GYS.L Regulatory News (GYS)

Gamesys Group plc

Excellent financial performance and operational execution

Revenue ahead 17%, adjusted EBITDA up 16%, leverage reduced

LONDON, 10 August 2021 - Gamesys Group plc (LSE: GYS) (the 'Group', 'Gamesys') announces its financial results for the six months ended 30 June 2021.

Financial summary

Financial highlights

· Excellent financial performance across the Group

o Revenue grew by 17% with good momentum in the UK and Asia

o Adjusted EBITDA1 increased 16% year-on-year, driven by strong revenue growth

o Adjusted net income1 increased 20% year-on-year

· Cash conversion of 94% from adjusted EBITDA1; adjusted net leverage ratio[3] reduced to 1.17x

o Operating cash flow of £103.5 million

· Cash balances at 30 June 2021 increased to £253.7m and post period-end, the Group paid down £100.0 million towards its outstanding term loan debt

Operational highlights

· The Group continues to execute successfully across key LTM performance indicators4:

o Average Active Players per Month[4] grew 16%, from 640,436 to 744,807

o On a monthly average basis, Real Money Revenue per Month4 increased 23%, from £50.9 million to £62.8 million

o As a result, Monthly Real Money Revenue per Average Active Player4 increased 5%, from £80 to £84

· In the UK, revenues increased 20% in H1 2021 with Virgin Games, Monopoly Casino and Rainbow Riches Casino driving strong performance

· Asia continues to deliver significant double-digit growth with revenues increasing by 30% year-on-year on a constant currency basis[5]

· In Europe, revenues declined by 29% reflecting a more challenging regulatory environment in Germany, Scandinavia and, to a degree, in Spain

· Revenues in ROW fell marginally by 1% year-on-year, with growth in North America offset by a contraction in other smaller markets

COVID-19 and responsible gambling

· With the pandemic still present in all our operating markets, we remain fully committed to ensuring the health and safety of both our players and employees throughout our global communities. This will remain a top priority whilst the virus is still in existence across our markets worldwide

· We have continued to see 100% continuity in our global business operations, and this is a testament to the commitment and diligence of our teams across the globe. We remain committed to creating a working environment which allows for increased flexibility for all employees in the future

· We continue to take proactive steps to enhance our responsible gambling approach through ongoing investment in new capabilities and resources. This is strengthening our position as a best-in-class operator in protecting our recreational players

· We remain fully supportive of the UK Government's review of the 2005 Gambling Act and reiterate the need for a rigorous evidence-based approach to potential policy change to ensure the complete protection of vulnerable customers whilst also allowing the majority to continue to enjoy their play in a responsible way

Capital allocation, dividend and completion of combination of Gamesys and Bally's Corporation

· The Group has further strengthened its robust balance sheet in the first half of 2021, as exceptional cash generation supports ongoing deleveraging and the paydown of debt on 30 July 2021

· In the scheme document relating to the combination of Gamesys and Bally's Corporation, the Board reserved the right to declare an interim dividend of up to 15.0p. The Board has approved and declared an interim dividend for the year ending 31 December 2021 of 15.0p per ordinary share in the Group ('Ordinary Shares'). The interim dividend will be paid on 15 October 2021 to shareholders on the register on 10 September 2021 and the Ordinary Shares will become ex-dividend on 9 September 2021, subject to the scheme of arrangement not becoming effective before that date

· The combination of Gamesys and Bally's Corporation is expected to become effective in Q4 of the current financial year

Lee Fenton, CEO, Gamesys Group plc, commented:

"The Group has delivered another set of excellent results for the first half of 2021 with revenue growth of 17% and adjusted EBITDA1 increasing by 16% during the period. This performance reflected significant double-digit revenue growth in our key markets of the UK and Asia and our continuing strong cash flow has seen leverage reduce further. We are fully focused on operational execution, product innovation and the enhancement of safer gambling initiatives across all of our markets and we remain fully confident in the Group's ability to deliver long-term sustainable growth."

Conference call

There will be a conference call for analysts and investors today at 1.00pm BST / 8.00am ET. To join the call, participants should dial one of the following numbers, using the password 'Gamesys', approximately 10 minutes ahead of the scheduled start time.

