Playtech Regulatory News (PTEC)

Playtech plc

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

Results for the six months ended 30 June 2023

Strong EBITDA growth in H1; FY23 on track to be slightly ahead of expectations

Playtech (LSE: PTEC), the leading platform, content and services provider in the online gambling industry, today announces its results for the six months to 30 June 2023.

Financial summary (continuing operations)1 

Summary

· Record H1 23 performance with H1 Adjusted EBITDA up 10% to €219.9 million.

· Continued strength seen across regulated B2B markets and Snaitech.

· Comprehensive partnership signed with Hard Rock Digital in Q1 23, establishing Playtech in key US states and with international expansion to follow.

· The Group is on course to deliver FY23 Adjusted EBITDA slightly ahead of current expectations.

Divisional highlights

B2B

· Strong performance from B2B, with H1 23 revenue up 7% to €334.5 million versus H1 22. B2B Adjusted EBITDA increased 5% to €81.3 million (H1 22: €77.2 million).

· The Americas was the standout region during the period, with revenue growth of 43% to €99.7 million. Caliente remains the key driver of this growth. Brazil continues to grow strongly as it moves towards regulating, and the early performance of Galera.bet is encouraging. 

· Significant progress made on executing the US strategy:

-  Landmark agreement signed with Hard Rock Digital in early 2023, including an $85 million (€79.8 million) investment in exchange for a small minority equity ownership stake.

-  Ohio, Maryland and West Virginia licences granted so far in 2023, and Playtech is now licensed in 10 states with further applications progressing.

-  Launched with several operators across multiple states, including 888, Rush Street Interactive and PokerStars, and expanded our relationships with BetMGM and BetParx as they launch in further states.

· Announced an extension of the partnership with NorthStar, alongside a strategic investment to ensure Playtech is well-positioned to benefit from the regulation of the Canadian market.

· Europe ex-UK revenue grew 5% to €96.6 million, with growth seen across multiple countries including Poland and Spain.

· Live Casino continued to see healthy revenue growth; the Company remains focused on regulated markets which saw revenue growth of 24% in H1 23 versus H1 22.

· SaaS revenues grew more than 50% in H1 23 versus H1 22, illustrating our excellent progress towards achieving the medium-term SaaS revenue target of €60 million - €80 million.

· Launched BetBuddy, part of Playtech's safer gambling technology, with five new brands in H1 23, bringing the total to 15 brands in eight jurisdictions.

B2C

· Solid B2C performance (including Snaitech, HAPPYBET and Sun Bingo & Other B2C) with revenue up 9% to €532.1 million (H1 22: €487.3 million). Adjusted EBITDA up 14% to €138.6 million (H1 22: €121.9 million).

· Snaitech Adjusted EBITDA increased 12% to €141.9 million (H1 22: €127.0 million) driven by growth across both retail and online, as well as pent-up demand following the World Cup.

-  Retail Adjusted EBITDA up 13% to €73.2 million (H1 22: €64.7 million)

-  Online Adjusted EBITDA up 10% to €68.7 million (H1 22: €62.3 million)

· The Snai brand maintained its number one market share position (retail and online combined measured by GGR) across Italian sports betting brands in H1 2023.

· HAPPYBET, now integrated into Snaitech's operations, reported Adjusted EBITDA of €-6.1 million (H1 22: €-5.2 million), although the current period includes a €2 million historical litigation settlement expense. Strategic and operational measures have been taken across both retail and online, with leading KPIs showing improvement.

· Sun Bingo and Other B2C saw 8% revenue growth to €34.1 million (H1 22: €31.7 million) while Adjusted EBITDA grew to €2.8 million, up from €0.1 million in H1 22.

Financial and corporate activity

· Reported post-tax profit of €3.1 million in H1 23, was down from €71.4 million in H1 22, due to an overall reduction in the fair value of the derivative financial assets recognised in the income statement, and the derecognition of brought forward deferred tax assets.

· Strong cash generation in H1 23, with adjusted operating cashflow4 of €232.8 million.

· Group net debt as at 30 June 2023 was €248.2 million, resulting in leverage of 0.6x.

· Robust balance sheet following the issuance of a €300 million bond due 2028. In July 2023, part of the proceeds were used to redeem all of the outstanding €200 million notes due 2023, and also to repay outstanding debt under Playtech's revolving credit facility, such that this facility is now fully undrawn.

Corporate governance

As announced on 17 May 2023, John Krumins advised the Board that he wished to step down from the Board. At the request of the Chairman, John agreed to remain as a Non-executive Director of the Company and Chairman of the Audit Committee until after the publication of the Group's interim results, ensuring a smooth transition to his successor as Chairman of the Audit Committee. Playtech now confirms John Krumins will be stepping down on 29 September 2023.

Playtech has also made the following changes to the Committees of the Board, effective from 29 September 2023:

· Ian Penrose will assume the Chair of the Audit Committee and is appointed to the Nominations Committee, while stepping down from the ESG Committee.

· Samy Reeb is appointed to the Audit and ESG Committees along with assuming the Chair of the Risk Committee, replacing Anna Massion.

· Anna Massion will become the Chair of the Remuneration Committee, replacing Ian Penrose and is also appointed to the ESG Committee.

Current trading and outlook

· Following a strong H1 performance, H2 has started well with normal seasonality.

· On track to deliver FY 2023 Adjusted EBITDA slightly ahead of current expectations.

· B2B medium term Adjusted EBITDA target of €200 - 250 million and B2C medium-term Adjusted EBITDA target of €300 - 350 million maintained.

· Strength of balance sheet further improved by strong cash generation and bond issuance, giving flexibility to pursue both organic and inorganic growth opportunities.

· The Board remains confident in Playtech's ability to execute on growth opportunities across both B2B and B2C divisions.

Mor Weizer, CEO, said:

"We delivered our highest ever Adjusted EBITDA in the first half of 2023, demonstrating the benefits of the continued strategic and operational progress made in recent years. I would like to thank all our colleagues for their hard work and support in making this possible.

"Our success in the period was driven by our diversified portfolio, spanning B2B and B2C, in some of the fastest-growing regulated markets around the world. Having laid the groundwork in the US, we are growing our offering across multiple states and are confident in our future prospects following the landmark agreement with Hard Rock Digital. Additionally, we further cemented our leadership in LatAm with Caliente in Mexico and Galera.bet in Brazil. Snaitech in Italy enjoyed another strong period, with the management team continuing to leverage their retail presence to grow the online business.

"We have started the second half of the year well and are on track to deliver FY23 Adjusted EBITDA slightly ahead of current expectations. With our proven strategy, robust balance sheet and our operational expertise, we are confident in our ability to capitalise on the many growth opportunities we have ahead." 

- Ends -

For further information contact:

1Totals in tables throughout this statement may not exactly equal the components of the total due to rounding.

2Adjusted numbers relate to certain non-cash and one-off items, as well as material reorganisation and acquisition-related costs. The Board of Directors believes that the adjusted results more closely represent the consistent trading performance of the business. A full reconciliation between the actual and adjusted results is provided in Note 10.

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

4Adjusted operating cash flow refers to net cash provided by operating activities from continuing operations after adjusting for changes in jackpot balances, client funds, professional fees and the ADM security deposit in Italy.

5H1 2022 numbers have been restated to reflect Snaitech's online bank charges, which are now being recognised within EBITDA. Refer to Note 4B for more details.

Conference call and presentation

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

https://www.investis-live.com/playtech/64e31fc09b8a600d00eba947/melgkr

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

United Kingdom (Local): +44 20 4587 0498

United Kingdom (Toll-Free): +44 800 358 1035

Global Dial-In Numbers

Access Code: 303420

The presentation slides will be available today from 8.30 am at:

http://www.investors.playtech.com/results-centre/presentations.aspx

Forward looking statements

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

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

About Playtech

Founded in 1999 and premium listed on the Main Market of the London Stock Exchange, Playtech is a technology leader in the gambling industry with over 7,300 employees across 19 countries.

