-- Sun Bingo contract remains challenging

-- Pipeline of new licensees focussed on large, high-quality omni-channel opportunities

Financials Division

-- Momentum from 2016 continued into H1 with strong performance and improved KPIs

-- B2B offering further enhanced with acquisition of Alpha Capital Markets assets post period end

-- TradeTech Group brand launched to reflect the full B2B and B2C capabilities of the Financials Division

Current trading and outlook

-- Management is confident of a strong performance in 2017 driven by both organic growth and the acquisitions made in 2016 and 2017, albeit with normalised levels of growth in the second half from Asia following unusually high levels of activity in the first half

-- Average daily revenue in the Gaming Division for the first 53 days of Q3 2017, traditionally the slowest part of the year, was up 1% on Q3 2016 (6% at constant currency) and down 9% on an unusually strong Q2 2017 (down 6% at constant currency)

-- Excluding acquisitions, average daily revenue in the Gaming Division for the first 53 days of Q3 2017 was down by 1% on Q3 2016, increasing 3% at constant currency

-- The Financials Division is trading in line with expectations

Alan Jackson, Chairman of Playtech, commented:

"The proven strength of the Playtech model was once again demonstrated with a strong H1 performance driven by both underlying growth and recent acquisitions. As always, Playtech's performance has been converted into strong cash generation enabling a 10% increase in the interim dividend, in line with the progressive dividend policy.

"The first half of the year saw Playtech's Gaming Division deliver strong growth with double-digit underlying growth and recent acquisitions integrated and performing in line with expectations. Playtech has also continued to execute on its industry leading omni-channel solution by deepening its offering in key verticals with the integration of Playtech BGT Sports creating a fully integrated best-in-class sports technology solution and the launch of the world's largest Live Casino studio in Latvia, revolutionising the offering in a growing and dynamic channel.

"As with the Gaming Division, momentum in the Financials Division continued with improvements across all KPIs. The announced acquisition of assets from Alpha brings an important new B2B revenue stream and the creation of TradeTech Group as our operating and corporate brand for the business is an important milestone and better reflects the broadening of the division's offering towards a full turnkey B2B financial trading solution.

"Taken all together, this proven platform for growth across the business has again delivered a strong performance and management remain confident of further strategic progress in the second half of 2017."

- Ends -

(1) Adjusted numbers relate to certain non-cash and one-off items including amortisation of intangibles on acquisitions, professional costs on acquisitions, finance costs on acquisitions, deferred tax on acquisitions and additional various non-cash charges. The Directors believe that the adjusted profit measures represent more closely the consistent trading performance of the business. A full reconciliation between the actual and adjusted results is provided in Note 4 of the financial statements

(2) Attributable to the owners

(3) Constant 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

(4) Adjusted gross cash is net of cash held on behalf of clients, progressive jackpots and security deposits

Presentation and live webcast

A presentation for analysts and investors will be held today at 9.00 am in the offices of UBS, 5 Broadgate, London, EC2M 2QS.

The presentation will be webcast live and on-demand at the following website:

http://www.investis-live.com/playtech/595f4b299a0fb30c00d755fb/ruhf

The presentation will also be accessible via a live conference call:

Dial-in no: + 44 (0)20 3059 8125

Conference password: Playtech

There will also be a replay available for one week:

Dial-in no for UK and other locations: [phone]

Dial-in no for US: [phone]

Conference reference number: 6632999#

For further information contact:

 
 Playtech plc 
  Mor Weizer, Chief Executive 
  Officer 
  Andrew Smith, Chief                       [phone] 
  Financial Officer 
  c/o Bell Pottinger 
 
  James Newman, Head of 
  Investor Relations                         [phone] 
 Bell Pottinger 
  David Rydell, Jonathan 
  Hodgkinson, Laura Jaques, 
  Ed Brown                       [phone] 
 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

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

Playtech is a market leader in the gambling and financial trading industries. Founded in 1999 and listed on the Main Market of the London Stock Exchange (LEI code: 21380068TTB6Z9ZEU548), Playtech has c. 5,000 employees in 17 countries.

Playtech is the gambling industry's leading software and services supplier with more than 130 licensees globally, including many of the world's leading regulated online, retail and mobile operators, land-based casino groups, government sponsored entities such as lotteries, and new entrants opening operations in newly-regulated markets. Its business intelligence-driven gambling software offering includes casino, live casino, bingo, poker and sports betting.

It is the pioneer of omni-channel gambling which, through Playtech ONE, offers operators and their customers, a seamless, anytime, anywhere experience across any product, any channel (online, mobile, retail) and any device using a single account and single wallet. It provides marketing expertise, sophisticated CRM solutions and other services for operators seeking a full turnkey solution. Playtech's Financials Division, named TradeTech Group, operates both on a B2C and B2B basis. Its B2C focused offering is an established and growing online CFDs broker, operating the brand markets.com. Its B2B offering includes the division's proprietary trading platform, CRM and back-office systems, as well as its liquidity technology platform which provides retail brokers with multi-asset execution, prime brokerage services, liquidity and complementary risk management tools.

Chairman's statement

The first half of 2017 once again demonstrated the proven strength of the Playtech model as the Group delivered an impressive operational and financial performance driven by both underlying growth and recent acquisitions.

Importantly the results in the period continue to evidence Playtech's ability to achieve significant strategic milestones alongside delivering double-digit organic growth. Not only did the strategic acquisitions achieved in 2016 augment organic growth but significantly the integration of those acquisitions, coupled with the contract renewals in the period, will deliver a platform for future prospects.

I am also pleased to report that the trend in long term contract renewals reported in 2016 continued into the first half of 2017. Key licensees Paddy Power Betfair, Sky Bet and Betfred all renewed long-term agreements during the period, a clear testament to Playtech's industry leading offering. Important strategic milestones were also achieved in the continued execution of Playtech's industry leading omni-channel solution with the deepening of its offering in key verticals. The integration of Playtech BGT Sports has created a fully integrated best-in-class sports technology solution and in the burgeoning Live Casino vertical the launch of the world's largest Live studio in Latvia is revolutionising Playtech's offering and the wider Casino industry.

As with the Gaming Division, momentum in the Financials Division continued with improvements across all KPIs and further strategic achievements. The acquisition of assets from Alpha Capital Markets represent a significant milestone in the evolution of the B2B offering for the division. The addition of the B2B assets follow the creation of the brand TradeTech Group, which better reflects the broad offering across the B2B and B2C value chain.

To reflect the Board's confidence in the growth and cash generation of the business Playtech adopted a progressive dividend policy in 2016. One of the pillars of the Playtech model is its ability to convert its operational performance into strong cash generation and this has allowed a 10% increase in the interim dividend per share in the first half of 2017.

Taken all together, this proven platform for growth across the business has again delivered a strong performance and management remains confident of further strategic progress in the second half of 2017.

Chief Executive's review

Overview: Proven strategy provides platform for growth

I am pleased to report that the first half of 2017 saw Playtech achieve significant strategic milestones to augment the double-digit organic growth delivered by our proven model.

The strong growth reported in the Gaming Division in 2016 has continued into the first half of 2017 with recent acquisitions in 2016 and the beginning of 2017 contributing to growth. Progress continued into 2017 with long term contract renewals which will also 'lock-in' future growth.

Moreover, the Gaming Division achieved strategic progress in H1 2017 with the continued execution of its industry leading omni-channel strategy, Playtech ONE. Key strategic milestones in Casino, including Live Casino, and Sports have deepened our omni-channel offering and created a platform for future evolution.

Momentum in the Financials Division remained strong with impressive KPIs in the first half of the year. The creation of the TradeTech brand and the continued evolution of the B2B offering with the acquisition of sophisticated risk and trading capabilities, represents further significant milestones for the Group.

Gaming Division

Overview

The Gaming Division delivered another strong year achieving 28% reported revenue growth at constant currency, with a healthy blend of underlying growth and contribution from acquisitions.

Customer Concentration

H1 2017 saw revenue from the top ten licensees stand at 57% compared to 60% in the comparable period in H1 2016. This represented a marginal increase on the FY 2016 level when the top ten licensees represented 54% of Group revenue. Revenue from the top five licensees also decreased on a like for like basis with 39% of revenue coming from the top five compared to 44% in H1 2016. Again, this represented a slight increase on FY 2016 numbers when 36% of revenue came from the top ten.

The marginal increase was due to a combination of factors. This was the first reporting period where the consolidation, and ultimately increased scale and growth, of key licensees such as Ladbrokes Coral was fully counted. In addition, this was the first full reporting period where the large revenue contributing Sun Bingo related white-label contract was counted.

Mobile

Following the pattern set out in previous results reports, mobile continues to be a key driver of increased player activity across all verticals. Revenues from mobile accounted for 38% of overall software revenue, increasing from 29% in the same period in 2016.

Sports was the only vertical to see a decrease in mobile penetration as the integration of BGT into Playtech BGT Sports skews the vertical to a large retail channel exposure. Excluding the acquisition of BGT total Sport penetration in H1 2017 was 68% compared to 75% in H1 2016 reflecting the previously disclosed loss of certain Mobenga contracts compared to the comparative period.

The UK gaming market, given its maturity and the quality of its mobile networks, still leads the penetration levels with mobile accounting for 56% of software revenues. However, there is evidently a sustained increase in mobile penetration as the percentage of software revenue from mobile grew to 33% in the rest of the world in H1 from 18% in H1 2016. This highlights the significant opportunity in other parts of the world for Playtech's mobile developed products and software as well as underlining the strong position and the continued growth in the different verticals.

Native apps

Playtech operates a dual approach to mobile, believing that products should be offered in both HTML5 and native apps and we invest into each product area to ensure this is the case. The importance of native apps is becoming more and more pronounced in the industry given significant increase in quality and user experience. This has also been seen in the changing attitude of some of the marketing and distribution channels such as Google and Apple in regulated markets that now allow registering the native apps in the store.

Regulated Markets

Growing regulated markets revenue remains a strategic objective for Playtech and in the first half of 2017 regulated revenues in the Gaming Division rose to 44% compared to 39% in the first half of 2016. This figure was boosted by acquisitions made in 2016 along with the Sun Bingo contract which began in H2 2016. At Group level, regulated revenue reached 50% of total H1 2017 revenue, (H1 2016 48%).

During the period, we continued to strengthen our position and extend our reach in regulated markets by supporting the organic growth of our customers in the UK, Italy, Spain, Finland, Denmark, Mexico and Romania. Moreover, our strategy of partnering with the leading retail brands in newly regulated markets also continued as we became the first supplier to launch online casino in the Czech Republic with the expanding Fortuna brand.

Acquisitions made in 2016 and early 2017 continued to augment the growth of regulated revenues across the Group in line with our strategy. The acquisition of the sports retail software provider BGT 2016 allowed for the creation of the Playtech BGT Sports (PBS) division in H1 2017. PBS affords Playtech a strategic advantage in newly regulating and yet to be regulated online markets as Sports is often the first vertical to regulate and PBS' retail offering allows Playtech to partner in advance with the established local retail brands.

M&A

M&A remains a central part of Playtech's strategy. As demonstrated in FY 2016, Playtech's M&A strategy is to add regulated revenues through the acquisition of complimentary technology, services and additional offering deepening content. The M&A pipeline remains strong and we will continue to execute on value accretive M&A that strengthens Playtech's omni-channel offering, strengthen our position in existing product verticals or extend to new adjacent verticals in our industry.

