26th Aug 2015 10:42
LADBROKES GROUP FINANCE PLC
Registered Number 01429533
INTERIM RESULTS
FOR THE HALF YEAR ENDED 30 JUNE 2015
Business and financial review
For the half year ended 30 June 2015
Principal activities
Ladbrokes Group Finance plc (the 'Company') and its subsidiaries (together the 'Group') undertook the principal borrowing for Ladbrokes plc and its subsidiaries, invested in loans to other members of the Ladbrokes plc group and undertook associated finance-related activities.
Review of business
The Group continues to provide finance-related services to other members of the Ladbrokes plc group. There haven't been any significant changes to the existing arrangements during the first six months of the financial year. There have also been no important events that have affected the Group during the same period.
Results and dividends
The consolidated financial statements for the half year show a profit after taxation of £23,286,000 (half year ended 30 June 2014: loss £6,852,000).
The directors do not propose the payment of an interim dividend (half year ended 30 June 2014: £nil).
Key performance indicators
The Group's key financial performance indicators during the year were as follows:
Half year ended 30 June 2015 | Half year ended30 June 2014 | Change | |||
£000 | £000 | % | |||
Net finance income | 24,897 | 23,918 | 4.1 | ||
Profit before tax and exceptional item | 23,286 | 21,297 | 9.3 | ||
Profit/(loss) after tax | 23,286 | (6,852) | 439.8 | ||
30 June2015 | 31 December 2014 | ||||
£000 | £000 | ||||
Third party interest bearing loans and borrowings | (440,517) | (440,656) | 0.0 | ||
Amounts due from group companies | 3,432,739 | 3,352,755 | 2.4 | ||
Amount due to group companies | (2,710,501) | (2,653,968) | 2.1 | ||
Equity shareholder's funds | 351,234 | 314,527 | 11.6 | ||
Percentage of Ladbrokes plc group's gross borrowings at fixed rates (target minimum 25%) | 74.1% | 73.4% |
The loss for the half year ended 30 June 2014 was due to an impairment loss of £28,149,000 on an equity investment in Ladbroke & Co., Limited.
Going concern
In assessing the going concern basis, the directors considered the Group's activities and the financial position of the Group and the Group's financial risk management objectives and policies.
The directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing its financial statements.
Principal risks and uncertainties
The ultimate parent company of the Company, Ladbrokes plc, reviews and evaluates the key risks and uncertainties faced by the Ladbrokes plc group as part of the divisional reviews undertaken at its regular Board meetings. The impact of risks and uncertainties of the Group and the Company is considered as part of this review process.
The principal risks and uncertainties which could impact the Group relate to its exposure to foreign currencies and interest rate movements arising from the finance related activities and borrowing which it undertakes on behalf of the Ladbrokes plc group. The Group's risk profile at 31 December 2014 and the policies of the Group for managing these exposures are detailed in notes 15 and 16 of the Group's annual report and consolidated financial statements 2014 (the '2014 Annual Report').
The principal risks and uncertainties included in the 2014 Annual Report are summarised below:
Interest rate risk
The Group is exposed to interest rate risk on interest-bearing loans and borrowings and on cash and cash equivalents.
Foreign currency risk
The Ladbrokes plc group carries out operations through a number of foreign enterprises and has foreign currency exposure to the Australian Dollar and to the Euro arising from foreign currency assets.
Credit risk
The Group's exposure to credit risk arises from financial assets of the Group (other than those due from fellow subsidiaries of the Ladbrokes plc group), which comprise cash and cash equivalents and derivative instruments. The credit risk to the Group arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.
Liquidity risk
The objective of the Ladbrokes plc group is to maintain a balance between continuity of funding and flexibility through the use of borrowings with a range of maturities.
These risks and uncertainties remain valid at the interim reporting date and have not changed in the period to 30 June 2015.
It is anticipated that the principal risks and uncertainties affecting the Group will remain unchanged for the remaining six months of the financial year.
Future developments
The Group does not anticipate any changes in its activities in the remaining six months of the financial year.