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

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

Chief Executive Officer's Review

Overview

Playtech has continued to make good progress on its strategic priorities in the first half of 2023. We delivered record Adjusted EBITDA in the period, driven by strong performances from both the B2B and B2C businesses. The growth achieved in the first half of the financial year gives the Board further confidence in achieving Playtech's medium-term Adjusted EBITDA targets for B2B (€200 - €250 million) and B2C (€300 - €350 million), while taking further strides to capture the exciting market opportunities ahead.

The strategic focus of Playtech's B2B business remains on opportunities in regulated or soon to be regulated markets. There is a particular emphasis on high-growth markets including the US and Canada, Latin America and certain European markets. These regions helped the B2B segment to deliver revenue growth of 7% (+5% on a constant currency basis) to €334.5 million (H1 2022: €312.0 million). B2B Adjusted EBITDA increased 5% to €81.3 million (H1 2022: €77.2 million). This B2B performance absorbed marketing activities in the period to further promote Playtech's products, and thus, excluding the impact of these, growth would have been higher.

Accelerating the Group's presence in the US remains a key strategic priority for Playtech. In 2022, we laid the groundwork by signing deals with multiple operators. 2023 is a year where we are focused on execution and rolling out those deals to multiple states. In the first half of 2023, we launched with several operators across multiple states, including 888, PokerStars and Rush Street Interactive, while also expanding our presence with BetParx and BetMGM.

In early 2023, we signed a landmark agreement with Hard Rock Digital to provide Casino and Live, amongst other content, in North America. Playtech has also invested $85 million (€79.8 million) in exchange for a small minority stake in Hard Rock Digital.

In Latin America, Playtech has continued to see excellent growth from Caliente, which further cemented its leadership position in Mexico. Our other strategic agreements in Latin America also performed well. Sports betting has now been regulated in Brazil, subject to Congress approval, and Playtech is well positioned to capitalise on the opportunity given its exciting strategic agreement with Galera.bet.

In Europe ex-UK, B2B revenue was driven by strong performances across several countries, including most notably Poland and Spain.

Playtech remains committed to diversifying its B2B division by driving growth through our SaaS business model. At the FY 2022 results, we announced a medium-term SaaS revenue target of €60 million - €80 million, and we are pleased to report that we are making excellent progress towards achieving this target, with the SaaS business delivering revenue of €23 million in H1 23, up more than 50% versus H1 22. We continued to see strong customer acquisition with more than 50 further brands added, bringing the total to over 400.

B2C revenues rose 9% to €532.1 million (H1 2022: €487.3 million) and Adjusted EBITDA increased 14% to €138.6 million (H1 2022: €121.9 million), as Snaitech delivered another excellent performance. Both retail betting, which benefitted from pent-up demand after the football World Cup (given Italy was absent from the tournament), and the online business performed well. The latter benefitted from strong brand loyalty, continuous improvements to apps and technology, and a broadening of its content offering.

None of this would have been possible without our colleagues around the world, and I would like to thank them for their hard work and commitment to deliver first-class customer service to all of our clients. They are our greatest asset and are the key force behind the results published today.

B2B

Core B2B

Regulated markets

Playtech's B2B business remains focused on opportunities in regulated and soon to be regulated markets. The majority of these are high-growth markets such as the US, Latin America and certain European countries.

Regulated markets saw revenue growth of 15% (11% on a constant currency basis) compared to H1 2022, with strong contributions from Caliente in Mexico and other regulated markets such as Poland, Spain, Italy and Canada.

The Americas

The Americas continues to grow rapidly, with H1 2023 revenue up 43% (29% on a constant currency basis) compared to H1 2022. This was largely driven by another strong performance from Caliente as well as growing contributions from other customers, including NorthStar in Canada and Wplay in Colombia.

US

Accelerating the Group's presence in the US remains a key strategic priority. While the Group has taken significant steps to capitalise on the favourable regulatory environment in the US, there remains multiple opportunities ahead. Having signed deals with multiple operators in 2022, the first half of 2023 has seen Playtech shift its focus to executing on those agreements.

In the first six months of the year, we launched with several operators across multiple states. 888 with its SI Casino brand and PokerStars were launched in Michigan for both Casino and Live. Rush Street Interactive with its Betrivers brand went live in Michigan in addition to its Sugarhouse brand in New Jersey, both for Casino. Furthermore, we expanded our partnership with BetMGM with the launch of Casino in Michigan, while successfully rolling out Sports SSBTs for the first time in the state of Ohio.

We continue to expand our presence with BetParx. We successfully launched Live in New Jersey, featuring 'Adventures Beyond Wonderland', while also launching the IMS in Ohio and Maryland. This gives Playtech a presence with BetParx in five states: Michigan, Pennsylvania, New Jersey, Ohio and Maryland. Further product launches in additional states with BetParx are expected going forward.

As announced in March 2023, Playtech signed a landmark strategic agreement with Hard Rock Digital (HRD), the interactive gaming and sports betting division of Hard Rock International. As part of the partnership, in the US and Canada, HRD's customers will enjoy a variety of Playtech's iGaming content offering including slots, RNG and live dealer table games through HRD's existing proprietary platform and technology offering. These products will also be supplied outside of North America in addition to the IMS and services including marketing and operations. Playtech has also invested $85 million (€79.8 million) in exchange for a small minority equity ownership stake in HRD.

Aside from launching with multiple operators in several states, the Company is also rolling out its suite of innovative content. Adventures Beyond Wonderland for Live Casino was launched in the New Jersey facility in July 2023, delivering the first true game show experience to the American market. Mega Fire Blaze Roulette, a Playtech Live Casino hit in multiple countries, has opened in Michigan, while the Buffalo Blitz Live slot game has also launched in the US in Michigan. In addition, we will be launching a new Casino slot game in the US called, 'Gold Rush: Cash Collect', based on the popular Discovery Channel reality TV show. Gold Rush: Cash Collect has already launched in multiple European jurisdictions, proving successful.

Playtech remains committed to further expanding its physical footprint in the US and other high-growth markets. In addition to the existing Live studios in New Jersey and Michigan, construction on another Live facility in Pennsylvania is well underway and is expected to open before the end of 2023. Behind the Company's growing physical presence are an increasing number of employees focused on sales, operations and back-office functions, taking total headcount in the US to more than 150 at the end of H1 2023.

The regulatory landscape in the US is ever progressing. Since the repeal of PASPA in 2018, numerous states have approved legislation to legalise sports betting. Many of these markets have already launched in both online and retail channels, with others expected to launch soon. 

Online casino, which was not subject to PASPA, is allowed at the discretion of individual states. No new states have authorised Online casino in 2023 thus far, although there are several states where iGaming legislation is being considered.

In 2023, Playtech received licences for Ohio, Maryland and West Virginia, taking the total number of US states where Playtech has a licence to 10.

Canada

In early 2023, Playtech announced an expansion of its partnership with NorthStar. The Company also made an investment, initially by way of a convertible debenture in December 2022, which subsequently was converted into equity in H1 23. The agreement also expands the scope of Playtech's offering to NorthStar to include operational and marketing services, in addition to the IMS platform, Casino, Live, Poker and Bingo solutions already launched. NorthStar has since acquired Slapshot Media Inc. to open up the Canadian market to the NorthStar brand beyond Ontario, and is in the process of raising additional capital from Playtech and other investors to accelerate the growth of NorthStar's footprint across Canada. Aside from NorthStar, Playtech has further exposure to the Canadian market with more than 10 other operators and launched with Fan Duel for Casino and Live in Ontario.

Latin America

In Latin America, Playtech continues to see excellent growth from Caliente in Mexico. Revenue from Wplay was impacted by certain activities in the half. Underlying revenues from Wplay continued its strong performance, and Wplay remains well-positioned to grow its presence there further in the years ahead.