A replay facility will be available for 30 days and can be accessed by dialling one of the numbers below and quoting conference 5896372#

A transcript will also be made available on Gamesys Group plc's website at www.gamesysgroup.com/investors

Enquiries

Chief executive's business review

Overview

I am incredibly proud that our dedicated workforce has continued to prosper and thrive despite the challenges which the COVID-19 pandemic still presents and that the Group has delivered a record set of half-year numbers. As I have said before, we now know that 'normal' is never likely to return in exactly the same way but we will continue to maintain a focus on the wellbeing of both staff and players. Replacing old practices will require dedication but our workforce has an unerring appetite to learn how we can best market to and serve our players in the new world. We have made significant strides towards establishing a hybrid working environment as our offices open up across our international footprint and look forward to enhancing the collaboration-focused environment we have established remotely when teams do gather together onsite.

UK

A record performance from the UK, the Group's largest geographic market, in H1 2021. Revenue growth of 20% in H1 2021 was very similar to 21% in H2 2020 and has been driven by popular and established brands building on leading positions (e.g. Virgin Games and Monopoly Casino), and new brands such as Rainbow Riches Casino boosting growth. Meanwhile, our player base continues to grow sustainably; average monthly actives grew by 10% over H1 2020.

Asia

A record performance in H1 2021 building on well-established momentum and against extremely strong comparatives. The Group is the clear online casino market leader in Japan and success reflects best-in-class operational expertise, investment in product, infrastructure, customer support and marketing. We are launching new brands into Japan and have expanded our game portfolio with new, internally developed, exclusive titles. Our B2B business in Asia continues to grow supported by increasing features and improvements for our partners.

Europe

Europe was impacted by regulatory measures across a number of markets, namely Spain, Germany and Sweden. Spain did however show signs of stabilising in Q2 2021, with Monopoly Casino continuing to build momentum in this market. Revenues were also impacted by a withdrawal from some peripheral markets.

ROW

In our ROW market, the standout performer in H1 2021 was Canada with triple-digit growth over H1 2020. Our largest market in ROW is New Jersey in the US and we have invested in headcount and the technology platform to support our operations. We have built a foundation for sustainable growth in North America as a whole. Revenues were impacted by the contraction in some smaller markets in H1 2021.

Regulatory update

When the UK Government announced that it was initiating a review of the 2005 Act we welcomed the opportunity to create a framework fit for the digital age that was built upon on balance, evidence, efficacy and proportionality as the key drivers of sound policy. We now await the findings of that review and what we hope will be continued steps to enhance the protection of vulnerable customers whilst also protecting the enjoyment of the vast majority of customers who never experience any harms whatsoever.

Outlook

At its core, Gamesys is focused on providing entertainment, recreation and community to the record number of players who enjoy our well known and trusted brands. We continue to significantly expand our player base and we are well placed to deliver sustainable and long-term growth.

Note regarding non-IFRS financial measures

The following non-IFRS definitions are used in this release because management believes that they provide additional useful information regarding ongoing operating and financial performance. Readers are cautioned that the definitions are not recognised measures under IFRS, do not have standardised meanings prescribed by IFRS, and should not be considered in isolation or construed to be alternatives to revenue and net income/(loss) and comprehensive income/(loss) for the period determined in accordance with IFRS or as indicators of performance, liquidity or cash flows. Our method of calculating these measures may differ from the method used by other entities. Accordingly, our measures may not be comparable to similarly titled measures used by other entities or in other jurisdictions.

Adjusted EBITDA, as defined by the Group, is net income before interest expense including accretion (net of interest income), income taxes, amortisation and depreciation, severance costs, one-off tax (recovery)/charges, transaction related costs and foreign exchange (gain)/loss. Management believes that Adjusted EBITDA is an important indicator of the issuer's ability to generate liquidity to service outstanding debt and uses this metric for such purpose. The exclusion of severance costs, one-off tax (recovery)/charges, transaction related costs and foreign exchange (gain)/loss eliminates items which management believes are either non-operational and/or non-routine. 

Adjusted Net Income, as defined by the Group, means net income plus or minus items of note that management may reasonably quantify and believes will provide the reader with a better understanding of the Group's underlying business performance. Adjusted Net Income is calculated by adjusting net income for accretion on financial liabilities, amortisation of acquisition related purchase price intangibles, severance costs, one-off tax (recovery)/charges, transaction related costs, foreign exchange (gain)/loss and deferred tax on purchase price intangibles. The exclusion of accretion on financial liabilities eliminates non-cash items and the exclusion of amortisation of acquisition related purchase price intangibles, severance costs, one-off tax (recovery)/charges, transaction related costs, foreign exchange (gain)/loss and deferred tax on purchase price intangibles eliminates items which management believes are non-operational and/or non-routine. Adjusted Net Income is considered by some investors and analysts for the purpose of assisting in valuing a company.