In February 2017 Playtech completed the acquisition of Eyecon, a specialist supplier of online gaming soft slots and a bingo slots specialist software for an initial consideration of GBP25 million (EUR29 million). The acquisition of Eyecon is a further example of Playtech executing its omni-channel solution through earnings accretive M&A. Eyecon is a soft casino slot provider specialising in games for the Bingo market. Eyecon deepens the content offering in the Bingo vertical ultimately helping to drive revenue across verticals as well as allow us to also extend to retail. The acquisition strengthens Playtech's Bingo distribution network whilst offering industry leading slots content such as the Fluffy Favorites game and others which will all be available to Playtech bingo licensees.

Playtech ONE: Industry leading omni-channel offering

Playtech ONE is the industry's only true integrated omni-channel offering. Playtech ONE allows operators to develop a seamless inclusive approach to channels, products and platforms.

Although multi-channel approaches in the industry are common (same content across web, mobile and retail), Playtech's approach to omni-channel is very different as our single CRM allows for a single customer profile regardless of channel or vertical. We believe that omni-channel offerings act as an eco-system that incentivise the players to remain loyal to the operators and their brands. Playtech ONE provides operators with the tools to keep customers within this eco-system regardless of channel and through different brands, verticals and products. Our single CRM and infrastructure provides operators with a single customer view allowing them to appropriately target and incentivise customers - delivering a seamless experience and improving the customer journey.

Playtech ONE's ability to shape the user experience seamlessly across different channels and verticals is becoming central to operators' strategy to increase player value and player brand loyalty. Playtech is working tirelessly to ensure that it has industry leading and engaging content and experiences across all channels and verticals.

The completion of the launch of Playtech's new Live Casino studio in Riga has revolutionised Playtech's offering in the vertical and the completion of the migration of all the dedicated licensee tables is continuing to revolutionise how operators and players think about Live Casino. It is fully integrated into our casino offering and based on our same single omni-channel infrastructure.

The creation of Playtech BGT Sports (PBS) is also a significant step in the execution of our omni-channel strategy. Firstly, the popularity of the Sports vertical means it is a key customer acquisition channel for operators and as indicated many times is the most effective customer acquisition channel that acts as the gateway into higher margin gaming verticals. It is also the vertical that operators' brands are most associated with and the touch point for the brand that many players return to. Unifying all sports divisions together with BGT into one division - PBS, has entrenched the powerful retail channel in Playtech ONE. The integration of all sports assets into a single unique omni-channel based solution is underway and we expect it to be concluded in 2018.

Similarly to BGT in Sports, the integration of ECM, the Bingo retail software provider, has allowed Playtech to capture retail traffic and seamlessly offer them online content and vice versa, all on a fully integrated basis. ECM, which provides digital platform and products for retail bingo environments, is an integral part of our omni-channel approach and allows us to enlarge the eco-system Playtech ONE creates on a larger basis. The acquisitions of Eyecon in H1 2017 and Quickspin in 2016 further enhance the premium content available across Playtech's games portfolios as well as broadening the offering to different target demographics and further strengthen the depth and the breadth of our omni-channel Playtech ONE approach.

Gaming Division performance by vertical

Casino

Casino, Playtech's flagship offering, continues to go from strength to strength, with revenue increasing 26% on a constant currency basis in the first half of 2017. This exceptional performance was driven by the combination of the growth of existing licensees, particularly in Asia, the contribution from the key acquisitions made in 2016 and early 2017, and the contribution of new customers won throughout 2016 as underlying Casino revenue grew by a 22%.

Technology & Platform stability

Central to the success of Playtech's success and the success of our licensees and customers is the stability of our Casino platform. Playtech provides its customers with mission critical software and content and we are continuously working on the robustness and stability of our platform. To continue our work in this area, during the first half of 2017 our technology engineers 'de-coupled' our Casino games from the platform. This will make our platform even more agile and adaptable whilst also allowing for greater freedom in the development of new content and planning new releases.

As indicated previously, Playtech is in the process of revamping its entire gaming platform. One of the elements of the new platform is a new gaming development platform which simplifies and streamlines games development across mobile, retail and web. The first milestone was met earlier in the year as a number of games driven by the new gaming development platform were launched successfully with some licensees. The new revamped gaming development platform is currently still under development and will deliver our licensees with new models to accelerate the deployment of games developed by Playtech, third party content providers and also the licensees themselves. The new platform is utilising the most advanced technologies and methodologies, along with future regulatory requirements and an improved front end solution - all providing them more ways to differentiate and compete.

Player engagement

At Playtech, we are cognisant that our licensees come to us to develop unique customer offerings that cater to their target demographics and customer bases. Player data and intelligence collated via the IMS is being utilised in an anti-churn model to extend player lifetime values. As the market continues to mature the focus for operators in developed markets such as the UK is moving beyond player acquisition to also focus on player retention and ultimately increasing player life time value. The platform allows for industry standard bonusing, together with more sophisticated mechanics, including automated cashback, free-spins, golden chip for table and card games and other types of bonuses. All these promotional methods can be controlled and configured by the operator, allowing for stringent liability and monetary control.

To illustrate the platform's sophistication, gameplay bonuses allow the operator to incentivise players based on the outcome of a specific hand of black jack or spin of a roulette wheel. All promotional types can be triggered by a player event, but Playtech has also developed the ability to automate some of the player journeys by developing real time algorithms to trigger the qualification of such incentives. Game advisor is a real-time driven recommendation engine based on sophisticated real time algorithms that suggests other games the player might be interested in with high probability, dependent on many game-specific variables, including volatility, win hit frequency and win distribution.

Content & Studios

Playtech now operates ten games studios worldwide, all with proven pedigrees and collectively providing unparalleled knowledge and experience in online casino games creation. In the period work continued to unify the studios in using our agile games development platform, allowing them to develop higher quality games faster and more cost-effectively than before. The studios are now applying the new Playtech content pillars to game production; Signature (individual style of the studio), Reach (relevance to market), Reliability (stable games and publication dates) and Value (largest Jackpots, bonusing tools, engagement tools). This unified approach to rapid omni-channel game deployment enables operators seeking differentiation and customisation to integrate bespoke games in record time and under budget.

The first half of 2017 saw Playtech sign an industry first agreement with DC Comics to provide a full suite of DC branded games including the Man of Steel, Classic Superman and Batman and Suicide Squad slot titles. The DC agreement was the culmination of strategic project in the second half of 2016 designed to replace the Marvel studios content in the Playtech portfolio. Playtech had a long and successful relationship with Marvel studios and this ended in 2016 following Marvel's acquisition by Disney and a change of licensing approach from the acquirer.

Given the size and scale of Playtech's distribution platform we are in an unrivalled position to be able to develop and distribute such high profile branded content. Looking forward to the second half of 2017 Playtech will deliver another industry first with the first slot game launch to be synchronised with a Hollywood blockbuster film launch. During the period Playtech further grew its portfolio of branded games by launching the American Dad, RoboCop, Monty Python's Holy Grail and Dirty Dancing titles.

Playtech's own Age of the Gods suite of games continues to go from strength to strength with its games titles in the top rankings of popular games for all our licensees. The latest game in the series God of Storms has experienced a highly successful launch in H1. The Age of the Gods suite is the end result of thorough research that was based on big data analysis designed to improve the probability of success of the games. The ability to utilise large amounts of data as part of the games development process leading to a successful suite of games is a major milestone that we intend to replicate, improving the probability of new additional games being successful.

Live Casino

A key focus in the period has been the extension of Playtech's Live Casino offering. At the full year 2016 results we reported the completion of two new studios, the world's largest in Riga Latvia and a state-of the art Eastern European focused studio in Romania. The new facilities have enabled Playtech to drive product innovation in Live with new concepts, games and features. Driven by the powerful Playtech IMS player management platform and data-driven business intelligence technology, Playtech casino delivers industry leading in-house and premium branded games.

Built on top of the city's fortified 16th century walls in the heart of Riga Old Town in Latvia, the 8,500-square metre capacity studio dwarfs any existing live casino area in the market today. Technology has been at the heart of the development with hundreds of state-of-the-art cameras, catering for hundreds more custom-made tables and gaming areas, an advanced control and monitoring center and large-scale dealer campus that will be used to train and develop all Playtech Live's staff.

An important part of Sky Bet's long term multi-product deal with Playtech was the renewal and extension of its Live Casino services agreement. This included the launch of Live Casino on Sky's 'Sky Italy' gaming sites during the period. The sophistication and success of the new Live offering was reflected with Sky's success in winning the eGaming Review Innovation in Casino award for its new Playtech supplied Live Casino. Sky went live with its new state of the art dedicated Live Casino environment in April 2017 and won the award for offering players an enhanced omni-channel experience, product enhancements and richer gameplay.

As with all verticals across the Group, Playtech ONE enables us to offer unrivalled scale and cross-vertical experiences. Playtech Live can offer seamless promotional events such as progressive slot jackpots linked to Live Casino games or allow for targeted marketing and customer acquisition around events, such as Live draws or branded Live Casino games around racing at Cheltenham or Premier League derbies.

Playtech BGT Sports

Revenue in Sports for the first half of 2017 was up 108% at constant currency when compared to Sports revenue in the first half of 2016. This was due to the contribution from BGT, the retail Sports software provider acquired by Playtech in November 2016. Underlying revenue at constant currency declined compared to H1 2016 mainly due to the absence the Mobenga contracts which came into effect at the end of H1 2016.

A key strategic achievement in the first half of 2017 has been the integration and launch of Playtech BGT Sports (PBS). PBS brings together Playtech Sports companies BGT, Geneity, Mobenga, Unilogic and Playtech's internal Sports Trading team and contains more than 600 employees. PBS will provide a 'bricks-to-clicks' fully integrated sports betting technology solution based on Playtech ONE the unique omni-channel platform. The integration project is ongoing although I am delighted to report that PBS will launch the first consolidated web and mobile sportsbook project later in the year and a fully omni-channel including retail in H1 2018. The main commercial objective of the project is to create a consolidated sportsbook product which will provide operators with a full, omni-channel solution allowing them to offer their customers a single-betting account which can be used across the web, mobile, self-service betting terminals (SSBTs) and over the counter (OTC) in retail betting shops.

In H1 2017 PBS continued to focus on the opportunity to grow its retail customer base in Europe. Early in the period PBS announced a three-year agreement with OPAP, the leading Greek betting and lottery operator, for the supply of SSBTs, relevant software and services, and the introduction of an OTC sports betting solution. In addition to OPAP, H1 2017 also saw PBS launch SSBTs with customers in Malta, Romania, Spain, Czech Republic and Germany. PBS believes there is significant opportunity for SSBT growth in this market and, once the integration is complete this growth markets can benefit from Playtech's omni-channel customer offering. As outlined at the FY 2016 results, alongside Europe a key focus for the PBS SSBT product was growth in Latin America. H2 2017 will see PBS install a first phase SSBT programme in Columbia with two customers. In addition, PBS has been able to leverage the existing relationships across the Playtech Group and the first phase of SSBTs will be installed with some of Playtech's existing customers later in 2017 and into 2018.

Key contracts have been renewed with Betfred and Paddy Power Betfair with both secured until at least 2020 and with Betfred taking another 500 terminals and Paddy Power shops installing a minimum of 800 new terminals over the next 12 months. In addition to these headline customers, PBS is key strategic partner for the independent bookmakers in the UK and Ireland and all key independents have renewed their agreements until 2021.