In 2022, Playtech opened a new Live Casino facility in Peru as it continues to extend its presence across the region. Several customers, such as Wplay and Betano, have launched tables in the new Live facility with positive results so far. Given the strong demand, we are building a second studio in Lima which is expected to open in the coming months. This will help ensure we have the capacity to take advantage of further favourable regulation and strong growth in the region, such as in Brazil in the years to come.

Sports betting has now been regulated in Brazil with the President signing a Provisional Measure, which is subject to the approval of Congress. Brazil is anticipated to be a significant, high-growth market given the large population and love of sports. Playtech is well positioned to benefit given its exciting strategic agreement with Galera.bet, which migrated its Sports product onto Playtech's platform at the end of H1 23. In addition to Galera.bet, Playtech also has exposure to Brazil via its other B2B partners in the country.

Europe

In Europe ex-UK, B2B revenue growth of 5% (5% on a constant currency basis) was driven by strong performances in several countries including Poland and Spain. This was partly offset by lower revenue from the Netherlands due to increased competition and a strict regulatory environment.

There were several launches in Spain in the half, including DAZNBET going live with Casino and Live, KirolBet with Live, and both Luckia and Platin Casino with Casino. Playtech saw several launches with existing customers in expanded territories, such as Leo Vegas in Italy launching Casino and Live products and Unibet launching in Romania with Casino. This demonstrates the versatility and scalability of Playtech's business model and the trend to grow customer relationships over time.

Following another competitive public tender in 2023, Playtech's contract with Polish state operator, Totalizator, for the IMS platform was extended for multiple years, illustrating the strength of Playtech's offering and our successful strategy of partnering with leading brands and institutions in newly regulated online markets.

Elsewhere in Europe, the Company continues to expand its Live Casino infrastructure with extensions to facilities in Latvia, Romania, the Netherlands and the UK ongoing, illustrating the growing demand across the segment.

France saw positive regulatory developments in the first half. In May 2023, the French government introduced a bill that set out proposals to regulate the online casino market. A key part of the bill is for a five-year moratorium, whereby online casino would be regulated until January 2030, but only for existing land-based casino licensees. Following this, additional players could enter the market. At present, in the online segment, only poker, sports betting and horse race betting are regulated through approved operators. While it is still early days, Playtech is well positioned should France regulate the online casino segment, with multiple B2B customers. Overall B2B revenue from France grew healthily in the first half of the year.

UK

UK revenues saw declines of 2% (2% growth on a constant currency basis) compared to H1 2022, where the regulatory climate continues to have an impact.

In December 2020, the UK Government announced a call for evidence to review the existing gambling laws in Great Britain. Following the initial call for evidence, which closed on 31 March 2021, the Government assessed the evidence presented, alongside other data, and set out its conclusions and proposals for reform in a White Paper, published in April 2023. 

At this point in time, there is still some uncertainty around the impact of the White Paper on the industry. The proposals have not resulted in changes to legislation or regulation just yet, and are subject to consultation with various stakeholders, the timing of which is unclear. With affordability checks the area where any impact is most uncertain, the White Paper's message that it recommends these checks be frictionless is positive. However, until the specifics of any measures that will be implemented and the precise mechanics required to adhere to them are known, it is difficult to assess the overall impact. In response to the UK Government review, several operators have been taking pre-emptive measures in an attempt to show regulators that the industry is able to self-regulate. So while part of the impact of the White Paper has already been felt across the industry in the UK, the full extent of the impact is hard to quantify.

As one of the largest regulated markets in the world, the UK remains an important market for Playtech and its customers. Playtech is already working with customers that took pre-emptive measures in advance of the publication of the White Paper and is committed to supporting its remaining clients as the proposals come into force. Playtech is uniquely advantaged given its market-leading technology and data, which put safety and responsible gambling at the centre of everything. The Company remains heavily involved in discussions around safer game design and will continue to be following this next wave of regulation. This should further cement Playtech's reputation as the go-to platform for regulated markets.

Unregulated (excl. Asia)

The Group's strategy to focus on both regulated and regulating markets includes unregulated markets which are likely to regulate in the future. Revenue from these unregulated markets (excluding Asia) was down 13% (-14% on a constant currency basis) versus H1 2022, with underlying growth in Brazil more than offset by a decline in South Africa and Canada. In Canada, Ontario transitioned to being regulated, and as a result, some revenue has shifted to regulated operators while other operators have reduced their exposure to the Canadian market. As regulation progresses across Canada, it will continue to add to the size of the North America market opportunity.

In line with the Company's strategy to target newly regulating markets through strategic agreements, Playtech announced at the start of 2023 that it had reached an agreement to expand its offering to NorthStar in Canada. Playtech now provides strategic advice, most notably in online operations, managed services and market expansion in addition to the IMS platform, Casino, Live Casino, Poker and Bingo technology it already supplied as part of the software and services agreement agreed in December 2021. This agreement also extended the existing arrangement with NorthStar for 10 more years, and gives Playtech the right to expand its existing arrangement beyond Ontario and across the entire Canadian market.

The Company is also excited about the potential of the South African market as it takes steps towards regulating. At present, it is a nascent but fast-growing market, which permits sports betting and Live Casino. Towards the end of 2022, Playtech launched Casino and Live products with TsogoSun. 

Unregulated Asia

Unregulated Asia saw revenue decline 14% (-10% on a constant currency basis) compared to H1 2022 due to continued pressures in the region.

B2B - driving growth through innovation

SaaS

Playtech is committed to diversifying its B2B division by driving growth through our SaaS business model, which targets the long tail of providers that don't have access to our IMS platform. At the FY 2022 results, we announced a medium-term SaaS revenue target of €60 million - €80 million, and we are pleased to report that we are making good progress towards achieving this target, with the SaaS business seeing revenue growth of more than 50% in H1 2023 versus H1 2022.

While we continue to focus on increasing our wallet share with existing brands on our SaaS platform, we have also made progress in attracting new customers in both regulated and regulating markets to the SaaS offering. Playtech launched over 50 brands in the period, with notable progress in the US as Rush Street Interactive launched in Michigan and New Jersey. We now have more than 400 brands live since the launch of our SaaS model in 2019.

As the SaaS model provides a low friction method of exposing operators to Playtech's content, we have the ability to cross and upsell other Playtech products over time. Meanwhile, a broad range of customers from multiple countries across different product sets means our revenue base is more diversified, ensuring our B2B revenues are more resilient to any changes in our operating environment.

Product developments

As the online gaming world expands, there is ever increasing demand to deliver new, engaging and immersive entertainment experiences for consumers. In August 2023, Playtech announced the launch of Jumanji The Bonus Level, a new game within Live that combines cutting-edge technology with the cinematic qualities of the famous movie. Following a complex development process, Jumanji The Bonus Level is the first-ever Live game inspired by a Hollywood blockbuster, marking a key milestone in the gaming industry. This game is housed in a studio designed to immerse players in the world of Jumanji. The studio's attention to detail ensures that the game replicates the authenticity of the original movie, delivering a 24/7 theme park-like experience.

In July 2023, Playtech also announced the launch of Big Bad Wolf Live, an innovative experience that combines a slot game with elements of a Live experience, released from Quickspin Live, the RNG arm of our Live division. The game, which stands apart due to its artwork and unique features, sets a new industry standard for Live Casino gaming.

Playtech continues to invest in branded IP. In the half, the Company signed the exclusive US rights to Family Feud, one of US television's longest-running and highest rated gameshows, and expects to launch a Game Show next year.

Finally, Playtech's Live product has been recognised as a leading solution in the industry, winning the EGR Live supplier of the year for 2023, acknowledging the achievements of its extremely talented team.

B2C

Playtech's B2C business includes Snaitech, HAPPYBET, and Sun Bingo and Other B2C operations. Overall B2C revenues grew 9% (9% on a constant currency basis) to €532.1 million (H1 22: €487.3 million). Adjusted EBITDA also grew 14%, rising to €138.6 million (H1 22: €121.9 million).