Diluted Adjusted Net Income per share, as defined by the Group, means Adjusted Net Income divided by the diluted weighted average number of shares outstanding, calculated using the IFRS treasury method, for the applicable period. Management believes that Diluted Adjusted Net Income per share assists with the Group's ability to analyse Adjusted Net Income on a diluted weighted average per share basis.

Cautionary Note Regarding Forward Looking Information

This announcement may contain statements that constitute 'forward-looking information', 'future-oriented financial information' and 'financial outlook' within the meaning of applicable laws, including Canadian securities legislation. Forward-looking information contained in this announcement includes, but is not limited to statements with respect to: the Group's future financial performance, including its FY21 revenue and adjusted EBITDA1; the future prospects of the Group's business and operations; the Group's growth opportunities and the execution and sustainability of its growth and diversification strategies, including the pursuit of bolt-on acquisitions and opportunities in North America; the importance of the Group's enlarged and engaged customer base in driving sustainable growth; the Group's anticipated cash flow generation and deleveraging, and its ability to meet stated long-term targets ahead of schedule or at all; the Group's anticipated cash conversion rate from adjusted EBITDA1; returns to shareholders through share buyback programmes or otherwise; the anticipated timing of a dividend payment, and the implementation of a broader dividend and capital allocation policy; the Group's contributions to the environment for responsible gaming; the Group's preservation of flexibility to balance between cash conservation, debt paydown, potential acquisitions and returns of cash to shareholders; the Group's future priorities, including its focus on expanding its global revenue footprint; the implications of COVID-19 on the business and operations of the Group, including with respect to employee working environments; the Group's intention to exit markets that are subscale and/or have regulatory regimes that make cash generation challenging; future rates of e-commerce adoption; and continued investment in new games content and development of the Group's existing portfolio. Statements that reflect the Group's current expectations related to future events or its future results, performance, achievements or developments, and future trends affecting the Group constitute forward-looking information. Words such as 'plans', 'expects', 'estimates', 'projects', 'predicts', 'targets', 'seeks', 'intends', 'anticipates', 'believes', 'may', 'could', 'should', 'might', 'will' or similar expressions suggesting future outcomes or events are intended to identify such forward-looking information. Such forward-looking information is based on current expectations, estimates, forecasts and projections about the Group's business and the industry, regulatory and economic environments in which it operates, and include beliefs and assumptions made by management of the Group which may prove to be incorrect, including, but not limited to: the ability of the Group to secure, maintain and comply with all required licences, permits and certifications to carry out business in the jurisdictions in which it currently operates or intends to operate; no unforeseen changes in governmental or regulatory policies, including the introduction of new laws or changes in existing laws (or the interpretation thereof) related to online gaming; no downturn in general business, economic or market conditions (including market growth rates and the withdrawal of the UK from the European Union); uninterrupted operations; the Group operating in foreign jurisdictions; no unfavourable changes in the competitive environment; the expected growth of the online gaming market and potential new market opportunities; anticipated and unanticipated costs; the protection of the Group's intellectual property rights; the Group's ability to successfully integrate and realise the benefits of its completed acquisitions; the Group's continued relationship with third parties; the ability of the Group to service its debt obligations; the ability of the Group to obtain additional financing, if, as and when required; the Group's ability to retain its active customers; the availability of suitable bolt-on acquisition targets; and no unforeseen changes due to the COVID-19 pandemic. Such statements could also be materially affected by risks relating to the lack of available and qualified personnel or management; stock market volatility; taxation policies; competition; foreign operations; the Group's limited operating history and the Group's ability to access sufficient capital from internal or external sources. Gamesys believes that these are reasonable assumptions, based on information currently available to the Group.