Playtech's strategy in Sports is to continue to drive product development to retain operator and customer engagement with retail. In H1 2017, PBS launched its revolutionary Retail Mobile App named 'Bet Tracker'. Bet Tracker went live with Betfred in August 2017 and Jennings Bet, Boyles and Plucks will also follow in the second half of the year. The Bet Tracker product is leading the digitilisation of the retail sports experience, allowing customers to track their bets placed in store on their mobile phones without already having a mobile account, giving operators increased touch points with their customers.

Services

Services experienced a marginal decline in the first half of the year. Revenues were down 6% on a constant currency basis predominantly due to key white-label contracts in the second half of 2016 and first half of this year and continued proactive departure from unregulated markets moving our focus on regulated markets. This is in line with the guidance given in the AGM statement on 17 May 2017. The increase in contribution from the white-label offering meant the transition in services from dot com to regulated revenue streams continued in the period resulting in a higher proportion of regulated revenues for this vertical.

As stated in the 2016 annual results, Services revenue was expected to be broadly flat with increased white-label revenues, predominantly from the Sun Bingo contract, offsetting a decline in other Services including contract and market changes. H1 2017 results have been 6% lower than H1 2016 primarily due to lower than expected revenues from the Sun Bingo contract.

Bingo

Following the acquisition of Bingo software and services supplier ECM in October 2016 the Bingo vertical saw a 70% increase in revenue at constant currency in the first half of 2017. Importantly, Bingo also experienced underlying growth with revenue increasing by 3% excluding acquisitions. This was in line with guidance given at the full year where we expected to see Bingo return to underlying growth.

The Bingo vertical continues to experience high levels of activity at the operator level. The industry wide strategy to utilise bingo as an acquisition channel, and predominantly cross-sell into Casino has also continued. We believe this approach will continue to strengthen Playtech's position as our Playtech ONE omni-channel offering will allow operators to successfully cross-sell across all products and all verticals. Through Playtech ONE the acquisition of Eyecon will enable the Fluffy Favorites title to be rolled out across the retail estate in H2 2017 and hybrid game Fluffy Bingo is also in development to allow Playtech and licensees to offer attractive gaming content across all verticals.

The integration of retail software and services supplier ECM onto the Playtech Bingo platform has increased the opportunities to create an eco-system keep the players loyal regardless of channels and also drive player traffic to other verticals and roll out Playtech ONE content, such as Tiki Paradise, which was designed with our omni-channel approach in mind and includes cross channel features across the ECM estate. Leading Playtech ONE title Tiki Paradise is performing well on the Bingo platform further demonstrating the appetite for players for a seamless experience across Bingo and Casino slots.

Poker

The online Poker market remains challenging with revenues in H1 down 5% at constant currency when compared with the same period in 2016. The 5% fall compares favourably to the declines seen in recent years. Playtech remains dedicated to the Poker product, and we believe Poker remains an important part of the full product offering of Playtech ONE. Playtech offers the largest open and 'tappable' poker network.

Other

The 'Other' revenue lines includes IGS land-based Casino systems, sale of Videobet machines and revenue from Casual games. Other revenues grew to EUR25.3 million revenue in the first half of the year, an increase of 146% compared to H1 2016. The significant increase was mainly due to Casual games revenues which continued to enjoy revenue growth driven by the success of the Narcos branded game.

TradeTech Group - Financials Division

Strong momentum in the Financials Division continued into the first half of 2017. In line with the execution of our strategy at Group level, H1 2017 saw us achieve key milestones in the Financials Division, culminating in the branding of the division as TradeTech Group. The brand TradeTech Group is more representative of the breadth of operations across the division, from pure B2B services to our customer facing brand Markets.com.

TradeTech Group:

 
 --   Markets.com, a brand operated by Safecap as 
       a provider of CFD and FX trading platforms 
 --   CFH, providing tier 1 liquidity services and 
       multi-asset execution through its best of breed 
       proprietary brokerage technology 
 --   TradeTech Alpha, created in August 2017 as part 
       of the acquisition of assets from Alpha Capital 
       Markets, delivering a dedicated, industry leading, 
       professional bespoke trade execution, and risk 
       services 
 

TradeTech's strategy is to continue to build its capabilities across the entire value chain in the financial trading sector. In August, post-period end, we took another significant step in this strategy with the acquisition of assets from Alpha Capital Markets Group Limited (known in the industry as "Alpha") for an initial consideration of $5 million (total potential maximum consideration of $150 million). Alpha is a UK based B2B market maker, dealer and broker focusing on delivering bespoke risk management and trading services to institutional and professional clients. As part of this transaction, TradeTech Group is acquiring intellectual property, trading technology, business teams and international clients from Alpha and is now able to offer industry leading B2B risk management and trading services to the industry under the brand TradeTech Alpha.

Predominately, B2C brokers in the financial trading industry operate a marketing driven model that is dependent on third party technology and services. Following the integration of CFH at the end of 2016 and now the addition of B2B risk management capabilities, TradeTech Group has taken a significant step in providing a full turnkey B2B solution to brokers. TradeTech is now able to cover the entire lifecycle of a trade, from front end technology to CRM and platform management, to liquidity services, and now risk management and professional trading services.

Markets.com activity continued to improve, with the number of active customers up by 24% to approximately 19,400 and first time depositors up 94% to approximately 10,500 compared to the first half of 2016. These improved metrics derive from an improved cost per acquisition which caters for higher profitability for our B2C segment, despite the new leverage limitation implemented in the beginning of the year following Cysec's new guidance on default leverage, which naturally impacts volumes and revenues.

Similarly to Playtech's core Gaming vertical, TradeTech Group operates in a sector driven by dynamic regulation. As outlined at the full year results, 2016 was a transformational year for the Financials Division. Our experience of new regulatory frameworks learned in the Gaming Division prompted TradeTech to be an early adopter of new regulation, such as tighter on-boarding controls; greater restrictions on marketing and promotions; enhanced AML procedures and new leverage limitations. The steps taken in 2016 to deliver an efficient, compliant and competitive business model are bearing fruit now in 2017 with TradeTech reporting improvement 44% revenue and a 173% increase in EBITDA to EUR16.1m in H1 2017.

Current trading and outlook

Management is confident of a strong performance in 2017 driven by both organic growth and the acquisitions made in 2016 and 2017, albeit with normalised levels of growth in the second half from Asia following unusually high levels of activity in the first half.

Average daily revenue in the Gaming Division for the first 53 days of Q3 2017, traditionally the slowest part of the year, was up 1% on Q3 2016 (6% at constant currency) and down 9% on an unusually strong Q2 2017 (down 6% at constant currency).

Excluding acquisitions, average daily revenue in the Gaming Division for the first 53 days of Q3 2017 was down by 1% on Q3 2016, increasing 3% at constant currency.

I am pleased to report the Financials Division is trading in line with expectations.

Finally, it is worth noting that since the start of the year, the Euro has strengthened significantly against many currencies. By taking Playtech's budget at the start of the year and applying the impact of actual currency rates to date, then applying today's spot rates from now until the end of the year on remainder of the budget, the impact on our budgeted reported EBITDA is well into double-digit millions.

Chief Financial Officer's review

Presentation of results

The Directors believe that in order to best represent the trading performance and results of the Group, the reported numbers should exclude certain non-cash and one-off items including amortisation of intangibles on acquisitions, professional costs on acquisitions, finance costs on acquisitions, deferred tax on acquisitions and additional various non-cash charges.

The Directors believe therefore that Adjusted EBITDA and Adjusted Net Profit more accurately represent the trading performance of the business and are the key performance metrics used by the Board when assessing the Group's financial performance. A full reconciliation between the actual and adjusted results is provided in Note 4 of the financial statements below.

Given the significant fluctuations in exchange rates in the period, the underlying results are presented in respect of the above measures after excluding acquisitions and on a constant currency basis to best represent the trading performance and results of the Group.

Overview

The first half of 2017 has seen Playtech again deliver a strong financial performance driven by a combination of underlying growth and from the acquisitions made in 2016 and at the start of 2017.

Total reported revenue and Adjusted EBITDA increased 25% and 19% respectively compared to the first half of 2016. Reported Adjusted Net Profit increased 60% in the half due to significant fluctuations in currency exchange rates, mainly in Sterling, impacting H1 2016 reported Adjusted Net Profit leading to high growth from H1 2016 to H1 2017.

On a constant currency basis, revenue, Adjusted EBITDA and Adjusted Net Profit, increased by 30%, 24% and 20% respectively. When further excluding the effect of acquisitions, reflecting the underlying performance of the business, revenue, Adjusted EBITDA and Adjusted Net Profit increased by 10%, 11% and 10% respectively.

In line with the guidance provided at the 2016 full year results, the Group Adjusted EBITDA margin fell from 43% in H1 2016 to 41% in H1 2017. However, when adjusting for revenues and EBITDA from Playtech's inherently lower margin white-label / B2C business as well as from Casual, the Group Adjusted EBITDA margin increased. When further adjusting for acquisitions (in addition to adjusting for white-label / B2C / Casual) the adjusted Group Adjusted EBITDA margin increased by 4% points to 53%.

Playtech continues to be highly cash generative and delivered net cash from operations up 48% to EUR147.3 million compared to EUR99.5m in H1 2016, representing 79% cash conversion from Adjusted EBITDA when excluding cash movements, which are not reflected in Adjusted EBITDA, such as movements in jackpot liabilities, customer security deposits and changes in client equity.

Playtech has a very strong balance sheet with cash and cash equivalents of EUR536 million at the end of the half year, or Adjusted Gross cash of EUR376 million (Dec 2016: EUR392 million) net of cash held on behalf of client funds, progressive jackpot and security deposits. Together with the available-for-sale investments, which stood at EUR242 million at period end, Playtech has considerable available resources to execute its strategy.

Revenue

Total revenue increased by 25% to EUR421.6 million (2016: EUR337.7 million) and by 30% on a constant currency basis, with underlying growth of 10% (after excluding acquisitions at constant currency).

 
                         H1 2017   H1 2016   Change    Constant 
                            EURm      EURm             Currency 
                                                         Change 
---------------------   --------  --------  -------  ---------- 
 Casino                    225.9     186.7      21%         26% 
 Services                   69.0      76.5     -10%         -6% 
 Sport                      37.7      19.0      98%        108% 
 Bingo                      14.0       9.0      56%         70% 
 Poker                       4.7       5.0      -6%         -5% 
 Other                      25.3      10.3     146%        148% 
 Gaming Division           376.5     306.5      23%         28% 
 Financials Division        45.1      31.3      44%         43% 
                                  --------  -------  ---------- 
 Total revenue             421.6     337.7      25%         30% 
 

The new presentation of Gaming revenue by vertical, which was announced at the 2016 year-end results, removes the Land-based vertical to better reflect the true omni-channel nature of the business. Revenue previously referred to as 'land-based' has now been allocated to the relevant product verticals.

The revenue from Land-based was allocated as follows:

   -     Videobet and Videobet interactive to Casino; 
   -     retail sport revenue, which are mainly BGT, to Sports; 
   -     retail bingo revenue, generated by ECM to Bingo; and 
   -     IGS, including other sale of machines, to Other. 

Casino remains the biggest product vertical, increasing by EUR39.2 million of revenue in the period, taking total Casino revenue to EUR225.9 million, with growth of 26% at constant currency and 22% when excluding acquisitions. The growth in Casino is predominantly from core casino activity, such as online slots and roulette, driven by Mobile casino revenue which grew by 84% over H1 2016, increasing mobile penetration to 35% compared to 23% in the comparable period. The main growth in total casino and mobile casino was driven by growth in UK mobile revenue, growth in non-UK Europe and from growth in Asia. Asia more than doubled its mobile penetration compared to H1 2016 with the UK reaching more than 50% in penetration and the growth in non-UK Europe mobile penetration increased to 27%.