Snaitech

Snaitech revenue saw good growth in H1 2023, up 10% compared to the same period in the prior year, while Adjusted EBITDA grew 12% versus H1 2022. This strong performance was driven by both the retail segment which saw revenue and Adjusted EBITDA growth of 9% and 13% versus H1 22, respectively, and the online business which saw revenue and Adjusted EBITDA growth of 12% and 10% versus H1 22, respectively.

Within the retail segment, retail betting sales were up 24% versus H1 22 due to pent-up demand after the football World Cup (given Italy was absent from the tournament). Gaming Machines revenue was up 3% versus H1 22 as this business normalises post-pandemic, with the growth being driven mainly by the video lottery terminal business. At the Adjusted EBITDA level, retail margins expanded 80 bps versus H1 22, driven by operating leverage on strong revenue growth.

The online business saw strong growth, with both sports betting and casino performing well. The under-penetration of this segment continues to be a structural tailwind for the business, with Snaitech well-placed to benefit given the strength of the brand, the continuous improvements to apps and technology, and a broadening of its content offering.  Adjusted EBITDA margins remained high at 52% in H1 2023 versus 53% in H1 2022.

Following the regulatory approval to move the racetrack to the San Siro racecourse, Snaitech has begun the formal sales process of La Maura Racetrack in Italy, first disclosed at the FY2021 results. €1 million was received on signing in July 2021, with the remaining €19 million now expected to be received in H1 2025.

In March 2023, Snaitech acquired Giove Group for a total consideration of €6.0 million. Giove Group is a well-established betting operator in the Puglia region (southern Italy), and holds licences for both retail betting and online, directly managing 18 betting shops.

Snai maintained its number one market share position (retail and online combined measured by GGR) across Italian sports betting brands in H1 2023, cementing its reputation for consistent operational and brand strength.

HAPPYBET

HAPPYBET revenues were down 4% in H1 2023 compared to H1 2022, driven by a rationalisation of retail sites in Germany, while Adjusted EBITDA losses expanded to €6.1 million in H1 2023, versus a loss of €5.2 million in H1 2022. Excluding a €2 million expense related to an historical litigation settlement, Adjusted EBITDA losses narrowed to €4.1 million in H1 2023.

Since the Snaitech management have taken over the operations of HAPPYBET, they have been implementing a plan to improve the business's performance in retail and optimise the online segment.

A process is currently underway to modify the retail footprint in Germany, improving the quality of their locations. Less profitable retail stores have been rationalised, while there are plans to open several retail shops in more attractive areas in 2024, with local licences currently being applied for. The closure of retail sites in Germany, coupled with new retail shops yet to be opened is the primary cause of the decline in revenues in HAPPYBET during the half.

In Austria, revenue increased in H1 2023, partly offsetting the decline in Germany, due to the expansion in the number of retail sites in the most profitable federal states of Tyrol and Vienna. Adjusted EBITDA margins improved as some directly managed shops transitioned to a franchise model.

The strategy of optimising HAPPYBET's online business has so far focused on two main areas: optimising the player bonus policy and implementing a new approach to risk and trading around the sportsbook. There are signs that the measures put in place are having a positive impact, with better payouts being seen in Q2 2023 versus Q1 2023, lower bonus to GGR ratios in H1 23 v H1 22 and a positive trend in revenues, albeit from a low base.

Sun Bingo and Other B2C

Sun Bingo and Other B2C saw 8% revenue growth to €34.1 million (H1 2022: €31.7 million) while Adjusted EBITDA grew to €2.8 million up from €0.1 million in H1 2022. The primary reason for the improvement in performance was the increased marketing spend at the end of 2022 around the time of the football World Cup, resulting in higher revenue growth in H1 2023 at a high contribution margin.

Safer gambling and sustainability

As a business, the most impactful contribution that Playtech can make to the industry and in society is through the provision of technology to advance safer gambling and player protection. We are committed to supporting our licensees in this journey while growing our business sustainably and in a way that builds long term value for all our stakeholders. To meet this ambition we have set out a five-year strategy and roadmap that moves us towards fully integrating sustainability and responsible business into our culture, strategy and operations.

It is easy to forget that the war in Ukraine continues to rage on, causing untold devastation for countless people. Ukraine remains front and centre for all of us, not least given the number of employees we have there. I would like to say a huge thank you to our colleagues who have devoted significant amounts of time and resources to maintain contact with those on the ground in Ukraine and those who have been forced out of their homes.

We remain firmly committed to making progress on all areas relating to sustainability, including safer gambling, diversity and climate change. In the first half of the year, we have continued to take positive steps towards the targets that we set out under our sustainability framework. Highlights include:

Safer Gambling

· Launched BetBuddy, part of Playtech's safer gambling technology, with five new brands in H1 23, bringing the total to 15 brands in eight jurisdictions.

· Achieved GamCare B2B Safer Gambling Standard at Provisional Advanced Level 3, the highest award possible. 

· Published and presented two new research papers providing insights on data analytics for harm prevention and gambling product risk at the UNLV International Conference on Gambling & Risk Taking in May.

Climate Change

· Launched a new, global partnership with the environmental non-profit, Hubbub, to support employee engagement and action on climate change.

· Secured inclusion in the FT Europe Climate Leaders 2023 listing, published in April 2023.

Diversity and Inclusion

· Increased female representation amongst our senior leadership population with females representing 28% as of 30 June 2023 (FY 2022: 26%).

· Recognised for our progress on diversity by winning the Company of the Year award at the gambling industry's Women in Gaming Awards. 

Chief Financial Officer's review

Overview

Group performance

Overall, Playtech had a strong H1 2023 performance, with Adjusted EBITDA1 of €219.9 million (H1 2022: €199.1 million), an increase of 10% compared to H1 2022. Total reported revenue from continuing operations was €859.6 million (H1 2022: €792.3 million), representing an 8% increase compared to H1 2022.

The strong performance was driven by both the B2C and B2B divisions. In B2C, Snaitech had an excellent H1 2023 performance driven by growth across both online and retail divisions, with B2C Adjusted EBITDA of €138.6 million, an increase of 14% compared to H1 2022.

In B2B, the results were driven by strong growth in regulated markets, with B2B revenues growing by 7% from €312.0 million to €334.5 and Adjusted EBITDA increasing by 5% from €77.2 million in H1 2022 to €81.3 million. This B2B performance absorbed marketing activities in the period to promote the Playtech products, and thus, excluding the impact of these, B2B growth would have been higher. Notwithstanding this, the performance is in line with the Group's strategy of focusing on opportunities in regulated and soon to be regulated markets and is further analysed in this report.

In March 2023, the Group invested $85.0 million (€79.8 million) in Hard Rock Digital in exchange for a small minority interest in a combination of equity shares and warrants. This investment forms part of the Group's strategy to expand its presence in the US, in addition to providing growth opportunities globally. 

Reported and adjusted profit

Adjusted profit before tax from continuing operations grew by 14% to €139.3 million (H1 2022: €122.3 million), driven mainly by the rise in Adjusted EBITDA and decrease in financing costs, offset partly by the increase in amortisation and depreciation.

Reported profit before tax from continuing operations decreased to €79.6 million (H1 2022: €103.7 million) which in addition to the above also includes the decrease in the unrealised fair value changes of derivative financial assets. Total post-tax reported profit from continuing operations was €3.1 million (H1 2022: €71.4 million), with the movement in tax explained further in this report.

Balance sheet, liquidity and financing

The Group continues to maintain a strong balance sheet with Adjusted gross cash, which excludes the cash held on behalf of clients, progressive jackpots and security deposits, of €643.2 million as at 30 June 2023 (31 December 2022: €272.4 million). The increase is a result of the new €300.0 million bond issue which took place in June 2023 (see below), as well as the continued strong performance of the Group throughout the period. Net debt decreased to €248.2 million as at 30 June 2023 (31 December 2022: €275.2 million), while net debt/Adjusted EBITDA (last 12 months) improved slightly at 0.6x (31 December 2022: 0.7x).

