premier lotteries ireland limited reports ·and...

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Premier Lotteries Ireland Limited

Reports ·and Financial Statements for the financial year ended 31 December

.2015 Company Number: 527900

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PREMIER LOTTERIES IRELAND LIMITED

REPORTS AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

CONTENTS

PAGE

DIRECTORS AND OTHER INFORMATION 2

DIRECTORS' REPORT 3 - 5

DIRECTORS' RESPONSIBILITY STATEMENT 6

INDEPENDENT AUDITORS' REPORT 7-8

STATEMENT OF COMPREHENSIVE INCOME 9

STATEMENT OF FINANCIAL POSITION 10

STATEMENT OF CHANGES IN EQUITY 11

CASH FLOW STATEMENT 12

NOTES TO THE FINANCIAL STATEMENTS 13 - 37

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DIRECTOR'S AND OTHER INFORMATION

DIRECTORS Lee Sienna Nigel Railton Peter Quinn Donal Connell llya Kachko

SECRETARY · Jenny Fisher

REGISTERED OFFICE Lower Abbey Street Dublin I

SOLICITORS William Fry & Company 61h Floor 2 Grand Canal Square Dublin 2

BANKERS Bank of Ireland Lower O'Connell Street Dublin 1

AIB Ballsbridge Dublin 4 ·

The Royal Bank of Scotland (as Agent for the Syndicate of Lenders) 250 Bishopgate · London EC2M 4AA England

AUDITOR Deloitte Chartered Accountants and Statutory Audit Firm Deloitte & Touche House Earlsfort Terrace Dublin 2

COMPANY REGISTRATION NUMBER 527900

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DIRECTORS' REPORT

The directors present their report together with the audited financial statements of Premier Lotteries Ireland Limited (the 'Company' or 'PLI'} for the financial year ended 31 December 2015.

Effective 1 June 2015, the law of the DAC applies and Premier Lotteries Ir.eland Holdings Limited has yet to decide on the change of conversion to a LTD or DAC.

PRINCIPAL ACTIVITIES

The principle activity of the Company is to operate Ireland's National Lottery under licence from the Department of Public Expenditure and Reform, in accordance with the provisions of the National Lottery Act, 2013. The Company expects to pursue this activity for the foreseeable future.

RESULTS AND DIVIDENDS

The loss after taxation for the financial year ended 31 December 2015 amounted to €20.2m (2014: €19.9m}. No dividends have been paid or proposed in respect of the year ended 31 December 2015 (2014: €Nil).

GOING CONCERN

Management has prepared detailed budgets and cash flow forecasts which support the appropriateness of the going concern assumption for the financial year ended 31 December 2015.

BUSINESS REVIEW

Sales for the year ended 31 December 2015 were €670.4m, compared to €56.8m for the one month the PLI traded in 2014. Sales of draw based games were €482.5m and scratchcard games sales were €187.9m which was driven by the difference in the length of the trading periods. PLI successfully introduced the new Lotto game in September and 2015 also saw a return of the Christmas Raffle Game. Sales through our interactive channel were €23m , representing 3.4% of total sales. As required by the licence to operate the National Lottery, 65% of Gross Gaming Revenue (sales less prizes) is paid to fund Good Causes. In the year ended 31 December 2015, PLI generated funds to Good Causes of €188.0m. The consolidated statement of comprehensive income for the year ended 31 December 2015 and the consolidated statement of financial position are on pages 9 and 10 respectively.

KEY PERFORMANCE INDICATORS (KPls)

KPI

Gross ticket sales Prizes Prizes as a percentage of sales Funds for Good Causes Operating profit/(loss) Number of retail agents

2015

€670.4m €381.1m 56.85%

€188.0m €7.4m 4,002

2014 *

€56.8m €32.7m 57.6%

€15.7m (€5.4m)

3,726

* In the prior period the company commenced trading on 30 November 2014.

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DIRECTORS' REPORT (CONTINUED)

FUTURE DEVELOPMENTS AND THE YEAR AHEAD

PLI is focused on growing sales, offering players a wide choice of games and maximising the funds raised for Good Causes. This will be achieved through the ongoing development of our games and the development of our online channel.