Services revenue decreased by 6% on a constant currency basis, whilst decreasing by 10% on a reported basis. The decrease on a reported basis is mainly due to a faster decline in .com revenue, mostly reflected in marketing services revenue, than the increase in regulated revenue together with loss of contracts in Pokerstrategy. The increase in regulated services revenue was mainly generated from the addition of the Sun white-label operations revenue and from structured agreements, such as Caliente and Marca.

Sport revenue increased in H1 2017 by 108% on a constant currency basis and by 98% on a reported basis. The increase is due to the acquisition of BGT, as Sport revenue, when excluding acquisitions, on a constant currency basis, decrease by 28%. The decrease, as previously indicated, is mainly due to the loss of three Mobenga contracts with UK licensees.

Bingo revenue increased by 70% on a constant currency basis and by 56% on a reported basis. When excluding the increase in revenue generated by the acquisition of ECM, Bingo revenue on a constant currency basis were up 3% compared to H1 2016. KPIs, such as active players per week, bets per week and gross gaming win per week, continue to increase and are at an all-time high.

Poker reported revenue has decreased by 6% compared to H1 2016, as the entire market continues to be challenging. Poker is still an important vertical in the operators' offering and Playtech remains dedicated to the product.

Other revenue grew by 146% mainly due to Casual games revenue which enjoyed a significant uplift in the second half of 2016 following the launch of the Narcos branded game.

Revenue in Financials Division

For the first half of 2017 revenue in the Financials Division was EUR45.1m, up 44% versus H1 2016. When excluding the revenue generated by CFH, which was acquired at the end of November 2016, financial revenue increased 4% to EUR32.6m.

Looking at the top line performance of the division, the momentum reported at the full year 2016 results has continued into the first half of 2017. The steps taken in 2016 to deliver an efficient, compliant, competitive and sustainable business model are bearing fruit in 2017, with the improvement in revenue and a 173% increase in Adjusted EBITDA to EUR16.1m in H1 2017.

Adjusted EBITDA & Adjusted EBITDA margin

 
                                                   H1 2017     H1 2016 
                                                    EUR'000     EUR'000 
-----------------------------------------------   ---------  ---------- 
 EBITDA                                            164,548    137,277 
 Employee stock option expenses                    5,210      5,371 
 Professional expenses on acquisitions             786        1,156 
 Cost of business reorganisation                   380        - 
 Adjusted EBITDA                                   170,924    143,804 
 Adjusted EBITDA margin                            40.5%      42.6% 
 Adjusted EBITDA on a constant currency basis      177,933    143,804 
 Adjusted EBITDA margin on a constant currency 
  basis                                            40.7%      42.6% 
 EBITDA related to acquisitions at constant 
  currency                                         (17,882)   9 
 Underlying Adjusted EBITDA                        160,051    143,813 
 Underlying Adjusted EBITDA margin                 43.1%      42.7% 
 
 

Underlying adjusted EBITDA increased by 11% compared to H1 2016. Adjusted EBITDA for the Financials Division was EUR16.1 million, against an adjusted EBITDA of EUR5.9 million in H1 2016.

As we have stated previously, going forward we would expect Group EBITDA margin percentage to be a less relevant KPI for the Group given the different margin profiles across the business. We further outlined at the FY 2016 results that 2017 Group EBITDA margin would be around the level of the 2015 margin, following the higher percentage contribution from lower margin parts of the business including white-label, specifically from the full year contribution from Sun Bingo, the Financials Division and from Casual.

Group EBITDA margin in H1 2017 was therefore much in line with what we expected at 41% with a significant increase in the margin of the Financials Division, up from 19% to 36%.

Cost of operations

 
                                 H1 2017         H1 2016* 
                                 EUR'000          EUR'000 
-----------------------------  ---------  ----  ---------  ---- 
 Adjusted operating expenses     250,656          193,926 
 Less revenue-driven costs        53,256           18,052 
 Adjusted operating expenses 
  excluding revenue-driven 
  costs                          197,400          175,874 
 
 Employee-related costs          105,927   54%     96,034   54% 
 Cost of service                  27,499   14%     23,050   13% 
 Operational marketing 
  costs                           21,177   11%     20,516   12% 
 Admin and office costs           18,337    9%     16,935   10% 
 Other costs                      14,794    7%     12,245    7% 
 Travel, exhibition and 
  marketing costs                  9,666    5%      7,094    4% 
 Adjusted operating expenses 
  excluding revenue-driven 
  costs                          197,400          175,874 
 

* Direct marketing costs relating both to the Gaming Services division and the Financials Division were reallocated to Operational marketing costs in the comparative figures of 2016.

Adjusted operating expenses increased by 29%, from EUR193.9 million to EUR250.7 million in H1 2017 and by 34% on a constant currency basis.

Revenue-driven costs as a proportion of total revenue increased from 5% in H1 2016 to 13% in H1 2017, mainly due to additional cost related to Sun Bingo which was launched in September 2016. The increase in revenue-driven costs comprises mainly white-label related costs, such as brand fees, gaming taxes, processing fees, fees paid to sales agents and license fees paid to third parties (including games developers), and branded content. These fees are typically calculated as a share of the licensee revenue generated but are accounted for differently in white-label contracts.

Employee-related costs increased by 10%, and decreased by 6% after excluding acquisitions. The decrease is mainly due to a cost reduction plan that was executed towards the end of the first half of 2016, which resulted in a decrease of c. 400 employees when comparing the headcount at the end of H1 2017 to the end of H1 2016, (excluding acquisitions made during the year). Capitalised development costs as a percentage of total employee related costs remained at 15%, consistent with H1 2016, and in Euro increased to EUR18.3 million (2016: EUR16.9 million), reflecting 38% and 35% out of R&D related costs in 2017 and 2016 respectively. The increase in the capitalisation rate is mainly due the development of the Sportsbook system, including BGT.

Cost of service comprises mainly of dedicated development teams cost, charged back to licensees, hosting, feeds costs, and software license cost. During 2016 B2B marketing cost was reclassified from cost of service to operational marketing cost. Cost of service increased 19% on reported basis mainly due to additional feeds cost, hosting and terminal maintenance from BGT and at only 5% excluding acquisitions.

Admin and office costs increased by 8%, decreasing 5% excluding acquisitions, mainly as a result of the redundancy plan mentioned in the Employee-related costs section. As a proportion of adjusted non-revenue-related costs of operation remained broadly at the same level as in 2016.

Operational marketing costs include marketing costs for B2B and white-label activity of the Gaming Division together with B2C marketing costs in the Financials Division. These costs were reclassified from revenue driven costs and cost of service in 2016 to better reflect the operational marketing costs of the business. In 2017 there was a 3% increase including acquisitions, and a 20% decrease when excluding acquisitions.

Finance income, financial cost and tax

Adjusted net finance cost was EUR12.4 million in the period compared to EUR35.6 million in H1 2016. The decrease is predominantly due to lower foreign exchange rate losses of EUR13.0 million during H1 2017, compared to a EUR42.6 million loss in H1 2016. This was offset by lower total dividends from the available for sale investment from Ladbrokes of EUR3.0 million (H1 2016: EUR2.5 million) and nil from Plus500 (with the dividend of EUR6.5 million received on 3 July 2017) compared to EUR6.4 million in H1 2016.

The Company is tax registered, managed and controlled from the Isle of Man, where the corporate tax rate is set at zero. The Group's main trading subsidiaries are registered either in the Isle of Man, Alderney or Cyprus, where effective tax rates are low or set at zero. Other subsidiaries, related to the Group's development centers are located in other jurisdictions and operate on a cost-plus basis, and are taxed on their residual profits. The tax charge in H1 2017 was EUR2.3 million (H1 2016: EUR2.4 million).

Adjusted profit and Adjusted EPS

 
 
                                               2017        2016 
                                            EUR'000     EUR'000 
-------------------------------------  ------------  ---------- 
 Profit attributable to owners 
  of the parent                              89,647      48,772 
 Amortisation on acquisitions                25,341      19,733 
 Non-cash accrued bond interest               5,056       4,869 
 Employee stock option expenses               5,210       5,371 
 Professional costs on acquisitions             786       1,156 
 Cost of fundamental business 
  reorganization                                380           - 
 Movement in deferred and contingent 
  consideration                               1,689       (390) 
 Deferred tax on acquisition                (2,628)     (1,182) 
 Adjusted profit attributable 
  to owners of the parent                   125,481      78,329 
 Adjusted basic EPS (in Euro 
  cents)                                       39.9        24.6 
 Adjusted diluted EPS (in Euro 
  cents)                                       36.2        22.6 
 Constant currency impact                    20,018      42,567 
 Adjusted profit for the year 
  attributable to owners of 
  parent on constant currency               145,499     120,896 
 Adjusted Net Profit on constant 
  currency related to acquisitions         (12,103)          39 
 Underlying adjusted profit 
  for the year - attributable 
  to owners of the parent                   133,396     120,935 
 

Underlying adjusted profit increased by 10% compared to H1 2016 in line with the increase in the underlying adjusted EBITDA.

Adjusted diluted EPS was up 60% and the Adjusted diluted EPS on a constant currency basis excluding acquisition was up 11%, slightly impacted by the 5.2 million share buyback executed in December 2016. Adjusted diluted EPS is calculated on the basis of a weighted average number of shares in issue during 2017 of 349.2 million which includes the shares underlying the convertible bond issued in November 2014.

Total amortisation in the period was EUR41.7 million (2016: EUR35.2million), an increase generated mainly by new acquisitions. When excluding acquisitions, amortization decreased by a marginal 1%.

Cashflow

Playtech continues to be highly cash generative and once again delivered strong operating cashflows of EUR147.3 million.

Cash conversion

 
 
                                                   2017        2016 
                                                EUR'000     EUR'000 
-------------------------------------------  ----------  ---------- 
 Adjusted EBITDA                                170,924     143,804 
 Net cash provided by operating activities      147,321      99,469 
                                             ----------  ---------- 
 Cash conversion                                    86%         69% 
 Decrease /(Increase) in Progressive, 
  operators' jackpots, security deposits       (11,029)       3,149 
 Decrease /(Increase) in Client equity            (761)      10,093 
 Adjusted net cash provided by operating 
  activities                                    135,531     112,711 
                                             ----------  ---------- 
 Adjusted Cash conversion                           79%         78% 
 

Operating cash conversion from Adjusted EBITDA remained at the same level as in H1 2016 when adjusted for jackpots, security deposits and client equity. Since the timing of cash inflows and outflows for jackpots, security deposits and client equity only affects operating cashflow for technical accounting reasons, and not EBITDA, adjusting these cash fluctuations is essential to truly reflect the quality of revenue and cash collection.

Net cash outflows from investing activities totalled EUR73.7 million in the period. EUR36.2 million which mainly relates to the Eyecon acquisition in the period and payments for previous years acquisitions. Cash outflows from financing activities included EUR68.4 million of annual dividend payment.

Balance sheet and financing

As at 30 June 2017, cash and cash equivalents amounted to EUR536.4 million, a slight decrease of EUR8.4 million compared to the end of 2016, following the annual dividend payment of EUR68.4 million and consideration on acquisitions of EUR36.2 million.