Whether actual results and developments will conform with the expectations and predictions contained in the forward-looking information is subject to a number of risks and uncertainties, many of which are beyond the Group's control. Factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking statements include, among other things: risks relating to the lack of available and qualified personnel or management; unfavourable regulatory changes in key markets; risks associated with fluctuations in interest rates and failure to manage exposure to credit and financial instrument risk; a significant expansion in length or severity of the COVID-19 pandemic restricting or prohibiting the Group's operations or significantly impacting the Group's workforce; the severity of mitigation measures related to the COVID-19 pandemic; and risks associated with economic uncertainty and financial market volatility.

Although the Group has attempted to identify important factors that could cause actual results, performance, achievements or developments to differ materially from those described in forward-looking statements, there may be other factors that cause actual results, performance, achievements or developments not to be as anticipated, estimated or intended.

There can be no assurance that forward-looking statements will prove to be accurate, as actual results may differ materially from those expressed in or implied by the forward-looking information contained in this announcement.

All forward looking information in this announcement speaks as of the date of this announcement. While subsequent events and developments may cause the Group's expectations, estimates and views to change, the Group does not undertake or assume any obligation to update or revise any forward-looking information, except as required by applicable law.

In addition, the Group cautions readers that information provided in this announcement regarding the Group's outlook on certain matters, including any future-oriented financial information and financial outlook, is provided in order to give context to the Group's future financial performance and future prospects of the Group's business and operations, and may not be appropriate for other purposes.

Financial review

Revenue

The increase in total revenue for the six months ended 30 June 2021 in comparison to the same period in the prior year relates to organic growth[6] in the UK and Asia markets of the Group's online gaming segment.

Costs and expenses

Distribution costs

Selling and marketing expenses consist of payments made to affiliates and general marketing expenses related to each brand. Licensing fees consist of fees paid to game suppliers. Gaming taxes largely consist of point of consumption taxes payable in regulated jurisdictions that the Group operates in. Processing fees consist of costs associated with using payment providers and include payment service provider transaction and handling costs as well as deposit and withdrawal fees. With the exception of selling and marketing expenses, distribution costs tend to be variable in relation to revenue.

The increase in distribution costs for the six months ended 30 June 2021 compared to the same period in 2020 is mainly due to increased revenue and marketing spend in the online gaming segment.

Administrative costs

Compensation and benefits costs consist of salaries, wages, bonuses, directors' fees, benefits, long-term incentive plan expense and share-based compensation expense. The increase in these expenses for the six months ended 30 June 2021 compared to the same period in 2020 is primarily due to additional staff hired as the business continues to grow.

Professional fees consist mainly of legal, accounting and audit fees. The increase in professional fees for the six months ended 30 June 2021 compared to the same period in 2020 can be attributed to services obtained in relation to some of the Group's operational and corporate initiatives.

General and administrative expenses consist of items such as travel and accommodation, insurance, listing authority fees, technology and development costs, charitable donations and other office overhead charges. The decrease in these costs for the six months ended 30 June 2021 compared to the same period in 2020 relates to a one-time write-off of accounts receivable recorded in the prior period and lower office overhead charges, partially offset by higher technology and development costs and insurance.

Amortisation and depreciation expenses consist of amortisation of the Group's intangible assets and depreciation of the Group's tangible and right-of-use assets over their useful lives and lease terms, respectively. The increase in amortisation and depreciation in the six months ended 30 June 2021 is primarily due to a change in rates used to amortise purchase price intangibles bought as part of the Gamesys Acquisition to reflect expected player attrition.

Impairment of financial assets

Impairment of financial assets relates to net increases in provisions on certain high-risk balances in transit from, and rolling reserves held with payment service providers, as discussed in note 16 of the Annual Financial Statements.

Transaction related costs

Transaction related costs consist of legal, professional, due diligence and other direct costs/fees associated with transactions and acquisitions or disposals contemplated or completed by the Group. The increase in transaction related costs in the six months ended 30 June 2021 compared to the same period in 2020 relates to the Bally's Combination.

Net income

The Group's net income during the six months ended 30 June 2021 was 40% lower than in the same period in 2020. The decrease can be primarily attributed to the fact that the UK corporation tax rate change from 19% to 25% has been substantively enacted in the period ended 30 June 2021, resulting in recognition of an additional deferred tax provision. The tax rate change will apply from April 2023. This was partially offset by lower interest expense incurred in the current period due to pay down of long-term debt and higher foreign exchange gains. The remainder of the movement in the Group's net income compared to the prior period is attributable to gaming revenue as well as costs and expenses discussed above.