Independent review
This half-yearly report has not been audited or reviewed by auditors.
Statement of directors' responsibilities
The directors confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7R, namely:
§ an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year.
The directors of the Company are listed in the Group's annual report and accounts for the year ended 31 December 2014.
By order of the Board
A WilsonDirector26 August 2015
Consolidated income statement (unaudited)
for the half year ended 30 June 2015
Notes | Half year ended30 June 2015 | Half year ended30 June 2014 | ||
£'000 | £'000 | |||
Finance income | 4 | 61,658 | 56,920 | |
Finance expense | 4 | (36,761) | (33,002) | |
Net finance income | 24,897 | 23,918 | ||
Administrative expenses | (1,641) | (2,503) | ||
Exceptional item: impairment loss | 5 | - | (28,149) | |
Foreign exchange gains/losses | 30 | (118) | ||
Profit/(loss) on ordinary activities before tax | 23,286 | (6,852) | ||
Income tax | 6 | - | - | |
Profit/(loss) for the period | 23,286 | (6,852) | ||
Attributable to: | ||||
Equity holders of the parent | 23,286 | (6,852) |
Consolidated statement of comprehensive income (unaudited)
for the half year ended 30 June 2015
Half year ended30 June 2015 | Half year ended30 June 2014 | |||
£'000 | £'000 | |||
Profit/(loss) for the period | 23,286 | (6,852) | ||
Items that will be reclassified to profit or loss:
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Gain on fair value of available-for-sale financial asset
| 13,421 | - | ||
Total other comprehensive income | 36,707 | - | ||
Total comprehensive income/(expense) for the period | 36,707 | (6,852) | ||
Attributable to: | ||||
Equity holders of the parent | 36,707 | (6,852) |
Consolidated balance sheet (unaudited)
at 30 June 2015
30 June | 31 December | |||
Notes | 2015 | 2014 | ||
£'000 | £'000 | |||
ASSETS | ||||
Non-current assets | ||||
Other financial assets | 3,503,403 | 3,410,287 | ||
3,503,403 | 3,410,287 | |||
Current assets | ||||
Trade and other receivables | 6,107 | 6,183 | ||
Derivatives | 8 | - | 15 | |
Cash and short term deposits | 32 | 55 | ||
6,139 | 6,253 | |||
Total assets | 3,509,542 | 3,416,540 | ||
LIABILITIES | ||||
Current liabilities | ||||
Trade and other payables | (7,272) | (7,389) | ||
Interest-bearing loans and borrowings | 7 | (5,852) | (1,313) | |
Derivatives | 8 | (18) | - | |
(13,142) | (8,702) | |||
Non-current liabilities | ||||
Interest-bearing loans and borrowings | 7 | (3,145,166) | (3,093,311) | |
(3,145,166) | (3,093,311) | |||
Total liabilities | (3,158,308) | (3,102,013) | ||
Net assets | 351,234 | 314,527 | ||
SHAREHOLDERS' EQUITY | ||||
Issued share capital | 20,350 | 20,350 | ||
Capital reserve | 157,482 | 157,482 | ||
Retained earnings | 173,402 | 136,695 | ||
Equity shareholders' funds | 351,234 | 314,527 |
Consolidated statement of changes in equity (unaudited)
for the half year ended 30 June 2015
Issued share capital | Capital reserve | Retained earnings | Total | ||||
£'000 | £'000 | £'000 | £'000 | ||||
At 1 January 2014 |
20,350 | 157,482 | 142,457 | 320,289 | |||
Loss for the period | - | - | (6,852) | (6,852) | |||
Total comprehensive income | - | - | (6,852) | (6,852) | |||
At 30 June 2014 | 20,350 | 157,482 | 135,605 | 313,437 | |||
At 1 January 2015 |
20,350 | 157,482 | 136,695 | 314,527 | |||
Profit for the period | - | - | 23,286 | 23,286 | |||
Other comprehensive income | - | - | 13,421 | 13,421 | |||
Total comprehensive income | - | - | 36,707 | 36,707 | |||
At 30 June 2015 | 20,350 | 157,482 | 173,402 | 351,234 |
Consolidated statement of cash flows (unaudited)
for the half year ended 30 June 2015
Half year ended | Half year ended | |||
Notes | 30 June 2015 | 30 June 2014 | ||
£'000 | £'000 | |||
Net cash inflows/outflows from operating activities | 9 | 516 | (34,587) | |
Cash flows from financing activities | ||||
Proceeds from borrowings, net of issue costs | - | 98,699 | ||
Repayment of borrowings | (4,467) | (64,981) | ||
(4,467) | 33,718 | |||
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Net (decrease) in cash and cash equivalents | (3,951) | (869) | ||
Cash and cash equivalents at the beginning of the year | (1,258) | 297 | ||
Cash and cash equivalents at the end of the year | (5,209) | (572) | ||
Cash and cash equivalents comprise: | ||||
Cash and short term deposits | 32 | 56 | ||
Bank overdraft | 7 | (5,241) | (628) | |
(5,209) | (572) | |||
Notes to the consolidated financial statements (unaudited)
For the half year ended 30 June 2015
1. | Corporate information
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| Ladbrokes Group Finance plc (the 'Company') is a limited company incorporated and domiciled in the United Kingdom whose debt is publicly traded.