Progressive, operators' jackpots and security deposits increased by EUR11.0 million to EUR57.8 million and client funds and deposits decreased by EUR3.1 million, to EUR103.0 million, from the end of 2016. Cash and cash equivalents net of cash held on behalf of client funds, progressive jackpot and security deposit is EUR375.7 million.

Total available-for-sale investments were EUR241.8 million, an increase compared to the end of 2016, mainly due to an appreciation in value of holdings in Plus500 netted of by the depreciation in value of holdings in Ladbrokes and the exchange rate losses in total of EUR11.5 million.

Contingent and deferred consideration liability decreased to EUR205.0 million, mainly due to earn-out payments, and comprise of:

 
 Acquisition            Contingent consideration    Maximum payable 
                         and redemption liability    earnout 
                         as of 30.06.17 
---------------------  --------------------------  ---------------- 
 Markets                EUR139.6 million            EUR250 million 
---------------------  --------------------------  ---------------- 
 Quicksipin             EUR24.2 million             EUR26 million 
---------------------  --------------------------  ---------------- 
 Best Gaming 
  Technology            EUR21.8 million             EUR60 million 
---------------------  --------------------------  ---------------- 
 Consolidated 
  Financial Holdings    EUR16.0 million             $76.6 million 
---------------------  --------------------------  ---------------- 
 ECM                    EUR1.2 million              GBP1.1 million 
---------------------  --------------------------  ---------------- 
 Eyecon                 EUR1.3 million              GBP25.0 million 
---------------------  --------------------------  ---------------- 
 Others                 EUR1.0 million 
---------------------  --------------------------  ---------------- 
 

Dividend

To provide greater certainty and consistency of dividend payments, the Board adopted a progressive dividend policy in 2016 which allows the Board to reflect its confidence in the growth and cash generation of the business without being tied to a fixed percentage payout as one-off items can impact results, such as the impact from foreign exchange which we saw in 2016 and 2017.

Playtech's intention is to grow dividends from the current level in line with the underlying performance of the business on a smoothed basis and to continue to pay the dividend split approximately one-third as an interim dividend and two-thirds as a final dividend.

Accordingly, the Board has declared an interim dividend of 12.1 EURcents per share (2016: 11.0 EURcents), an increase of 10% over 2016's interim dividend.

For those shareholders wishing to receive their dividends in Sterling the last date for currency elections is 29 September 2017.

Dividend timetable:

 
 Ex-dividend         Thursday 21 September 2017 
  date: 
 Record date         Friday 22 September 2017 
  for dividend: 
 Currency election   Friday 29 September 2017 
  date: 
 Payment date:       Tuesday 24 October 2017 
 

Principal risks and uncertainties

Risks relating to both the Gaming division and Financials division

-- Regulation - licensing requirements

The Group holds a number of licences for its activities from regulators. Loss of all or any of these licences may adversely impact on the revenues and/or reputation of the Group.

-- Regulation - Local requirements

New licensing regimes may impose conditions. For example, introduction of a requirement to locate significant technical infrastructure within the relevant territory or to establish and maintain real-time data interfaces with the regulator. Such conditions present operational challenges and may prohibit the ability of licensees to offer the full range of the Group's products.

-- Taxation

Given the environment in which the Group operates, the business is exposed to continuously evolving rules and practices governing the taxation of e-commerce activity in various jurisdictions. Adverse changes to tax rules and changes may increase the Group's underlying effective tax rate and reduce profits available for distribution.

-- Economic Environment

A downturn in consumer discretionary spend or macroeconomic factors outside of Playtech's control could result in reduced spend by consumers on gambling and financial trading and the Group's revenues would fall.

-- Cash Management - Acquisitions

Playtech have significant cash balances, which may be used to acquire other businesses. Such acquisitions may not deliver the expected synergies and/or benefits and may destroy shareholder value.

-- Cash Management - Cash Balances

Foreign exchange volatility could impact the Group's financial position.

-- Key Employees

The Group's future success depends in large part on the continued service of a broad leadership team including executive Directors, senior managers and key personnel. The development and retention of these employees along with the attraction and integration of new talent cannot be guaranteed.

-- IT Security

The risk of impairment to our operations for example through cyber and distributed denial of service (DDoS) attacks, technology failure or terrorist attack continues to be one that the Group considers to be significant. System failure could significantly affect the services offered to our licensees.

-- Regulatory - Data Protection

The requirements of the new EU General Data Protection Regulations (GDPR) will come into force in May 2018. This places onerous responsibilities on data controllers and processors who have users in the EU regardless of where the data is held or processed.

-- Regulatory - Preventing Financial Crime

New regulations requiring companies to take action in preventing financial crime are being developed. These include a new Anti-Money Laundering (AML) directive coming into force on 26th June 2017 and calls for improved Anti-Bribery and Corruption (ABC) regulations.

-- Intellectual Property Rights

The Group's primary commercial activity is as a licensor of gambling software. The Group predominantly owns the intellectual property (IP) rights in that gambling software, including the IMS which is key to maintaining our competitive advantage. Any claim that the Group doesn't own its IP (by a licensee or a third party), or any copying of the Group's IP by a third party, could have a significant effect on revenues. In addition, the Group licenses intellectual property from third parties, including creation of very successful branded games. Any loss of such IP rights could lead to a decline in casino revenues.

-- Business Continuity Planning

Loss of revenue, reputational damage or breach of regulatory requirements may occur as a result of a business or location disruptive event.

Additional risks relating to the Gaming division

-- Regulatory - Responsible Gambling

Responsible gambling is a material concern to society as well as a regulatory priority. Licensing requirements are regularly updated to ensure that companies in the sector provide a safe environment for consumers. Recent trends have seen an additional regulatory focus on treating customers fairly and conducting marketing and advertising in a responsible manner.

Additional risks relating to the Financials division

-- Market exposure

The fair value of financial assets and financial liabilities could adversely fluctuate due to movements in market prices of foreign exchange rates, commodity prices, equity and index prices.

-- Regulatory - Capital Adequacy

The requirement to maintain adequate regulatory capital may affect the Group's ability to conduct its business and may reduce profitability.

-- Trading volume

Low volatility within foreign exchange rates, commodity prices, equity and index prices may reduce profitability.

Directors' responsibility statement

We confirm to the best of our knowledge;

-- The Group and Company financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company; and

-- The Annual Report includes a fair review of the development and performance of the business and the financial position of the Group and Company, together with a description of the principal risks and uncertainties that they face.

A list of current directors is maintained on Playtech's website, www.playtech.com

By order of the Board,

 
 Mor Weizer                 Andrew Smith 
  Chief Executive Officer    Chief Financial Officer 
  23 August 2017             23 August 2017 
 

INDEPENT 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 2017 which comprises the consolidated income statement, 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 and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

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

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

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority

BDO LLP

Chartered Accountants and Registered Auditors

London, United Kingdom

23 August 2017

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 2017            30 June 2016 
                                                                  Note      Actual    Adjusted      Actual    Adjusted 
                                                                           EUR'000     EUR'000     EUR'000     EUR'000 
---------------------------------------------------------------  -----  ----------  ----------  ----------  ---------- 
 Revenue                                                           3       421,580     421,580     337,730     337,730 
 
 Distribution costs before depreciation and amortisation                 (210,438)   (208,289)   (171,008)   (169,337) 
 Administrative expenses before depreciation and amortisation             (46,594)    (42,367)    (29,445)    (24,589) 
 EBITDA                                                                    164,548     170,924     137,277     143,804 
 
 Depreciation and amortisation                                            (54,688)    (29,347)    (44,235)    (24,502) 
 Finance income                                                    5         3,305       3,305       9,689       9,689 
 Finance cost                                                      5      (22,466)    (15,721)    (49,743)    (45,264) 
 Share of profit from joint ventures                                           263         263          81          81 
 Share of profit (loss) from associates                                        389         389     (1,720)     (1,720) 
 Profit before taxation                                                     91,351     129,813      51,349      82,088 
 
 Tax expenses                                                              (2,322)     (4,950)     (2,368)     (3,550) 
 Profit for the period                                                      89,029     124,863      48,981      78,538 
 Other comprehensive income for the period: 
 Items that may be classified to profit or loss: 
 Change in fair value of available for sale equity instruments     8        15,563      15,563     (1,778)     (1,778) 
 Exchange gains arising on translation of foreign operations              (32,436)    (32,436)     (5,746)     (5,746) 
 Total items that will be classified to profit or loss                    (16,873)    (16,873)     (7,524)     (7,524) 
 Total comprehensive income for the period                                  72,156     107,990      41,457      71,014 
 
 Profit for the period attributable to: 
 Owners of the parent                                                       89,647     125,481      48,772      78,329 
 Non-controlling interest                                                    (618)       (618)         209         209 
                                                                            89,029     124,863      48,981      78,538 
 Total comprehensive income attributable to: 
 Owners of the parent                                                       74,159     109,993      40,984      70,541 

 Non-controlling interest                                                  (2,003)     (2,003)         473         473 
                                                                            72,156     107,990      41,457      71,014 
 
 Earnings per share for profit attributable to the owners of 
 the parent during the period: 
 Basic (cents)                                                     6          28.5        39.9        15.3        24.6 
 Diluted (cents)                                                   6          27.3        36.2        15.3        22.6 
 
 

* Adjusted numbers relate to certain non-cash and one-off items including amortisation of intangibles on acquisitions, professional costs on acquisitions, finance costs on acquisitions, deferred tax on acquisitions, change in fair value of available-for-sale investments in the income statement, non-cash accrued bond interest and additional various non-cash charges. The directors believe that the adjusted profit represents more closely the consistent trading performance of the business. A full reconciliation between the actual and adjusted results is provided in Note 4.

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 
                  Additional   Available   Retained   Employee   Convertible   Call/Put   Foreign           Total   Non-controlling       Total 
                     paid in    for sale   earnings    benefit   bond option    options   exchange   attributable          interest      equity 
                     capital     reserve                 trust       reserve    reserve   reserve       to equity 
                                                                                                       holders of 
                                                                                                           parent 
                     EUR'000     EUR'000    EUR'000    EUR'000       EUR'000    EUR'000    EUR'000        EUR'000           EUR'000     EUR'000 
---------------  -----------  ----------  ---------  ---------  ------------  ---------  ---------  -------------  ----------------  ---------- 
 Balance at 1 
  Jan 2017           627,764    (51,057)    498,864   (25,417)        45,392   (34,341)     16,800      1,078,005            21,714   1,099,719 
 Changes in 
 equity for the 
 period 
 Total 
  comprehensive 
  income for 
  the period               -      14,405     89,647          -             -          -   (29,893)         74,159           (2,003)      72,156 
 Dividend paid             -           -   (68,404)          -             -          -          -       (68,404)                 -    (68,404) 
 Exercise of 
  options                              -      (810)      1,599             -          -          -            789                 -         789 
 Employee stock 
  option scheme            -           -      5,103          -             -          -          -          5,103                38       5,141 
 Acquisition of 
  minority 
  interest                 -           -      (498)          -             -          -          -          (498)             (586)     (1,084) 
 Minority 
  interest 
  acquired on 
  business 
  combination              -           -          -          -             -      (252)          -          (252)               105       (147) 
 Balance at 30 
  June 2017          627,764    (36,652)    523,902   (23,818)        45,392   (34,593)   (13,093)      1,088,902            19,268   1,108,170 
 