Playtech has taken a proactive approach to managing its balance sheet so far this year. In June 2023, the Company acted quickly to take advantage of a window of relative market calm and secure favourable interest rates, issuing €300 million of senior secured notes due in 2028 at an interest rate of 5.875%. Part of the proceeds were used post-period end to redeem all of the outstanding €200.0 million 3.75% senior secured notes due in October 2023. The Company also used the proceeds to repay outstanding debt under its existing revolving credit facility in July 2023, which remains available and undrawn today.

Group summary (continuing operations)3

The Group's total reported EBITDA increased by 19% to €207.3 million (H1 2022: €173.9 million). The adjusted items between reported and Adjusted EBITDA are explained in Note 10 of the interim financial statements.

Divisional performance

B2B

B2B revenue

Overall, B2B revenues increased by 7% (5% on a constant currency basis), largely due to an increase in the regulated B2B business.

Core B2B revenues2 increased by 10%, driven by an increase in regulated markets in the Americas and Europe (excluding the UK) of 43% and 5% respectively (29% and 5% respectively on a constant currency basis), partly offset by declines in revenues from the UK and unregulated excluding Asia.

The increase in the Americas was primarily driven by Mexico, due to revenue growth from Caliente while in Europe (excluding the UK) growth was driven by several countries including Poland and Spain. The increase in Poland was driven by Playtech's partnership with Polish state operator, Totalizator, which is going from strength to strength, whereas in Spain there were several new launches during H1 2023. 

The small decline seen across the UK market was due to the continued impact of the uncertain regulatory climate, as well as the marketing activities to push promotion of Playtech products further. In unregulated markets excluding Asia, most of the decline is due to revenue shifting from this category to regulated, as areas such as Ontario in Canada move to a regulated environment.

The revenue from Asia declined by 14% and 10% on an actual and constant currency basis respectively, due to the continued pressures in the region.

B2B costs

Research and Development ("R&D") costs include, among others, employee-related costs, and proportional office expenses. Expensed R&D costs grew by 20% to €51.6 million (H1 2022: €42.9 million), driven by the increase in employee-related costs, due to inflationary rises. Capitalised development costs were 35% of total B2B R&D costs in H1 2023 (H1 2022: 38%).

General and Administrative costs include employee-related costs, proportion of office expenses, consulting and legal fees, and corporate costs such as audit and tax fees and listing expenses. These costs increased by 14% to €42.6 million (H1 2022: €37.4 million), mainly due to increases in consulting fees and other administration costs.

Sales and Marketing costs increased by 24% to €10.4 million (H1 2022: €8.4 million), mainly due to the full return of marketing and exhibition activities to pre-COVID-19 levels.

Operations include costs relating to infrastructure and other operational projects, IT and security and general day to day operational costs, including employee and office-apportioned costs and branded content fees. These costs increased by 2% to €148.6 million (H1 2022: €146.1 million), driven mainly by an increase in employee-related costs mostly due to Playtech's expanding Live and US operations, as well as increase in costs to support Playtech's structured agreements. H1 2022 included a provision for bad debt for Asia with no further provision in H1 2023.

B2B Adjusted EBITDA

Total B2B Adjusted EBITDA increased by 5% to €81.3 million (H1 2022: €77.2 million), while EBITDA margin dropped slightly to 24% from 25% in H1 2022, driven by the above period on period movement in revenue and costs.

B2C

* Includes intercompany revenue from HAPPYBET of €0.7 million (H1 2022: €1.1 million).

** Includes intercompany costs from Snaitech of €0.7 million (H1 2022: €1.1 million).

Snaitech

Snaitech revenues increased 10% from the prior period to €488.4 million (H1 2022: €446.0 million), with operating costs seeing a similar increase of 9% to €346.5 million (H1 2022: €319.0 million). These results were driven by both the retail and online segments, with the former as a result of pent-up demand following the football World Cup (due to Italy not being a participant). The online segment continues to see impressive growth.

Snaitech's Adjusted EBITDA increased by 12%, while revenue increased by 10%. As a result, Snaitech's Adjusted EBITDA margin increased to 29% (H1 2022: 28%), mostly due to retail margins by achieving operating leverage on the very strong revenue growth.

Sun Bingo and Other B2C

Revenue from the Sun Bingo business increased by 8% to €34.1 million (H1 2022: €31.7 million). Operating costs within Sun Bingo decreased by 1% to €31.3 million (H1 2022: €31.6 million), leading to an Adjusted EBITDA of €2.8 million (H1 2022: €0.1 million). The increase in Adjusted EBITDA was as a result of the increase in marketing spend towards the end of 2022 during the football World Cup, resulting in higher revenue growth in H1 2023 at a high contribution margin.. Adjusted EBITDA still includes the unwinding of the minimum guarantee prepayment of €2.5 million in the current year (H1 2022: €2.7 million) recognised as an expense over the new period of the contract which was renegotiated in 2019.

On a reported basis Playtech incurred a one-off cost of €10.4 million in H1 2022 to terminate an onerous contract with a service provider.

HAPPYBET

Revenue from HAPPYBET decreased by 4% to €10.3 million (H1 2022: €10.7 million), with costs increasing by 3%. The business remains loss making, with Adjusted EBITDA loss in the current period of €6.1 million (H1 2022: loss of €5.2 million), albeit H1 2023 includes a €2.0 million expense relating to a litigation settlement.

Below EBITDA items

Depreciation and amortisation

Reported and adjusted depreciation increased by 7% to €22.1 million (H1 2022: €20.6 million). After deducting amortisation of acquired intangibles of €20.6 million (H1 2022: €21.9 million), adjusted amortisation increased by 27% to €36.9 million (H1 2022: €29.0 million) after renewal of certain licenses in Snaitech during H2 2022, which were previously extended for free until June 2022 (therefore no corresponding amortisation in H1 2022). The remainder of the balance under depreciation and amortisation of €10.1 million (H1 2022: €9.0 million) relates to IFRS 16 Leases and the recognition of the right-of-use asset amortisation.

Impairment of intangible assets

The prior period impairment of €20.6 million related to the impairments of the Eyecon cash-generating unit (CGU) of €13.6 million and Quickspin CGU of €7.0 million. There was no impairment on any of the Group's CGUs in the current period. 

Finance income and finance costs

The reported and adjusted finance income of €6.0 million (H1 2022: €11.7 million) relates to foreign exchange gain of €3.0 million (H1 2022: €10.5 million) and interest received of €3.0 million (H1 2022: €1.2 million).

Reported finance costs include interest payable on the bonds and other borrowings, bank facility fees, bank charges, interest expense on lease liabilities and expected credit losses on loan receivables. Reported finance costs decreased by 25% to €20.2 million (H1 2022: €26.9 million), mainly due to the partial repayment of the 2018 Bond in H2 2022. The difference between adjusted and reported finance costs is the movement in contingent consideration of €1.3 million (H1 2022: €0.1 million) relating to the acquisition of AUS GMTC PTY Ltd.

Unrealised fair value changes of derivative financial assets

The unrealised fair value decrease in derivative financial assets of €25.5 million (H1 2022: increase of €48.5 million) is due to the movement of the fair value of the various call options held by the Group which fall under the definition of derivatives within IFRS 9 Financial Instruments. Further details on the fair value of the various call options are disclosed in Note 16C.

Taxation

A reported tax expense from continuing operations of €76.5 million (H1 2022: €32.3 million) arises on a reported profit before tax of €79.6 million (H1 2022: €103.7 million) compared to an expected charge of €18.7 million based on the UK headline rate of tax for the period of 23.5%. The key items for which the reported tax charge has been adjusted are UK tax losses on which a deferred tax asset of €23.4 million was derecognised as expected utilization would fall outside the forecasting period and therefore there is not sufficient certainty they will be recovered.