The interim consolidated financial statements of the Company and its subsidiaries (together the 'Group') for the half year ended 30 June 2015 were authorised for issue in accordance with a resolution of the directors on 26 August 2015.
The principal activities of the Group are described in the business and financial review. |
2. | Basis of preparation
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| The annual consolidated financial statements of the Group for the year ended 31 December 2014 were prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union.
The interim condensed consolidated financial statements for the half year ended 30 June 2015 have been prepared in accordance with International Accounting Standard ('IAS') 34 'Interim Financial Reporting'. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements at 31 December 2014.
The accounting policies adopted in the preparation of the interim financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2014.
These condensed consolidated interim financial statements have not be subject to a full audit or audit review and do not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. The consolidated financial statements for the year ended 31 December 2014 were approved by the directors of the Company on 19 June 2015 and have been filed with the Registrar of Companies. The report of the auditors on those financial statements was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
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| Going concern
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| The directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing its financial statements. |
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| 3. | Segmental analysis
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| The Group's principal activity of borrowing for Ladbrokes plc and its subsidiaries represents a single operating segment in the United Kingdom and therefore no additional segmental information is required.
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| 4. | Finance income and expense | ||||||
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Half year ended30 June 2015 | Half year ended30 June 2014 |
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£'000 | £'000 |
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Bank interest receivable | 3 | 8 |
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Interest receivable from parent company | 40,921 | 37,842 |
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Interest receivable from fellow subsidiary companies | 20,734 | 19,070 |
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Total interest income for financial assets not at fair value through profit and loss (1) | 61,658 | 56,920 |
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Total finance income | 61,658 | 56,920 |
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Bank loans and overdrafts | (1,113) | (1,984) |
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Bonds at amortised cost | (11,449) | (8,984) |
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Interest payable to fellow subsidiary companies | (24,199) | (22,034) |
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Total interest expense for financial liabilities not at fair value through profit and loss (1) | (36,761) | (33,002) |
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Total finance expense | (36,761) | (33,002) |
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Net finance income | 24,897 | 23,918 |
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| (1) Calculated using the effective interest method
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| 5. | Exceptional item | ||||||
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| The exceptional item for the half year ended 30 June 2014 represented an impairment loss which arose on the fair value of the investment in Ladbroke & Co., Limited. | ||||||
6. | Income tax |
| No provision has been made in these financial statements for UK corporation tax as an undertaking has been received from the Company's ultimate parent company, Ladbrokes plc, that it will assume all liability for any such taxation.