Business unit results

Online gaming

Unallocated corporate costs - adjusted EBITDA1

Online revenue by geography

Revenue for the online gaming segment for the six months ended 30 June 2021 was 17% higher than in the same period in 2020. UK revenues increased by 20% for the six months ended 30 June 2021 compared to the same period in 2020 despite the continued impact of enhanced responsible gambling measures. Asia continued to perform strongly, growing revenue by 29% for the six months ended 30 June 2021 compared to the same period in 2020. Europe revenues declined by 29% for the six months ended 30 June 2021 compared to the same period in 2020, largely due to the impact of regulatory measures in Spain, Sweden and Germany, as well as exit from certain peripheral markets in the current period. ROW was mostly flat for the six months ended 30 June 2021 compared to the same period in 2020 as growth in North America was offset by contraction in smaller markets.

Distribution costs for the online gaming segment increased 23% for the six months ended 30 June 2021 compared to the same period in 2020 as a result of higher marketing spend as well as higher licensing costs, gaming taxes and processing fees, all driven by higher revenues achieved.

The increase in administrative costs for the online gaming segment for the six months ended 30 June 2021 compared to the same period in 2020 was mainly driven by increases in personnel costs as the Group continues to grow, partially offset by a decrease in administrative overhead costs.

Financial position

The £25.1 million decrease in non-current assets since 31 December 2020 largely relates to amortisation of the Group's intangible assets.

The £2.6 million decrease in current assets (excluding a cash increase of £41.1 million) since 31 December 2020 largely relates to a £3.3 million decrease in taxes receivable due to a refund received in the current period.

The £37.5 million increase in current liabilities mostly relates to higher accounts payable and accrued liabilities due to an increase in the Group's direct costs, higher short-term payables arising from costs incurred for the Bally's Combination and a £9.6 million increase in provision for taxes related to strong results achieved by the Group.

The £9.2 million decrease in non-current liabilities primarily relates to a £13.9 million decrease in the Group's long-term debt largely due to foreign exchange fluctuations on the EUR Term Facility, partially offset by a £8.0 million increase in deferred tax liabilities driven by the fact that the UK corporation tax rate change from 19% to 25% has been substantively enacted as at 30 June 2021, resulting in recognition of an additional liability.

Cash flow by activity

Cash provided by operating activities during the six months ended 30 June 2021 relates to cash generated from the operational activities of the online gaming segment, less corporate expenses. For the six months ended 30 June 2021, the operating cash flow increased compared to the same period in 2020 primarily due to strong results achieved by the Group.

Decrease in cash used in financing activities during the six months ended 30 June 2021 compared to the same period in 2020 primarily relates to the fact that the Group did not pay down any of its long-term debt in the current period (six months ended 30 June 2020 - £40.0 million) and lower interest payments associated with the reduced long-term debt balance, partially offset by a £30.7 million payment of shareholder dividends in the current period (six months ended 30 June 2020 - £nil).

Increase in cash used in investing activities during the six months ended 30 June 2021 compared to the same period in 2020 primarily relates to higher spend on tangible and intangible assets as the Group continues to grow.

Key performance indicators - pro-forma[7]

Average Active Players and Average Active Players per Month are a key performance indicator used by management to assess real money player acquisition and real money player retention efforts of each of the Group's brands. The Group defines average active players ('Average Active Players') as being real money players who have placed at least one bet in a given month. 'Average Active Players per Month' is the Average Active Players per month, averaged over a twelve-month period. While this measure is not recognised under IFRS, management believes that it is a meaningful indicator of the Group's ability to acquire and retain players.

Total Real Money Revenue and Average Real Money Revenue per Month are key performance indicators used by management to assess revenue earned from real money gaming operations of the business. The Group defines total real money revenue ('Total Real Money Revenue') as revenue less revenue earned from B2B operations. The Group defines average real money revenue per month ('Average Real Money Revenue per Month') as Real Money Revenue per month, averaged over a twelve-month period. While these measures are not recognised under IFRS, management believes that they are meaningful indicators of the Group's real money operational results.

Monthly Real Money Revenue per Average Active Player is a key performance indicator used by management to assess the Group's ability to generate Real Money Revenue on a per player basis. The Group defines monthly real money revenue per average active player ('Monthly Real Money Revenue per Average Active Player') as being Average Real Money Revenue per Month divided by Average Active Players per Month. While this measure is not recognised under IFRS, management believes that it is a meaningful indicator of the Group's ability to generate Total Real Money Revenue.