The total adjusted tax expense is €53.6 million (H1 2022: €28.0 million) which arises on an adjusted profit before tax of €139.3 million (H1 2022: €122.3 million). The total adjusted tax expense of €53.6 million consists of an income tax expense of €21.4 million (H1 2022: €10.9 million) and a deferred tax expense of €32.2 million (H1 2022: €17.1 million). The total adjusted deferred tax expense mainly consists of a deferred tax expense of €25.1 million relating to the Snaitech group including the use of Snaitech tax losses and excess interest expense.

The Group's effective adjusted tax rate for the current period is 38.5%. This rate is higher than the UK headline rate for the period of 23.5%. The key reasons for the differences are a mix of profits including subsidiaries located in territories where the tax rate is higher than the UK statutory tax rate (which predominately relates to Snaitech based in Italy) and expenses not deductible for tax purposes including unrealised fair value changes of derivative financial instruments.

Discontinued operations

Finalto (formerly TradeTech Group)

Finalto was disposed of in July 2022 with cash proceeds of $228.1 million (€223.9 million) and transaction costs of €1.6 million resulting in a profit on disposal of €15.1 million.

Adjusted profit

The reconciling items in the table above are further explained in Note 10 of the interim financial statements. Reported profit post tax from continuing operations was €3.1 million (H1 2022: €71.4 million), due to an overall reduction in the fair value of the derivatives financial assets and the derecognition of brought forward deferred tax.

Adjusted EPS (in Euro cents)

Basic EPS is calculated using the weighted average number of equity shares in issue during H1 2023 of 302.3 million (H1 2022: 299.6 million). Diluted EPS also includes the dilutive impact of share options and is calculated using the weighted average number of shares in issue during H1 2023 of 311.3 million (H1 2022: 312.2 million).

Cash flow

Cash conversion

Playtech continues to be cash generative and delivered operating cash flows of €228.1 million (H1 2022: €237.2 million) including cash from discontinued operations which impacts only H1 2022. 

Excluding the impact of discontinued operations, operating cashflows increase from €200.3 million in the prior period to €228.1 million in H1 2023.

Adjusted cash conversion of 106% (H1 2022: 109%) is shown after adjusting for jackpot balances, client funds, professional fees and ADM security deposit.

Adjusting for the above cash fluctuations is essential in order to truly reflect the quality of revenue and cash collection. This is because the timing of cash inflows and outflows for jackpots, security deposits and client funds only impact the reported operating cash flow and not Adjusted EBITDA, while professional fees are excluded from Adjusted EBITDA but impact operating cash flow.

Cash flow statement analysis

Net cash outflows used in investing activities totalled €189.1 million (H1 2022: €64.0 million) of which key items include:

· €79.8 million for the acquisition of a small minority interest in Hard Rock Digital (refer to Note 16B);

· €41.3 million cash payment in relation to a subcontractor option redemption (refer to Note 16C); and

· €57.3 million (H1 2022: €51.8 million) used in the acquisition of property plant and equipment, intangibles and capitalised development costs.

Net cash inflows from financing activities totalled €318.9 million (H1 2022: outflow of €38.1 million) of which key movements include:

· Net RCF withdrawal of €48.0 million; and

· Net proceeds received on the new 2023 Bond issued of €297.3 million.

Balance sheet, liquidity and financing

Cash

The Group continues to maintain a strong balance sheet with total cash and cash equivalents of €786.0 million at 30 June 2023 (31 December 2022: €426.5 million). Adjusted gross cash, which excludes the cash held on behalf of clients, progressive jackpots and security deposits, increased to €643.2 million as at 30 June 2023 (31 December 2022: €272.4 million), a result of the new €300.0 million bond issue (see below) and the continued strong performance of the Group throughout the period.

Financing and net debt

As at 30 June 2023 the Group had the following borrowing facilities:

· €200.0 million 2018 Bond (31 December 2022: €200.0 million), initially issued as a five-year senior secured note of €530 million (3.75% coupon), of which €330.0 million was repaid in H2 2022, with the rest due in H2 2023 and repaid in July 2023;

· €350.0 million 2019 Bond (31 December 2022: €350.0 million) (4.25% coupon, maturity 2026) which was raised in March 2019;

· €45.9 million withdrawn from its €277.0 million revolving credit facility (31 December 2022: €Nil); This facility is available until October 2025, with an option to extend by 12 months; and

· €300.0 million 2023 Bond issued in June 2023, as further discussed below.

Playtech has taken a proactive approach to managing its balance sheet so far this year. In June 2023, the Company acted quickly to take advantage of a window of relative market calm and secure favourable interest rates. Playtech issued €300.0 million of senior secured notes due 2028 at an interest rate of 5.875% (2023 Bond). The 2023 Bond has been assigned a rating of BB by S&P Global Ratings UK Limited and Ba2 by Moody's Investors Service Ltd upon issue. In July 2023, part of the proceeds of the bond were used to redeem all of the outstanding 2018 Bond of €200.0 million 3.75% due in H2 2023 and to repay the outstanding debt under its existing revolving credit facility, which remains available and undrawn today. The remaining amount, after payment of transaction-related expenses, will be used for general corporate purposes.

As a result of timing between the Group receiving the proceeds of the 2023 Bond (June 2023) and settling outstanding debt (July 2023) total gross debt increased to €891.4 million as at 30 June 2023 (31 December 2022: €547.6 million). Net debt, after deducting Adjusted gross cash, decreased to €248.2 million (31 December 2022: €275.2 million), while net debt/Adjusted EBITDA (last 12 months) decreased slightly to 0.6x (31 December 2022: 0.7x).

Contingent consideration

Contingent consideration increased to €4.5 million (31 December 2022: €2.9 million) mostly due to the fair value movement in the contingent consideration related to Aus GMTC PTY Ltd acquisition. The existing liability as at 30 June 2023 comprised the following:

Going concern

In adopting the going concern basis in the preparation of the financial statements, the Group has considered the current trading performance, financial position and liquidity of the Group, the principal risks and uncertainties together with scenario planning and reverse stress tests completed for a period of no less than 12 months from the approval of these interim financial statements.

At 30 June 2023, the Group held total cash of €786.0 million (31 December 2022: €426.5 million) and Adjusted gross cash, which excludes the cash held on behalf of clients, progressive jackpots and security deposits, of €643.2 million (31 December 2022: €272.4 million). Net debt, which is debt after deducting Adjusted gross cash, decreased to €248.2 million (31 December 2022: €275.2 million).

The financing and net debt position has been reported and analysed in the relevant section above. As at the date of this report (7 September 2023) the Group's facilities include the 2019 Bond of €350.0 million and the 2023 Bond of €300.0 million, which are both long term borrowings due in 2026 and 2028 respectively, as well as the fully undrawn RCF of €277.0 million.

As disclosed in Note 2 of the interim financial statements, management concluded that the risk of a covenant breach over the next 12-month period from the date of releasing this report is low and as such, has a reasonable expectation that the Group will have adequate financial resources to continue in operational existence.

1 Adjusted numbers throughout relate to certain non-cash and one-off items, as well as material reorganisation and acquisition related costs. The Board of Directors believes that the adjusted results represent more closely the consistent trading performance of the business. A full reconciliation between the actual and adjusted results is provided in Note 10 of the financial statements.

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

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

4 Comparative information throughout has been re-stated due to change in accounting policy. Further details are provided in Note 4B of the financial statements.

Chris McGinnis

Chief Financial Officer

6 September 2023

Directors' responsibilities

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

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

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

o  important events during the six months ended 30 June 2023 and their impact on the condensed consolidated financial statements;

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

o  related parties' transactions and changes therein.

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

INDEPENDENT REVIEW REPORT TO PLAYTECH PLC

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 2023 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.

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 2023 which comprises the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated statement of cash flows and the related notes.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410"). 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.

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

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410, however future events or conditions may cause the group to cease to continue as a going concern.

Responsibilities of 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.