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| There are no amounts of deferred tax required to be indemnified in respect of any material timing differences for 2015 or 2014. |
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7. | Interest-bearing loans and borrowings | |||||||
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30 June | 31 December |
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2015 | 2014 |
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£'000 | £'000 |
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Current |
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Unsecured: |
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Bank overdrafts | 5,241 | 1,313 |
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Amounts due to fellow subsidiary companies | 611 | - |
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Total current interest-bearing loans and borrowings | 5,852 | 1,313 |
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Non-current |
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Unsecured: |
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Bank loans | 112,541 | 117,008 |
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7.625% bonds due 2017 | 223,913 | 223,580 |
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5.125% bonds due 2022 | 98,822 | 98,755 |
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Amounts due to fellow subsidiary companies | 2,709,890 | 2,653,968 |
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Total non-current interest-bearing loans and borrowings | 3,145,166 | 3,093,311 |
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Total interest-bearing loans and borrowings | 3,151,019 | 3,094,624 |
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| The Group has undrawn committed bank facilities of £287,459,000 at 30 June 2015 (31 December 2014: £282,992,000). | |||||||
8. | Financial instruments and fair value disclosures |
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The following tables illustrate the Group's financial assets and liabilities that are measured at fair value at 30 June 2015 and 31 December 2014, by level of fair value hierarchy:
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| 30 June 2015 | |||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||
£'000 | £'000 | £'000 | £'000 | |||||||||
Assets measured at fair value | ||||||||||||
Equity investments in Ladbrokes plc group companies | - | - | 58,475 | 58,475 | ||||||||
Liabilities measured at fair value | ||||||||||||
Derivatives | - | (18) | - | (18) | ||||||||
Total |
- | (18) | 58,475 | 58,457 | ||||||||
31 December 2014 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
£'000 | £'000 | £'000 | £'000 | ||||||||||||
Assets measured at fair value | |||||||||||||||
Equity investments in Ladbrokes plc group companies | - | - | 45,054 | 45,054 | |||||||||||
Derivatives | - | 15 | - | 15 | |||||||||||
Total | - | - | 45,054 | 45,069 | |||||||||||
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| Assets and liabilities designated as at fair value through profit or loss and as available-for-sale are carried at fair value. The fair value of cash and short term deposits approximates to book value due to its short-term maturity. The fair value of the £225 million 7.625% bond at 30 June 2015 was £241.3 million (31 December 2014: £244.3 million) and is classified as a level 1 fair value measurement for disclosure purposes, as the fair value is determined based on quoted prices in active markets for identical liabilities. The fair value of the £100 million 5.125% bond at 30 June 2015 was £100.6 million (31 December 2014: £100.2 million) and is classified as a level 1 fair value measurement for disclosure purposes, as the fair value is determined based on quoted prices in active markets for identical liabilities. The amortised cost of interest-bearing loans and borrowings, with the exception of the £225 million 7.625% bond and the £100 million 5.125% bond, and the carrying value of all other assets and liabilities, approximates to fair value.
Derivatives |
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| The Group classifies all derivatives as level 2 financial instruments, as their fair value is determined based on techniques for which all significant inputs are observable, either directly or indirectly.
Equity investments in Ladbrokes plc group companies The estimated fair value of the investment at 30 June 2015 is £58,475,000 (31 December 2014: £45,054,000). This is classified as a level 3 financial instrument, as its fair value is measured using techniques where significant inputs are not based on observable market data. The £13,421,000 increase in the fair value since 31 December 2014 has been recorded in other comprehensive income as an amount that will be reclassified through profit or loss.
The fair value is determined with reference to the market price of Ladbrokes plc shares, adjusted to reflect the size of Ladbroke & Co., Limited as a proportion of the Ladbrokes plc group. A change in the estimate of this proportion would have a corresponding impact on the fair value of the financial asset.
The Group determines the size of Ladbroke & Co., Limited as a proportion of the total Ladbrokes plc group by using discounted cash flow models of both the Ladbroke & Co., Limited and total Ladbrokes plc group. The key assumptions taken into account by management in producing these discounted cash flows are the amounts staked, the gross win margin and the discount rate applied. The estimated amounts staked and gross win margin are based upon historic experience and management's best estimate of future trends and performance, taking into account industry sources. The pre-tax discount rate applied to cash flow projections is 9.3%.