Monthly Real Money Revenue per Average Active Player increased by 5% year-over-year, maintaining a level consistent with the Group's overall player acquisition and retention strategy.

Principal risks and uncertainties

Details of the Group's principal risks were set out on pages 60 to 66 of the Annual Report for the year ended 31 December 2020 (the '2020 Annual Report'). As at 30 June 2021, the directors have reviewed the Group's risk profile in the context of current market conditions and the outlook for the remaining six months of the financial year. In addition, they have reconsidered previous statements made on risk appetite, risk governance and internal controls and do not consider there to be any significant changes since the 2020 Annual Report.

However, while COVID-19 has not had a dramatic impact on the company's ability to operate thus far, it still poses a significant threat to the global economy and the discretionary spending of our customer base, particularly in the event of recurring lockdowns and/or a prolonged economic recession. To this point, we have been proactive in managing the impact of the pandemic on our business, and our main priority has always been and continues to be the safety and wellbeing of our customers and employees. This resulted in us taking prompt action to introduce new responsible gambling policies to protect customers during lockdown, as well as encouraging our employees to work from home since the crisis began in line with government guidance, and implementing policies and initiatives to support and help improve their home working environment. We expect to manage the crisis in a similarly appropriate way in the months ahead, responding to changes in consumer behaviour and other challenges that may be presented by COVID-19.

Directors' responsibility statement in respect of the half yearly financial report

For the six months ended 30 June 2021, we confirm to the best of our knowledge that:

a) The condensed interim set of financial statements has been prepared in accordance with IAS 34 - Interim Financial Reporting as adopted by the United Kingdom;

b) The Interim Report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c) The Interim Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

A list of the current Directors is maintained on the Gamesys Group plc website: https://www.gamesysgroup.com/.

Signed on behalf of the Board of Directors

Lee Fenton

Chief Executive Officer

10 August 2021 

INDEPENDENT REVIEW REPORT TO GAMESYS GROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 which comprises the Interim Condensed Consolidated Statements of Comprehensive Income, the Interim Condensed Consolidated Balance Sheets, the Interim Condensed Consolidated Statements of Changes in Equity, the Interim Condensed Consolidated Statements of Cash Flows and the related notes.

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

Directors' responsibilities

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

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

Our responsibility

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

Scope of review

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

Conclusion

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

Use of our report

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

BDO LLP

Chartered Accountants

London

10 August 2021

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

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

See accompanying notes

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

See accompanying notes 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes 

SUPPLEMENTARY NOTES FOR THE SIX MONTHS ENDED 30 JUNE 2021

1. Corporate information

Gamesys Group plc is an online gaming holding company that was incorporated under the Companies Act 2006 (England and Wales) on 29 July 2016. Gamesys Group plc's registered office is located at 10 Piccadilly, London, United Kingdom. Unless the context requires otherwise, use of 'Group' in these accompanying notes means Gamesys Group plc and its subsidiaries, as applicable.

The Group currently offers bingo, casino and other games to its players using the Jackpotjoy, Megaways Casino, Botemania, Virgin Games, Heart Bingo, Virgin Casino, Monopoly Casino, Rainbow Riches Casino, Vera&John, InterCasino and VIP Casino brands. All brands operate off proprietary software owned by the Group.

On 24 March 2021, the boards of the Group and Bally's Corporation ('Bally's') announced a possible combination and on 13 April 2021, the Group announced agreement of definitive terms by which it will combine with Bally's (the 'Bally's Combination'). Pursuant to the Bally's Combination, Bally's and Premier Entertainment Sub, LLC (an indirect wholly-owned subsidiary of Bally's) would acquire the entire issued and to be issued ordinary share capital of the Group. Under the terms of the Bally's Combination, each shareholder of the Group will be entitled to receive 1,850p in cash for each ordinary share of the Group. Bally's will also make available a share alternative, pursuant to which Gamesys shareholders may elect to receive Bally's shares in lieu of part or all of the cash consideration to which they would otherwise be entitled under the terms of the Bally's Combination. Under the share alternative, for each ordinary share of the Group, shareholders will be entitled to 0.343 of Bally's shares.

On 30 June 2021, shareholders of the Group and Bally's voted in favour of the Bally's Combination.