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statement in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of 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

55 Baker Street, London, W1U 7EU, UK

06 September 2023

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

Unaudited consolidated statement of comprehensive income

1 Adjusted numbers relate to certain non-cash and one-off items, as well as certain reorganisation and acquisition-related costs. The Board of Directors believe that the adjusted results more closely represent the consistent trading performance of the business. A full reconciliation between the actual and adjusted results is provided in Note 10.

2 Comparative information has been re-stated due to change in accounting policy. Further details are provided in Note 4B.

Unaudited consolidated statement of changes in equity

Unaudited consolidated balance sheet

The condensed consolidated interim financial statements were approved by the Board and authorised for issue on 6 September 2023.

Mor Weizer Chris McGinnis

Chief Executive Officer Chief Financial Officer

1 Comparative information has been re-stated due to change in accounting policy. Further details are provided in Note 4B.

Unaudited consolidated statement of cash flows

Notes to the financial statements

Note 1 - General

Playtech plc (the "Company") is an Isle of Man company. The registered office is located at St George's Court, Upper Church Street, Douglas, Isle of Man IM1 1EE.

These are the condensed consolidated interim financial statements ("interim financial statements") for the six months ended 30 June 2023 comprising the Company and its subsidiaries (together referred to as the "Group").

Note 2 - Basis of preparation

These interim financial statements for the six months ended 30 June 2023 have been prepared in accordance with UK adopted IAS 34,"Interim Financial Reporting", and should be read in conjunction with the Group's last annual consolidated financial statements for the year ended 31 December 2022 ("last annual financial statements"). They do not include all the information required for a complete set of financial statements prepared in accordance with the IFRS Standards. However, selected explanatory notes are included to explain events and transactions that are significant to the understanding of the changes in the Group's financial position and performance since the last annual financial statements.

These interim financial statements were authorised for issue by the Company's Board of Directors on 6 September 2023.

Going concern basis

In adopting the going concern basis in the preparation of the interim financial statements, the Directors have considered the current trading performance, financial position and liquidity of the Group, the principal and emerging risks and uncertainties together with scenario planning and reverse stress tests. The Directors have assessed going concern over a 12-month period to 30 September 2024.

The increase in adjusted gross cash and cash equivalents from €272.4 million at 31 December 2022 to €643.2 million at 30 June 2023 is mainly the result of the new €300.0 million bond issue and continued strong performance of the Group throughout the period.

The Directors have considered sensitivities in respect of potential downside scenarios, reverse stress tests and the mitigating actions available to management. The modelling of downside scenarios assessed if there was a significant risk to the Group's liquidity and covenant compliance position. This includes risks such as not realising budget/forecasts across certain markets and any potential implications of changes in tax and other regulations, as well as the impact on cash flow should the share buyback scheme and other shareholder return options resume.

In June 2023, the Company announced that it successfully issued new €300.0 million senior secured notes at a rate of 5.875% repayable in June 2028 (the "2023 Bond"). The 2023 Bond has been assigned a rating of BB by S&P Global Ratings UK Limited and Ba2 by Moody's investors Services Ltd upon issue. Playtech has served notice and subsequently redeemed at par the outstanding 2018 Bond with a €200.0 million balance in July 2023.

Other than the newly raised €300.0 million 2023 Bond, the Group's principal financing arrangements also include an RCF up to €277.0 million, out of which €45.9 has been drawn as at 30 June 2023, the balance of the 2018 Bond amounting to €200.0 million, which has been repaid post period end as per the above, and the 2019 Bond amounting to €350.0 million, which is repayable in March 2026. The RCF was restructured in October 2022, reducing the credit line from €317.0 million to €277.0 million and is available until October 2025, with the Group having the option to extend by 12 months. The RCF amount of €45.9 million outstanding at 30 June 2023 was also repaid in July 2023.

The RCF is subject to certain financial covenants which are tested every six months on a rolling 12-month basis, as set out in Note 19. As at 30 June 2023, the Group comfortably met its covenants which were as follows:

• Leverage: Net Debt/Adjusted EBITDA to be less than 3.5:1 for the 12 months ended 30 June 2023 (12 months ended 31 December 2022: less than 3.5:1).

• Interest cover: Adjusted EBITDA/Interest to be over 4:1 for the 12 months ended 30 June 2023 (12 months ended 31 December 2022: over 4:1).

The 2018, 2019 and 2023 Bonds only have one financial covenant, being the Fixed Charge Coverage Ratio (same as the Interest cover ratio for the RCF), which should equal or be greater than 2:1.

If the Group's results are in line with its base case projections as approved by the Board it would not be in breach of the financial covenants for a period of no less than 12 months from approval of these financial statements (the "relevant going concern period").

Stress test

The stress test assumes a worst-case scenario for the entire Group which includes additional sensitivities around Italy, the Americas and Asia, but with mitigations similar to the ones taken in 2020 and 2021 (including salary and capital expenditure reductions). It also considers the impact of cash flow should the share buyback scheme commence again, as well as other shareholder return options. Under this scenario Adjusted EBITDA could fall on average by 13% per month compared to the base case over the relevant going concern period, and the Group would not breach its covenants.

Reverse stress test

The reverse stress test was used to identify the reduction in Adjusted EBITDA required that could result in either a liquidity event or breach of the RCF and bond covenants.

As a result of completing this assessment, without considering further mitigating actions, management considered the likelihood of the reverse stress test scenario arising to be remote. In reaching this conclusion management considered the following:

• current trading is performing in line with the base case;

• Adjusted EBITDA would have to fall by 84% in the year ending 31 December 2023 and 85% in the 12 months to September 2024 compared to the base case, to cause a breach of covenants; and

• in the event that revenues decline to this point to drive the decrease in Adjusted EBITDA, additional mitigating actions are available to management which have not been factored into the reverse stress test scenario.

As such, the Directors have a reasonable expectation that the Group will have adequate financial resources to continue in operational existence over the relevant going concern period and have therefore considered it appropriate to adopt the going concern basis of preparation in these interim financial statements.

Note 3 - Functional and presentation currency

These consolidated financial statements are presented in Euro, which is the Company's functional currency. The main functional currencies for subsidiaries are Euro, United States Dollar, Great British Pound and Ukraine Hryvnia. All amounts have been rounded to the nearest million, unless otherwise indicated.

Note 4 - Change in accounting policy

Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements for the year ended 31 December 2022.

A. Deferred tax related to assets and liabilities arising from a single transaction

The Group has adopted Deferred Tax related to assets and liabilities arising from a Single Transaction - Amendments to IAS 12 effective from 1 January 2023. The amendments narrow the scope of the initial recognition exemption to exclude transactions that give rise to equal and offsetting temporary differences e.g., leases and decommissioning liabilities. For leases and decommissioning liabilities, an entity is required to recognise the associated deferred tax assets and liabilities from the beginning of the earliest comparative period presented, with any cumulative effect recognised as an adjustment to retained earnings or other components of equity at that date.

Following the change to the initial recognition exemption, the Group has recognised a separate deferred tax asset in relation to its lease liabilities and a deferred tax liability in relation to its right-of-use assets.

The table below presents the cumulative effects of the items affected by the initial application on the consolidated balance sheet as at 1 January 2022 and 31 December 2022:

B. Reclassification of bank charges in the profit or loss

Effective 1 January 2023, the Group changed its accounting policy to recognise certain costs within distribution costs, previously recognised within finance costs. Management believes that the classification as distribution costs is more in line with the nature of the cost, being banking charges relating to players' transaction processing within the B2C business segment. 

Below is a summary of the impact of the change in accounting policy for the previous period: 

Note 5 - Accounting standards issued but not yet effective

A number of new accounting standards and amendments to accounting standards are effective for annual periods beginning after 1 January 2023 and earlier application is permitted. The Group has not early adopted any of the forthcoming new or amended accounting standards in preparing these condensed consolidated interim financial statements.