 Balance at 1 
  Jan 2016           638,209       1,964    592,051   (27,495)        45,392          -      3,266      1,253,387             7,308   1,260,695 
 Changes in 
 equity for the 
 period 
 Total 
  comprehensive 
  income for 
  the period               -     (3,012)     48,772          -             -          -    (4,776)         40,984               473      41,457 
 Dividend paid             -           -   (60,811)          -             -          -          -       (60,811)                 -    (60,811) 
 Exercise of 
  options                              -      (214)        324             -          -          -            110                 5         115 
 Employee stock 
  option scheme            -           -      5,288          -             -          -          -          5,288                83       5,371 
 Acquisition of 
  minority 
  interest                 -           -    (6,702)          -             -          -          -        (6,702)           (1,356)     (8,058) 
 Minority 
  interest 
  acquired on 
  business 
  combination              -           -          -          -             -          -          -              -               329         329 
 Balance at 30 
  June 2016          638,209     (1,048)    578,384   (27,171)        45,392          -    (1,510)      1,232,256             6,842   1,239,098 
 

UNAUDITED CONSOLIDATED BALANCE SHEET

 
                                                               At 30 June 2017   At 30 June 2016   At 31 December 2016 
                                                        Note           EUR'000           EUR'000               EUR'000 
                                                                                                             (Audited) 
-----------------------------------------------------  -----  ----------------  ----------------  -------------------- 
 NON-CURRENT ASSETS 
 Property, plant and equipment                                          78,075            52,965                72,893 
 Intangible assets                                                     993,254           807,213             1,014,635 
 Investments in equity accounted associates & joint 
  ventures                                                              38,836            47,455                39,026 
 Available for sale investments                          8             241,759           234,388               230,278 
 Other non-current assets                                               29,299            24,452                26,861 
                                                                     1,381,223         1,166,473             1,383,693 
-----------------------------------------------------  -----  ----------------  ----------------  -------------------- 
 CURRENT ASSETS 
 Trade receivables                                                      99,003            98,540                73,744 
 Other receivables                                                      78,438            30,037                73,966 
 Cash and cash equivalents                                             536,434           777,576               544,843 
                                                                       713,875           906,153               692,553 
-----------------------------------------------------  -----  ----------------  ----------------  -------------------- 
 TOTAL ASSETS                                                        2,095,098         2,072,626             2,076,246 
 
 EQUITY 
 Additional paid in capital                                            627,764           638,209               627,764 
 Available-for-sale reserve                                           (36,652)           (1,048)              (51,057) 
 Employee Benefit Trust                                               (23,818)          (27,171)              (25,417) 
 Convertible bonds option reserve                                       45,392            45,392                45,392 
 Put/Call options reserve                                             (34,593)                 -              (34,341) 
 Foreign exchange reserve                                             (13,093)           (1,510)                16,800 
 Retained earnings                                                     523,902           578,384               498,864 
 Equity attributable to equity holders of the parent                 1,088,902         1,232,256             1,078,005 
-----------------------------------------------------  -----  ----------------  ----------------  -------------------- 
 Non-controlling interest                                               19,268             6,842                21,714 
 TOTAL EQUITY                                                        1,108,170         1,239,098             1,099,719 
-----------------------------------------------------  -----  ----------------  ----------------  -------------------- 
 
 NON CURRENT LIABILITIES 
 Loans and borrowings                                                        -           200,000               200,000 
 Convertible bonds                                                     271,286           261,298               266,230 
 Deferred revenues                                                       4,104             4,630                 3,454 
 Deferred tax liability                                                 36,798            19,606                40,443 
 Contingent consideration and redemption liability       9              50,498           164,361               204,550 
 Other non-current liabilities                                           1,829             1,029                 1,627 
                                                                       364,515           650,924               716,304 
 CURRENT LIABILITIES 
 Loans and borrowings                                                  200,000                 -                     - 
 Trade payables                                                         21,634            14,428                28,171 
 Progressive operators' jackpots, security deposits                     57,788            60,191                46,759 
 Client deposits                                                        74,120                 -                76,229 
 Client funds                                                           28,858            33,668                29,863 
 Tax liabilities                                                         9,972             5,752                 9,731 

 Deferred revenues                                                      10,047             3,880                 4,456 
 Contingent consideration                                9             154,505             4,008                 4,577 
 Other payables                                                         65,489            60,677                60,437 
                                                                       622,413           182,604               260,223 
 TOTAL EQUITY AND LIABILITIES                                        2,095,098         2,072,626             2,076,246 
 

The financial statements were approved by the Board and authorised for issue on 23 August 2017.

 
 
  Mor Weizer                Andrew Smith 
  Chief Executive Officer   Chief Financial Officer 
 

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

 
                                             Six months ended 30 June 2017   Six months ended 30 June 2016 
                                                                   EUR'000                         EUR'000 
------------------------------------------  ------------------------------  ------------------------------ 
 CASH FLOWS FROM OPERATING ACTIVITIES 
 Profit after tax                                                   89,029                          48,981 
 Adjustments to reconcile net income to 
  net cash provided by operating 
  activities (see below)                                            62,254                          54,885 
 Income taxes paid                                                 (3,962)                         (4,397) 
 Net cash provided by operating activities                         147,321                          99,469 
------------------------------------------  ------------------------------  ------------------------------ 
 CASH FLOWS FROM INVESTING ACTIVITIES 
 Long-term deposits and loan advances                              (2,427)                         (3,622) 
 Acquisition of property, plant and 
  equipment                                                       (18,387)                        (10,524) 
 Return on investment in joint ventures                                644                             748 
 Acquisition of intangible assets                                     (55)                        (12,321) 
 Acquisition of subsidiaries                                      (36,240)                        (41,739) 
 Cash of subsidiaries on acquisition                                   326                           1,581 
 Capitalised development costs                                    (18,872)                        (17,693) 
 Investment in equity-accounted associates                           (622)                           (500) 
 Return on available for sale investments                            2,976                           8,919 
 Proceeds from sale of property, plant and 
  equipment                                                             41                              60 
 Acquisition of minority interest                                  (1,084)                               - 
 Net cash used in investing activities                            (73,700)                        (75,091) 
------------------------------------------  ------------------------------  ------------------------------ 
 CASH FLOWS FROM FINANCING ACTIVITIES 
 Dividends paid to the holders of the 
  parent                                                          (68,404)                        (60,811) 
 Interest payable on loans and bank 
  borrowings                                                       (1,408)                         (1,437) 
 Exercise of options                                                   767                             115 
 Net cash used in financing activities                            (69,045)                        (62,133) 
------------------------------------------  ------------------------------  ------------------------------ 
 INCREASE (DECREASE) IN CASH AND CASH 
  EQUIVALENTS                                                        4,576                        (37,755) 
 CASH AND CASH EQUIVALENTS AT BEGINNING OF 
  PERIOD                                                           544,843                         857,898 
 Exchange losses on cash and cash 
  equivalents                                                     (12,985)                        (42,567) 
 CASH AND CASH EQUIVALENTS AT OF 
  PERIOD                                                           536,434                         777,576 
------------------------------------------  ------------------------------  ------------------------------ 
 
                                                       Six months ended 30     Six months ended 30 June 2016 
                                                                 June 2017 
                                                                   EUR'000                           EUR'000 
 -----------------------------------------  ------------------------------  -------------------------------- 
 ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING 
 ACTIVITIES 
 Income and expenses not affecting 
 operating cash flows: 
 Depreciation                                                       13,030                             9,037 
 Amortisation                                                       41,658                            35,198 
 Share of profit in joint ventures                                   (263)                              (81) 
 Share of loss/(profit) in associates                                (389)                             1,720 
 Interest expenses on convertible bonds                              5,056                             4,869 
 Income tax expense                                                  2,322                             2,368 
 Employee stock option plan expenses                                 5,211                             5,371 
 Movement in deferred and contingent 
  consideration                                                      1,689                             (390) 
 Exchange losses on cash and cash 
  equivalents                                                       12,985                            42,567 
 Return on available for sale investments                          (2,976)                           (8,919) 
 Other                                                                (31)                                84 
 Changes in operating assets and 
 liabilities: 
 Increase in trade receivables                                    (23,991)                          (22,962) 
 Increase in other receivables                                     (4,370)                           (3,794) 
 Decrease in trade payables                                        (6,622)                           (3,409) 
 Increase/(decrease) in progressive, 
  operators jackpot and security deposits                           11,029                           (3,149) 
 Increase/(decrease) in client funds                                   761                          (10,093) 
 Increase in other payables                                            990                             5,965 
 Decrease in deferred revenues                                       6,165                               503 
                                                                    62,254                            54,885 
------------------------------------------  ------------------------------  -------------------------------- 
 
 

Acquisition of subsidiaries

 
                                                         Six months ended 30 June 2017   Six months ended 30 June 2016 
                                                  Note                         EUR'000                         EUR'000 
-----------------------------------------------  -----  ------------------------------  ------------------------------ 
 Acquisitions in the period 
 A. Acquisition of Eyecon Limited                 10a                           27,735                               - 
 B. Other acquisitions                            10b                            1,050                               - 
 Acquisitions in previous years 
 A. Acquisition of Quickspin AB                   11a                                -                          24,461 
 B. Acquisition of ECM Systems Holdings Ltd                                      3,061                               - 
 C. Acquisition of Patelle Limited                                               2,016                               - 
 C. Acquisition of Yoyo Games Limited                                                -                           1,372 
 B. Acquisition of Consolidated Financial                                          336                               - 
 Holdings AB 
 C. Other acquisitions                                                           2,042                          15,906 
                                                                                36,240                          41,739 
-----------------------------------------------  -----  ------------------------------  ------------------------------ 
 

NOTE 1 - GENERAL

   A.   Playtech plc (the 'Company') is a company domiciled in the Isle of Man. 

Playtech and its subsidiaries ('the Group') develop unified software platforms for the online and land based gambling industry, targeting online and land based operators. Since May 2015 the Group is also offered an online trading platform to retail customer which enables them to trade CFD (Contracts For Differences) on a variety instruments which fall under the general categories of Foreign exchanges, Commodities, Equities and indices. In the context of this activity, the Group acts as a market-maker in a predominantly B2C environment. Following the acquisition of CFH in November 2016, the Group also provides B2B clients with technology for liquidity and clearing. Playtech's gaming applications - online casino, poker and other P2P games, bingo, mobile, live gaming, land-based kiosk networks, land based terminal and fixed-odds games - are fully inter-compatible and can be freely incorporated as stand-alone applications, accessed and funded by the operators' players through the same user account and managed by the operator by means of a single, powerful management interface.

B. The interim financial statements as at 30 June 2017 and 30 June 2016 and the six months then ended, respectively, have been reviewed by the Group's external auditors.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The annual financial statements of the Group were prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

These consolidated financial statements have been prepared in accordance with IAS 34,

"Interim Financial Reporting", as adopted by the European Union. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2016 Annual Report.

The same accounting policies, presentation and methods of computation are followed in these consolidated financial statements as were applied in the Group's latest annual audited financial statements.

The comparative period income statement adjusted results have been restated to reflect the impact of adjusting for deferred tax on acquisitions. This results in an increase in the adjusted tax charge and decrease in the resulting adjusted profit and total comprehensive income of EUR1.2 million. Actual results are unaffected. The comparative statements of financial position were restated to reclassify indirect tax liabilities from the tax liabilities heading to the other payables heading, this did not impact net assets or other totals.

New standards, interpretations and amendments effective from 1 January 2017

There are no new standards, interpretations or amendments which are effective for periods beginning on or before 1 January 2017 which have a material effect on the Group's financial information.