These Unaudited Interim Condensed Consolidated Financial Statements were authorised for issue by the Board of Directors of Gamesys Group plc on 10 August 2021.

2. Basis of preparation

These Unaudited Interim Condensed Consolidated Financial Statements have been prepared by management on a going concern basis, are presented in compliance with UK-adopted International Accounting Standard 34 - Interim Financial Reporting and have been prepared on a basis consistent with the accounting policies and methods used and disclosed in Gamesys Group plc's consolidated financial statements for the year ended 31 December 2020 (the 'Annual Financial Statements'), except for the adoption of new and amended standards as described in note 3. Certain information and disclosures normally included in the Annual Financial Statements prepared in accordance with International Financial Reporting Standards ('IFRS') as issued by the International Accounting Standards Board ('IASB') have been omitted or condensed.

These Unaudited Interim Condensed Consolidated Financial Statements should be read in conjunction with the Annual Financial Statements. All defined terms used herein are consistent with those terms as defined in the Annual Financial Statements.

The comparative financial information for the year ended 31 December 2020 in these Unaudited Interim Condensed Consolidated Financial Statements does not constitute statutory accounts for that year. The auditors' report on the statutory accounts for the year ended 31 December 2020 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.

These Unaudited Interim Condensed Consolidated Financial Statements have been prepared under the historical cost convention, other than for the measurement at fair value of the Group's Interest Rate Swap, Currency Swap and certain loans receivable.

3. Significant accounting policies

For a description of the Group's significant accounting policies, significant accounting estimates and assumptions, and related information see notes 3 and 4 to the Annual Financial Statements. Other than what is described below, there have been no changes to the Group's significant accounting policies or significant accounting estimates and assumptions during the six months ended 30 June 2021.

Management has exercised judgement in applying the Group's accounting policies to the recognition of transaction related costs attributable to work performed during the six months ended 30 June 2021 in relation to the Bally's Combination and has recognised certain expenses in line with IAS 37 - Provisions, Contingent Liabilities and Contingent Assets. Judgement was exercised principally in assessing the probability of the transaction completing and the likelihood that certain costs will be incurred. As a result, certain liabilities have been recognised accordingly in these Unaudited Interim Condensed Consolidated Financial Statements

The Group has adopted amendments to the below standards in response to the interest rate benchmark reform - phase 2 (the 'IBOR Reform - Phase 2') issued in August 2020:

· IFRS 9 - Financial Instruments;

· IAS 39 - Financial Instruments: Recognition and Measurement;

· IFRS 7 - Financial Instruments: Disclosures; and

· IFRS 16 - Leases

In accordance with the transition provisions, the amendments have been adopted retrospectively to hedging relationships and financial instruments. These amendments did not have a material effect on the Group's current or comparative periods, consequently comparative amounts have not been restated, and there was no impact on the current period opening reserves amounts on adoption.

4. Segment information

The Group has a single operating segment, being online gaming. The online gaming segment consists of online bingo and casino operating results of the Jackpotjoy, Megaways Casino, Virgin Games, Heart Bingo, Botemania, Rainbow Riches Casino, Virgin Casino, Monopoly Casino, Vera&John, InterCasino and VIP Casino brands, as well as the Group's B2B operations.

The following tables present selected financial results for online gaming and the unallocated corporate costs.

During the six months ended 30 June 2021, revenue was earned from players situated in the following locations: United Kingdom - 60% (six months ended 30 June 2020 - 58%), Japan - 28% (six months ended 30 June 2020 - 25%), rest of Europe - 6% (six months ended 30 June 2020 - 10%), rest of world - 6% (six months ended 30 June 2020 - 7%).

During the six months ended 30 June 2021, the Group's B2B revenue comprised 4% (six months ended 30 June 2020 - 4%) of the Group's total revenues, with the remaining portion being revenues earned from Net Gaming Revenue operations.

Non-current assets by geographical location as at 30 June 2021 were as follows: Europe £99.8 million (31 December 2020 - £98.8 million), Americas £5.0 million (31 December 2020 - £6.1 million) and United Kingdom £849.7 million (31 December 2020 - £874.7 million). £25.2 million of the movement in non-current assets relates to the Group's online gaming segment, with the remainder relating to unallocated corporate costs.