An increase or decrease in the amounts staked, the gross win margin and the discount rate applied would not have a significant impact on the fair value, as they would affect both the value of the Ladbroke & Co., Limited group and the total Ladbrokes plc group. However, increases or decreases in amounts staked and the gross win margin in only certain parts of the Ladbrokes plc group would impact the proportion of the Ladbroke & Co., Limited group that is within the Ladbrokes plc group. A 3% increase or decrease in the proportion of the group included in Ladbroke & Co., Limited would have a £1.5 million impact on fair value.
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9. | Notes to the statement of cash flows |
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Reconciliation of profit to net cash inflow from operating activities:
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Half year ended30 June 2015 | Half year ended30 June 2014 |
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£'000 | £'000 |
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Profit/(loss) before taxation | 23,286 | (6,852) |
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Adjustments for: |
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Amortisation of arrangement fees and issue costs | 400 | 284 |
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Net gains/(losses) on derivatives | 48 | (79) |
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Foreign exchange (gain)/loss | (31) | 119 |
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Exceptional item: impairment loss | - | 28,149 |
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Operating cash flows before movements in working capital | 23,703 | 21,621 |
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Decrease/(increase) in other receivables | 366 | (394) |
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Net increase in loans to other group companies | (23,436) | (55,895) |
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(Decrease)/increase in payables | (117) | 81 |
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Net cash inflows/(outflows) from operating activities | 516 | (34,587) |
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10. | Contingent liabilities |
| Under the terms of cross guarantee agreements, the Company has jointly and severally guaranteed the liabilities of certain other Ladbrokes plc group companies in respect of their current accounts held with UK clearing banks. The amounts under the guarantees are limited to any credit balances on current accounts held by the Company with these banks. At 30 June 2015, the aggregate amount of such credit balances was £nil (31 December 2014: £nil).
The Company has jointly and severally guaranteed the value added tax liability of Ladbrokes plc companies within the group registration which amounted to approximately £nil at 30 June 2015 (31 December 2014: £nil) |
11. | Post balance sheet events |
| On 24 July 2015 the ultimate parent company, Ladbrokes plc, announced the following:
· Ladbrokes plc and Gala Coral Group Limited have agreed terms of a recommended merger (the 'Merger') of Ladbrokes plc with certain businesses of Gala Coral, including Coral Retail, Eurobet Retail and Gala Coral's online businesses to create a leading European betting and gaming group that is better positioned to compete more effectively (the 'Combined Entity'). · A successful completion of the placing of a total of 92,378,680 new ordinary shares of 28 1/3 pence each in the Company representing approximately 9.99 per cent. of the Company's existing issued ordinary share capital (excluding treasury shares) have been placed at a price of 125 pence per placing share raising proceeds of £115.5 million (before expenses). As part of the placing, 22.9% of the placing shares have been placed with Playtech plc. · A three year strategy which incorporates an aggressive three year investment programme to build Ladbrokes plc's UK Retail, Digital and Australian recreational customer base and a plan to restore Ladbrokes plc's passion and pride of being at the heart of sportsbetting in its culture and all that it does. |
| · Completion of the Merger is conditional upon, inter alia, the approval of Ladbrokes plc's existing shareholders and clearance from the Competition and Markets Authority ('CMA'). Ladbrokes plc are confident that the Merger is deliverable and are committed to working closely with Gala Coral and the CMA in its review.
Details of all of the above are contained within the press releases dated 24 July 2015, which can also be found on the Ladbrokes plc website at www.ladbrokesplc.com. None of the above announcements or the details contained within it amount to an adjusting balance sheet event.
Playtech Agreement
To assist in the flexibility for the Combined Entity to achieve integration and realise synergies, Playtech plc has agreed conditional upon completion, to accelerate the determination of amounts due to it under its marketing services agreement with Ladbrokes plc. The sum agreed is £75 million, of which £40 million shall be satisfied by way of the issue of shares in the Combined Entity on completion of the Merger and with a further guaranteed £35 million in cash paid upon the delivery by Playtech plc of key operational milestones but, in any event, within 42 months following completion of the Merger.
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Related Shares:
LAD2.L