The directors are still considering the potential impact of IFRS 15: Revenue from contracts with customers, and IFRS 9: Financial Instruments, but do not expect these standards to have a material effect on the Group's future financial information. The directors are still considering the potential impact of IFRS 16: Leases but expect a material adjustment to arise on transition as the Group has material lease commitments. Other than as noted, the directors do not expect that any other new standards, interpretations and amendments which are effective for periods beginning after 1 January 2017 to have a material effect on the Group's future financial information

The comparative financial information for period ended 31 December 2016 included within this report does not constitute the full statutory accounts for that period. The Independent Auditors' Report on the Annual Report for the year ended 31 December 2016 was unqualified, and did not draw attention to any matters by way of emphasis.

The directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly consolidated financial statements.

Significant judgements and estimates

There has been no change in the nature of the critical accounting estimates and judgements as set out in Note 3 to the Group's audited financial statements for the year ended 31 December 2016.

NOTE 3 - SEGMENT INFORMATION

The Group's reportable segments are strategic business units that offer different products and services.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including the Chief Executive Officer and the Chief Financial Officer.

The operating segments identified are:

-- Gaming: including Casino, Services, Sport, Bingo and Poker

-- Financial: including B2C and B2B CFD

The Group-wide profit measures are adjusted EBITDA and adjusted net profit (see Note 4). Management believes the adjusted profit measures represent more closely the underlying trading performance of the business. No other differences exist between the basis of preparation of the performance measures used by management and the figures in the Group financial information.

There is no allocation of operating expenses, profit measures, assets and liabilities to individual products within the segments as of 30 June 2017.

Six months ended 30 June 2017

 
                                                                                   Total       Total 
                  Casino    Services     Sport     Bingo     Poker     Other      Gaming   Financial      Consolidated 
                 EUR'000     EUR'000   EUR'000   EUR'000   EUR'000   EUR'000     EUR'000     EUR'000           EUR'000 
-------------  ---------  ----------  --------  --------  --------  --------  ----------  ----------  ---------------- 
 Total 
  revenue        225,874      68,996    37,727    13,962     4,707    25,258     376,524      45,056           421,580 
 Adjusted 
  EBITDA                                                                         154,864      16,060           170,924 
 Adjusted net 
  profit                                                                         115,553       9,310           124,863 
 Total assets                                                                  1,769,398     325,700         2,095,098 
 Total 
  liabilities                                                                    655,890     331,038           986,928 
 

Six months ended 30 June 2016

 
                                                                                    Total       Total 
                  Casino    Services     Sport     Bingo     Poker     Other       Gaming   Financial      Consolidated 
                 EUR'000     EUR'000   EUR'000   EUR'000   EUR'000   EUR'000      EUR'000     EUR'000           EUR'000 
-------------  ---------  ----------  --------  --------  --------  --------  -----------  ----------  ---------------- 
 Total 
  revenue        186,658      76,475    18,967     8,970     5,043    10,339      306,452      31,278           337,730 
 Adjusted 
  EBITDA                                                                          137,919       5,885           143,804 
 Adjusted net 
  profit                                                                           65,447      13,091            78,538 
 Total assets                                                                   1,862,183     210,443         2,072,626 
 Total 
  liabilities                                                                     669,207     164,321           833,528 
 

As disclosed in the 2016 annual report, the 2016 revenues by product have been restated to combine 'land based' into the other headings to reflect the current internal reporting by management. Total revenue remains unchanged.

NOTE 4 - ADJUSTED ITEMS

The following tables give a full reconciliation between adjusted and actual results:

 
                                                         Six months ended 30 June 2017   Six months ended 30 June 2016 
                                                                               EUR'000                         EUR'000 
------------------------------------------------------  ------------------------------  ------------------------------ 
 Distribution costs before depreciation and 
  amortisation                                                                 210,438                         171,008 
 Employee stock option expenses                                                (2,149)                         (1,671) 
 Adjusted distribution costs before depreciation and 
  amortisation                                                                 208,289                         169,337 
                                                        ------------------------------  ------------------------------ 
 
 
 Administrative expenses before depreciation and 
  amortisation                                                                  46,594                          29,445 
 Employee stock option expenses                                                (3,061)                         (3,700) 
 Professional fees on acquisitions                                               (786)                         (1,156) 
 Cost of fundamental business reorganization                                     (380)                               - 
 Total adjusted items                                                          (4,227)                         (4,856) 
                                                        ------------------------------  ------------------------------ 
 Adjusted administrative expenses before depreciation 
  and amortisation                                                              42,367                          24,589 
                                                        ------------------------------  ------------------------------ 
 
 

 Depreciation - distribution costs                                               9,034                           8,015 
 Depreciation - administrative costs                                             3,996                           1,022 
 Amortisation - distribution costs                                              41,658                          35,198 
                                                        ------------------------------  ------------------------------ 
 Total depreciation and amortisation                                            54,688                          44,235 
 Amortisation of intangibles on acquisitions - 
  distribution costs                                                          (25,341)                        (19,733) 
 Adjusted depreciation and amortisation                                         29,347                          24,502 
                                                        ------------------------------  ------------------------------ 
 
 Tax expenses                                                                    2,322                           2,368 
 Deferred tax on acquisition                                                     2,628                           1,182 
                                                        ------------------------------  ------------------------------ 
 Corporate tax                                                                   4,950                           3,550 
                                                        ------------------------------  ------------------------------ 
 
 
 EBITDA                                                                                           164,548   137,277 
 Employee stock option expenses                                                                     5,210     5,371 
 Professional expenses on acquisitions                                                                786     1,156 
 Cost of fundamental business reorganization                                                          380         - 
                                                                                                ---------  -------- 
 Adjusted EBITDA                                                                                  170,924   143,804 
                                                                                                ---------  -------- 
 Constant currency impact                                                                           7,009         - 
                                                                                                           -------- 
 Adjusted EBITDA on constant currency basis                                                       177,933   143,804 
                                                                                                           -------- 
 EBITDA related to acquisitions on constant currency basis                                       (17,882)         9 
 Underlying adjusted EBITDA                                                                       160,051   143,813 
                                                                                                ---------  -------- 
 
 Profit for the period- attributable to owners of parent                                           89,647    48,772 
 Amortisation of intangibles on acquisitions                                                       25,341    19,733 
 Employee stock option expenses                                                                     5,210     5,371 
 Professional expenses on acquisitions                                                                786     1,156 
 Cost of fundamental business reorganization                                                          380         - 
 Non-cash accrued bond interest                                                                     5,056     4,869 
 Movement in deferred and contingent consideration                                                  1,689     (390) 
 Deferred tax on acquisition                                                                      (2,628)   (1,182) 
                                                                                                ---------  -------- 
 Adjusted profit for the period - attributable to owners of the parent                            125,481    78,329 
                                                                                                ---------  -------- 
 Constant currency impact                                                                          20,018    42,567 
 Adjusted profit for the period - attributable to owners of the parent on constant currency 
  basis                                                                                           145,499   120,896 
                                                                                                ---------  -------- 
 Adjusted net loss/(profit) related to acquisitions on constant currency basis                   (12,103)        39 
 Underlying adjusted profit for the period - attributable to owners of the parent on constant 
  currency basis                                                                                  133,396   120,935 
                                                                                                ---------  -------- 
 

NOTE 5 - FINANCING INCOME AND COSTS

 
                                                     Six months         Six months 
                                                          ended              ended 
                                                        30 June            30 June 
                                                           2017               2016 
                                                        EUR'000            EUR'000 
--------------------------------------------  -----------------  ----------------- 
 
 A. Finance income 
 Interest received                                          329                770 
 Dividends received from available-for-sale 
  investments                                             2,976              8,919 
                                                          3,305              9,689 
                                              -----------------  ----------------- 
 B. Finance cost 
 Finance cost - movement in contingent 
  consideration                                         (1,689)                390 
 Interest expenses on convertible 
  bonds                                                 (5,798)            (5,612) 
 Bank charges and interest paid                         (1,994)            (1,954) 
 Exchange differences                                  (12,985)           (42,567) 
                                                       (22,466)           (49,743) 
                                              -----------------  ----------------- 
 Net financing income                                  (19,161)           (40,054) 
                                              -----------------  ----------------- 
 

NOTE 6 - EARNINGS PER SHARE

Earnings per share have been calculated using the weighted average number of shares in issue during the relevant financial periods. The weighted average number of equity shares in issue and the earnings, being profit after tax, is listed below. In addition, adjusted earnings per share have been disclosed as the directors believe that the adjusted profit represents more closely the underlying trading performance of the business. The adjusted items are included in Note 4.

 
                                             Six months ended   Six months ended   Six months ended   Six months ended 
                                             30 June 2017                          30 June 2016 
                                             Actual             Adjusted           Actual             Adjusted 
                                             EUR'000            EUR'000            EUR'000            EUR'000 
------------------------------------------  -----------------  -----------------  -----------------  ----------------- 
 
 Profit for the year attributable to 
  owners of the parent                       89,647             125,481            48,772             78,329 
 Add interest on convertible bond            5,798              743                n/a                743 
                                            -----------------  -----------------  -----------------  ----------------- 
 Earnings used in diluted EPS                95,445             126,224            48,772             79,072 
 
 Basic (cents)                               28.5               39.9               15.3               24.6 
 Diluted (cents)                             27.3               36.2               15.3               22.6 
 
 
                                         Six months ended   Six months ended   Six months ended   Six months ended 
                                         30 June 2017                          30 June 2016 
                                         Actual             Adjusted           Actual             Adjusted 
                                         Number             Number             Number             Number 
 Denominator - basic 
 Weighted average number of equity 
  shares                                 314,392,086        314,392,086        318,495,749        318,495,749 
 Denominator - diluted 
 Weighted average number of equity 
  shares                                 314,392,086        314,392,086        318,495,749        318,495,749 
 Weighted average number of option 
  shares                                 1,614,569          1,614,569          1,064,964          1,064,964 
 Weighted average number of 
  convertible bonds                      33,157,683         33,157,683         -                  30,737,705 
                                        -----------------  -----------------  -----------------  ------------------- 

 Weighted average number of shares       349,164,338        349,164,338        319,560,713        350,298,418 
 
 

NOTE 7 - SHAREHOLDERS' EQUITY

A. Share Capital

Share capital is comprised of no par value shares as follows:

 
                            Number of Shares 
                       30 June 2017       30 June 
                                              201 
--------------------  -------------  ------------ 
 Authorised                    N/A*          N/A* 
 Issued and paid up     317,344,603   322,624,603 
 

* The Group has no authorised share capital but is authorized under its memorandum and article of association to issue up to 1,000,000,000 shares of no par value.

B. Employee Benefit trust

During 2013 the Group established an Employee benefit trust by acquiring 5,517,241 shares for a total of EUR48.5 million. During the period 190,950 shares were sold with a cost of EUR0.3 million (Six months to 30 June 2016: 36,062 shares with a cost of EUR0.3 million), and as of 30 June 2017, a balance of 3,035,673 (2016: 3,244,027) shares remains in the trust with a cost of EUR23.8 million (2016: EUR27.2 million).

C. Share options exercised

During the period 193,120 (Six months to 30 June 2016: nil) share options were exercised.

D. Distribution of Dividend

In June 2017, the Group distributed EUR68,404,085 as a final dividend for the year ended 31 December 2016. (2016: EUR60,810,670).