5. Costs and expenses

6. Interest income/expense

7. Taxes and deferred taxes

The difference between the actual tax charge for the period and the standard rate of corporation tax in the United Kingdom applied to profits for the period as follows:

As at 30 June 2021, tax payable and receivable balances consist primarily of taxes related to the 2018, 2019, 2020 and 2021 fiscal years.

As at 30 June 2021, the Group has tax losses amounting to £9.5 million (as at 31 December 2020 - £4.5 million) for which no deferred tax asset has been recognised due to reduced certainty over the existence of future taxable profits in the affected subsidiaries.

Deferred tax assets relate to differences in timing of distribution of taxed profits through intercompany dividend declarations (£13.6 million) and other temporary differences (£0.6 million). Deferred tax liabilities relate exclusively to balances arising on business combinations.

8. Earnings per share

1Basic net income per share is calculated by dividing the net income by the weighted average number of shares outstanding during the period.

2Diluted net income per share is calculated by dividing the net income by the weighted average number of shares outstanding during the period and adjusted for the number of potentially dilutive share options, warrants and contingently issuable instruments.

9. Related party transactions

Key management is comprised of officers and members of management of the Group. Key management personnel compensation for services rendered is as follows:

10. Liabilities arising from financing activities

11. Tangible assets

12. Intangible assets and goodwill

1During the year ended 31 December 2020, the Group concluded that a number of its purchase price partnership agreements have either expired or have been terminated. As a result, the Group recognised a £4.1 million impairment for the unamortised portion of the relevant contracts.

13. Other long-term receivables

14. Cash, restricted cash and player deposits

1Player deposits - restricted cash consists of cash held by the Group in relation to amounts payable to players.

15. Trade and other receivables

The following table summarises the movement of the Group's expected credit loss provision on trade and other receivables:

The following table summarises the Group's expected credit loss on its trade and other receivables and other long-term receivables as at 30 June 2021:

The following table summarises the Group's expected credit loss on its trade and other receivables and other long-term receivables as at 31 December 2020:

16. Currency swap and interest rate swap

The Group considers there to be a clear economic relationship between the EUR Term Facility and the Currency Swap. Due to the consistency in key terms between the EUR Term Facility and the Currency Swap agreement, the Group has not experienced any notable hedge ineffectiveness.

As at 30 June 2021, the fair value of the Currency Swap was a £8.2 million payable (31 December 2020 - £5.0 million). The Group has included £6.5 million of this amount in current liabilities (31 December 2020 - £2.9 million), with the remaining balance included in other long-term payables, as discussed in note 22. For the six months ended 30 June 2021, the Group recognised a loss of £4.2 million in other comprehensive income (six months ended 30 June 2020 - gain of £4.4 million).

As at 30 June 2021, the Currency Swap references EURIBOR and has not yet transitioned to ESTR or an alternative interest rate benchmark. Phase 1 of the IBOR Reform has been applied to the hedging relationship in the context of IFRS 9, IAS 39 and IFRS 7.

The Group considers there to be a clear economic relationship between the GBP Term Facility and the Interest Rate Swap. Due to the consistency in key terms between the GBP Term Facility and the Interest Rate Swap agreement, the Group has not experienced any notable hedge ineffectiveness.

As at 30 June 2021, the fair value of the Interest Rate Swap was a £1.1 million payable (31 December 2020 - £1.8 million). The Group has included £0.7 million of this payable in current liabilities (31 December 2020 - £0.8 million), with the value of the remaining balance included in other long-term payables, as discussed in note 22. For the six months ended 30 June 2021, the Group recognised a gain of £0.3 million in other comprehensive income (six months ended 30 June 2020 - loss of £1.5 million).

As at 30 June 2021, the Interest Rate Swap references GBP LIBOR and has not yet transitioned to SONIA or an alternative interest rate benchmark. Phase 1 of the IBOR Reform has been applied to the hedging relationship in the context of IFRS 9, IAS 39 and IFRS 7.

17. Leases

The Group's leasing activity consists solely of leases of property. As at 30 June 2021, the carrying value of the right-of-use assets amounted to £20.8 million and the carrying value of lease liabilities amounted to £21.8 million, with £6.3 million (31 December 2020 - £6.1 million) of this balance shown in current liabilities and the remaining portion of £15.5 million (31 December 2020 - £16.6 million) reflected under non-current liabilities.

The lease liabilities balances were calculated using an incremental borrowing rate range of 2.0 - 5.0%.