Note 6 - Significant accounting judgements, estimates and assumptions

In preparing these interim financial statements, management has made judgements and estimates that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual events may differ for these estimates.

The significant judgements made by management in applying the Group's accounting policies and key sources of estimation and uncertainty were the same as those described in the last annual financial statements, except as described below.

Estimates and assumptions

Impairment of non-financial assets

The Group is required to test annually and when an impairment indicator arises, whether goodwill and indefinite life assets have suffered any impairment. Impairment exists when the carrying value of an asset or cash-generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The value in use calculation is based on a discounted cash flow model (DCF). The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that may enhance the performance of the assets of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. CGUs with an indication of impairment as at 30 June 2023 are disclosed and further explained in Note 15, including a sensitivity analysis.

Income taxes

The Group is subject to income tax in several jurisdictions and significant judgement is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Group recognises tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognised when, despite the Group's belief that its tax return positions are supportable, the Group believes it is more likely than not that a taxation authority would not accept its filing position. In these cases, the Group records its tax balances based on either the most likely amount or the expected value, which weights multiple potential scenarios. The Group believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgements about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made. Where management conclude that it is not probable that the taxation authority will accept an uncertain tax treatment, they calculate the effect of uncertainty in determining the related taxable profit (tax loss), tax bases, unused tax losses, unused tax, credits or tax rates. The effect of uncertainty for each uncertain tax treatment is reflected by using the expected value - the sum of the probabilities and the weighted amounts in a range of possible outcomes. More details are included in Note 13.

Deferred tax asset

In evaluating the Group's ability to recover our deferred tax assets in the jurisdiction from which they arise, management considers all available positive and negative evidence, projected future taxable income, tax-planning strategies and results of recent operations. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Judgement is required in determining the initial recognition and the subsequent carrying value of the deferred tax assets. Deferred tax assets are only able to be recognised to the extent that utilisation is considered probable. It is possible that a change in profit forecasts or risk factors could result in a material change to the income tax expense and deferred tax asset in future periods.

Deferred tax asset in the UK

As a result of the Group's internal restructuring in January 2021, the Group is entitled to UK tax deductions in respect of certain goodwill and intangible assets. A deferred tax asset was recognised as the tax base of the goodwill and intangible assets is in excess of the book value base of those assets. At the beginning of the period, the recognised deferred tax asset amounted to €56.8 million. As at 30 June 2023, an additional deferred tax asset of €2.6 million was recognised. This additional deferred tax asset has been recognised as the Group's management has concluded that it is probable the UK entities will generate taxable profits in the future against which the Group can utilise the tax deductions for goodwill and intangible assets. During the period, €7.4 million has been utilised and the recognised deferred tax asset as at 30 June 2023 amounts to €52.0 million. In addition, a total of €34.4 million of deferred tax asset has not been recognised in respect of the benefit of future tax deductions related to the goodwill and intangible assets which will arise more than five years after the balance sheet date.

Deferred tax asset is reviewed at each reporting date. In considering their recoverability, the Group assesses the likelihood of their being recovered within a reasonably foreseeable timeframe, which is broadly in line with our viability assessment and the cash flow forecasts period used in our CGU impairment assessment. The Group updated its forecasts, following changes in assumptions made to the forecasts during the period to 30 June 2023, due to certain changes in the current period to the expected profit profile within its UK business unit that carries significant losses. This forms a change in accounting estimate and resulted in a reversal of €23.4 million in the current period of previously recognised deferred tax assets in respect of UK tax losses and tax attributes relating to excess interest expense brought forward.

A deferred tax asset of €41.1 million has been recognised in respect of UK tax losses of €164.4 million (2022: €41.1 million) carried forward at 30 June 2023. Based on the current forecasts, these losses will be fully utilised over the forecast period. Remaining UK tax losses and excess interest expense of €162.6 million (2022: Nil) have not been recognised as at 30 June 2023 as expected utilization would fall outside the forecasting period and therefore there is not sufficient certainty they will be recovered.

Any future changes in the tax law or the structure of the Group could have a significant effect on the use of the tax deductions, including the period over which the deductions can be utilised.

Deferred tax assets in Italy

The Group has recognised a deferred tax asset of €18.0 million in respect of tax losses and excess interest expense in Italy which are available to offset against the future profits of the Italian Group companies. Based on the current forecasts, these losses will be fully utilised within the next five years.

The Group reviewed the latest forecasts for the Italian companies for the next five years, including their ability to continue to generate income beyond the forecast period under the tax laws substantively enacted at the reporting date. Based on this, the Group management concludes that it is probable that the Italian Group companies will continue to generate taxable income in the future against which the losses can be utilised. Any future changes in the tax law or the structure of the Group could have a significant effect on the use of the tax deductions, including the period over which the deductions can be utilised.

Impairment of financial assets

The Group undertook a review of trade receivables and other financial assets, as applicable, and their expected credit losses (ECLs). The review considered the macroeconomic outlook, customer credit quality, exposure at default, and effect of payment deferral options as at the reporting date. The ECL methodology and definition of default remained consistent with prior periods. The model inputs, including forward-looking information, scenarios and associated weightings, together with the determination of the staging of exposures, were revised. The Group's financial assets consist of trade and loans receivables and cash and cash equivalents. ECL on cash balances was considered and calculated by reference to Moody's credit rating for each financial institution, while ECL on trade and loans receivables was based on past default experience and an assessment of the future economic environment.

In respect of the Group's Asian licensees' business model an additional ECL risk was identified due to increase in collection days and uncertainty over timing of receipt of funds. No additional provision was made in the period ended 30 June 2023 (H1 2022: €15.4 million).

Measurement of fair values of equity investments and equity call options

The Group's equity investments and, where applicable equity call options held by the Group, are measured at fair value for financial reporting purposes. The Group has an established control framework with respect to the measurement of fair value.

In estimating the fair value of an asset and liability, the Group uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Group engages third-party qualified valuers to perform the valuation. The Group works closely with the qualified valuers to establish the appropriate valuation techniques and inputs to the model.

As mentioned in Note 16, the Group has:

• investments in listed securities where the fair values of these equity shares are determined by reference to published price quotations in an active market;

• equity investments in entities that are not listed, accounted at fair value through profit or loss under IFRS 9; and

• derivative financial assets (call options in instruments containing potential voting rights and warrants in entities that are not listed), which are accounted at fair value through profit or loss under IFRS 9.

The fair value of the equity investments that are not listed and of the derivative financial assets, rely on non-observable inputs that require a higher level of management judgement to calculate a fair value than those based wholly on observable inputs. Valuation techniques are used to calculate fair values include comparisons with similar financial instruments for which market observable prices exist, discounted cash flow analysis and other valuation techniques commonly used by market participants. Upon the use of DCF method, the Group assumes that the expected cash flows are based on the EBITDA.

The Group only uses models with unobservable inputs for the valuation of certain unquoted equity investments. In these cases, estimates are made to reflect uncertainties in fair values resulting from a lack of market data inputs, for example, as a result of illiquidity in the market. Inputs into valuations based on unobservable data are inherently uncertain because there is little or no current market data available from which to determine the level at which an arm's length transaction would occur under normal business conditions. Unobservable inputs are determined based on the best information available. Further details on the fair value of assets are disclosed in Note 16, which includes a significant judgement relating to the public announcement made by the Group on 6 February 2023 where Playtech plc is seeking a declaration from the English Courts to obtain clarification on a point of disagreement between the Group and Caliplay.

The following table shows the carrying amount and fair value of non-current assets, as disclosed in Note 16, including their levels in the fair value hierarchy.

Note 7 - 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:

• B2B: including Casino, Services, Sport, Bingo, Poker and Other;

• B2C: including Snaitech, HAPPYBET and Sun Bingo and Other B2C; and

• Financial: including B2C and B2B CFD (discontinued operations).

The Group-wide profit measures are Adjusted EBITDA and Adjusted Profit (see Note 10).