NOTE 8 - AVAILABLE-FOR-SALE INVESTMENTS

 
                                                                 30 June 2017       30 June 2016 
                                                                      EUR'000            EUR'000 
-----------------------------------------------------------  ----------------  ----------------- 
 Investment in available-for-sale investments at 1 January            230,280            237,100 
 Unrealised valuation movement recognised in equity                    15,563            (1,778) 
 Translation                                                          (4,084)              (934) 
 Investment in available-for-sale investments at 30 June              241,759            234,388 
                                                             ----------------  ----------------- 
 

The fair value of quoted investments is based on published market prices (level one).

 
                                                                 30 June 2017     30 June 2016 
                                                                      EUR'000          EUR'000 
------------------------------------------------------------  ---------------  --------------- 
 Available-for-sale financial assets include the following: 
 Quoted: 
 Equity securities- UK                                                237,168          222,859 
 Equity securities- Asia                                                4,589           11,529 
                                                                      241,757          234,388 
                                                              ---------------  --------------- 
 

NOTE 9 -CONTINGENT CONSIDERATION

 
                                                                        Six months ended    Six months ended 
                                                                            30 June 2017        30 June 2016 
---------------------------------------------------------------------  -----------------  ------------------ 
 
 Non-Current contingent consideration consists: 
 Acquisition of TradeFX Group                                                          -             138,664 
 Acquisition of Quickspin AB                                                      14,722              24,104 
 Acquisition of Eyecon Limited                                                     1,296                   - 
 Other acquisitions                                                                  148               1,593 
                                                                                  16,166             164,361 
                                                                       -----------------  ------------------ 
 
 Non-Current redemption liability consists: 
 Acquisition of Consolidated Financial Holdings                                   16,022                   - 
 Acquisition of Patelle Limited                                                   16,890                   - 
 Acquisition of ECM Systems Holdings Limited                                       1,162                   - 
 Other acquisition                                                                   258                   - 
                                                                       -----------------  ------------------ 
                                                                                  34,332                   - 
                                                                       -----------------  ------------------ 
 Total Non-Current contingent consideration and redemption liability              50,498             164,361 
                                                                       -----------------  ------------------ 
 
 Current contingent consideration consists: 
 Acquisition of TradeFX Group                                                    139,597                   - 
 Acquisition of Quickspin AB                                                       9,485                   - 
 Acquisition of Patelle Limited                                                    4,875                   - 
 Acquisition of Yoyo Games Limited                                                     -                 455 
 Other acquisitions                                                                  548               3,553 
                                                                                 154,505               4,008 
                                                                       -----------------  ------------------ 
 

Contingent consideration arising on the acquisition of TradeFX Group (now Markets) in 2015 is payable in 2018 based on an EBITDA multiple, less initial consideration and capped at EUR250 million. The liability above reflects managements discounted anticipated contingent consideration liability due.

NOTE 10 - ACQUISITIONS DURING THE PERIOD

A. Acquisition of Eyecon Limited and Eyecon PTY

On 7 February 2017, the Group acquired 100% of the shares of Eyecon Limited and Eyecon PTY (together "Eyecon"), an Australian specialist supplier of online gaming slots software.

The Group paid total cash consideration of EUR27.7 million (GBP 23.7 million) and additional consideration capped at EUR29.0 million (GBP 25.0 million) in cash will be payable based on an EBITDA multiple less initial consideration paid, and is payable in 2020.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill, are as follows:

 
                                     Fair value on acquisition 
                                                       EUR'000 
  -------------------------------  --------------------------- 
 Property, plant and equipment                              77 
 Intangible assets                                      12,990 
 Trade and other receivables                             1,361 
 Cash and cash equivalent                                  575 
 Trade payables                                        (2,834) 
 Net identified assets                                  12,169 
                                   --------------------------- 
 Goodwill                                               16,859 
 Fair value of consideration                            29,028 
                                   --------------------------- 
 
 
                                                                                    EUR'000 
                                                                     ---------------------- 
 Cash consideration                                                                  27,735 
 Non-current contingent consideration                                                 1,486 
 Finance cost arising on discounting of contingent consideration                      (193) 
                                                                     ---------------------- 
 Fair value of consideration                                                         29,028 
                                                                     ---------------------- 
 Cash purchased                                                                       (575) 
 Net cash payable                                                                    28,453 
                                                                     ---------------------- 
 

Adjustments to fair value include the following:

 
                                   Amount   Amortisation 
                                  EUR'000              % 
------------------------  ---------------  ------------- 
 IP Technology                      9,279        16.7-33 
 Customer relationships             2,436             10 
 Brand                              1,275             10 
 

The main factor leading to the recognition of goodwill is the revenue stream from new games and new licensees, assembled work force with vast experience and strong records and cost synergies. In accordance with IAS36, the Group will regularly monitor the carrying value of its interest in Eyecon.

The key assumptions used by management to determine the value in use of the Customer relationships within Eyecon are as follows:

-- The MPEEM income approach.

-- The discount rate assumed is equivalent to the WACC for the Customer relationship.

-- The growth rates and attrition rates were based on market analysis.

The key assumptions used by management to determine the value in use of the Brand within Eyecon are as follows:

-- The relief from royalty approach.

-- The royalty rate was based on a third party market participant assumption for the use of the Brand.

-- The discount rate assumed is equivalent to the WACC for the Brand.

-- The growth rates and attrition rates were based on market analysis.

The key assumptions used by management to determine the value in use of the IP Technology within Eyecon are as follows:

-- The with and without model, taking into account the time and additional expenses required to recreate the IP Technology and the level of lost cash flows in the period.

-- The discount rate assumed is equivalent to the WACC for the IP Technology.

-- The growth rates and attrition rates were based on market analysis.

Management has not disclosed Eyecon contribution to the Group profit since the acquisition nor has the impact the acquisition would have had on the Group's revenue and profits if it had occurred on 1 January 2017 been disclosed, because the amounts are not material.

B. Other acquisitions

During the period, the Group acquired a further 45% of the shares of a games studio in steps for a consideration of EUR1.2m, with previous consideration of EUR0.8 million paid to acquire the previously recognized 35% interest in associate. A fair value movement was required on conversion to a subsidiary of EUR0.1m.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill, are as follows:

 
                                        Fair value on acquisition 
                                                           EUR000 
  -----------------------------------  -------------------------- 
 Net identified assets                                        525 
 Goodwill                                                   1,593 
 Non-controlling interest                                   (105) 
 Total fair value of consideration                          2,013 
                                       -------------------------- 
 
 
                                                                    EUR'000 
                                                   ------------------------ 
 Cash consideration                                                   1,050 
 Deferred consideration                                                 144 
 Conversion of previously recognized associate                          819 
 Fair value of consideration                                          2,013 
                                                   ------------------------ 
 Cash purchased                                                         249 
 Net cash payable                                                     2,262 
                                                   ------------------------ 
 
 
 Adjustments to fair value include the following: 
                                              Amount   Amortisation 
                                             EUR'000              % 
---------------------------------  -----------------  ------------- 
 IP Technology                                   640          25-50 
 

The main factor leading to the recognition of goodwill is the frontend framework and its games integration, unique workforce and future revenue and cost synergies. In accordance with IAS36, the Group will regularly monitor the carrying value of its interest in these acquisitions.

The key assumptions used by management to determine the value in use of the IP Technology within these acquisitions are as follows:

-- The income approach, in particular, the MPEEM method and the with and without models.

-- The discount rate assumed is equivalent to the WACC for the IP Technology.

-- The growth rates and attrition rates were based on market analysis.

Management has not disclosed other acquisitions' contribution to the Group profit since these acquisitions nor has the impact the acquisition would have had on the Group's revenue and profits if it had occurred on 1 January 2017 been disclosed, because the amounts are not material.

NOTE 11 - ACQUISITIONS IN PREVIOUS PERIOD

A. Acquisition of Quickspin AB

On 24 May 2016, the Group acquired 100% of the shares of Quickspin AB ("Quickspin"). Quickspin is a Swedish games studio that develops and supplies high quality video slots to operators, both in online real money gambling as well as in the social gaming market.

The Group paid total cash consideration of EUR24.5 million (SEK 228.4 million) and additional consideration capped at EUR26.0 million (SEK 242.9 million) in cash will be payable subject to achieving target EBITDA.

B. Other acquisitions

During the prior period, the Group acquired the shares of various companies for a total consideration of EUR12.3 million. One of these subsidiaries was acquired in steps, with previous consideration of EUR2.4 million paid to acquire the previously recognized associate. There was no fair value movement required on conversion to a subsidiary.

NOTE 12 - RELATED PARTIES AND SHAREHOLDERS

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party's making of financial or operational decisions, or if both parties are controlled by the same third party. Also, a party is considered to be related if a member of the key management personnel has the ability to control the other party.

On 27 June 2017, Brickington Trading Limited ("Brickington") decreased its holding to 6.3% (30 June 2016: 33.61%) of Playtech plc shares and the relationship agreement terminated. From this date Brickington no longer meets the definition of a related party. Accordingly, the following companies are not accounted as related parties from the same date:

Skywind Holdings Limited ("Skywind"), SafeCharge Limited, Crossrider Technologies Ltd ("Crossrider"), Royalfield Limited, Easydock Investments Ltd. (Easydock), Selfmade Holdings, Glispa GmbH ("Glispa"), Anise Development Limited and Anise Residential Limited (together "Anise").

Mr Teddy Sagi, the ultimate beneficiary of Brickington, provides advisory services to the Group for a total annual consideration of EUR1.

The joint ventures and the structured agreements are associates of the Group by virtue of the Group's significant influence over those arrangements.

The following transactions arose with related parties:

 
                                            Six months ended   Six months ended 
                                                30 June 2017       30 June 2016 
                                           -----------------  ----------------- 
                                                     EUR'000            EUR'000 
-----------------------------------------  -----------------  ----------------- 
 Revenue including income from associate 
 Skywind                                                 720                987 
 Structured agreements                                 8,970             22,992 
                                           -----------------  ----------------- 
 
 Share of profit in joint ventures                       263                 81 
 Share of profit/(loss) in associates                    389            (1,720) 
                                           -----------------  ----------------- 
 
 Operating expenses 
 SafeCharge Limited                                    3,612              3,121 
 Crossrider                                            1,314              1,308 
 Structured agreements                                     6                625 
 Anise                                                   518                539 
 Skywind, net of capitalised cost                        334                132 
 Glispa                                                  165                 15 
 Selfmade Holdings                                         -                 10 
 Royalfield Limited                                        -                  4 
 Easydock                                                  -                  1 
                                           -----------------  ----------------- 
 Interest income 
 Structured agreements                                    49                  - 
                                           -----------------  ----------------- 
 

NOTE 13 - CONTINGENT LIABILITIES

As part of the Board's ongoing regulatory compliance process, the Board continues to monitor legal and regulatory developments and their potential impact on the Group.

Management is not aware of any contingencies that may have a significant impact on the financial position of the Group.

Note 14 - Post balance sheet events

Acquisition of ACM Group Limited assets

On 23 August 2017, the Group agreed to acquire technology, intellectual property and certain customer assets (together 'the acquisition') from ACM Group Limited. Consideration for the acquisition comprises an initial up-front payment of $5 million in cash, and additional contingent consideration of up to $145 million is payable in cash based on 5.2 x the 2019 EBITDA. As of the approval date of the financial statements by the Board and due to the proximity to the reporting date, the Group had not completed the valuation of the fair value of the intangible assets and liabilities acquired and accordingly these disclosures are not provided in the financial statements.

This information is provided by RNS

The company news service from the London Stock Exchange

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(END) Dow Jones Newswires

August 24, 2017 02:00 ET (06:00 GMT)