The key risks facing the Company include the Company's significant reliance upon its IT and telecommunications infrastructure and retailer operations, the delivery of promises made in its bid for the Licence, and the impact of general economic factors on the Company. The Directors have developed a range of strategies to address these and other risks faced by the Company which have been discussed within Note 13 Financial Risk Management.

FINANCIAL INSTRUMENTS

The company is exposed to certain levels of credit, interest rate and liquidity risks that arise in the normal course of business. Details of these risks are disclosed in Note 13.

EMPLOYEES

The Company is an equal opportunities employer. All applications for employment are given full and fair consideration, due regard being given to the aptitude and ·ability of the individual and the requirements of the position concerned.

All persons are treated on equal terms as regards to training, career development and promotion.

The well-being of staff working in the Company is safeguarded through the strict adherence to health and safety standards. The Safety, Health and Welfare at Work Act, 2005 imposes certain requirements in respect of staff and the Company has taken the necessary action to ensure compliance with the Act, including the adoption of a Safety Statement.

DIRECTORS AND SECRETARY

The names of the directors who served at any time during the year under review are:

Directors Lee Sienna Nigel Railton Peter Quinn Donal Connell llya Kachko

None of the directors hold a beneficial interest in, or options to acquire, shares in the CompaD¥------- - - -

Secretary Jenny Fisher

On 1 December 2015, Wilton Secretarial Limited resigned as company secretary and Jenny Fisher was appointed.

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PREMIER LOTIERIES IRELAND LIMITED


ACCOUNTING RECORDS

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The measures that the directors have taken to secure compliance with the requirements of sections 281 to 285 of the Companies Act 2014 with regard to the keeping of accounting records, are the employment of appropriately qualified accounting personnel and the maintenance of computerised accounting systems. The company's accounting records are maintained at the company's registered offices at Lower Abbey Street, Dublin 1.

AUDITORS

The auditors, Deloitte Chartered Accountants and Statutory Audit Firm, will continue in office in accordance with Section 383(2) of the Companies Act 2014.

By order of the Board

~- ~ Lee Sienna Director 22 March 2016

Donal Connell Director

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DIRECTORS' RESPONSIBILITIES STATEMENT

The directors are responsible for preparing the directors' report and the financial statements in accordance with the Companies Act 2014 and the applicable regulations.

Irish company law requires the directors to prepare financial statements for each financial year. Under the law, the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union ("relevant financial reporting framework"). Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the company as at the financial year end date and of the profit or loss of the company for the financial year and otherwise comply with the Companies Act 2014. In preparing these financial statements, the directors are required to:

• select suitable accounting pqlicies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether the financial statements have been prepared in accordance with the applicable accounting

standards, identify those standards, and note the effect and the reasons for any material departure from those standards; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for ensuring that the company keeps or causes to be kept adequate accounting records which correctly explain and record the transactions of the company, enable at any time the assets, liabilities, financial position and profit or loss of the company to be determined with reasonable accuracy, enable them to ensure that the financial statements and directors' report comply with the Companies Act 2014 and enable the financial statements to be audited. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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Deloitte.

INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF PREMIER LOTTERIES IRELAND LIMITED

Deloi tte Chartered Accountants & St atutory Audit Firm

We have audited the financial statements of Premier Lotteries Ireland Limited for the year ended 31 December 2015 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Cash Flow Statement and the related notes 1 to 26. The financial reporting framework that has been applied in the preparation is the Companies Act 2014 and International Financial Reporting Standards (IFRSs) as adopted by the European Union ("relevant financial reporting framework").

This report is made solely to the company's members, as a body, in accordance with Section 391 of the Companies Act, 2014. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view and otherwise comply with the Companies Act 2014. Our responsibility is to audit and express an opinion on the financial statements in accordance with the Companies Act 2014 and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition , we read all the financial and non-financial information in the Reports and Consolidated Financial Statements for the financial year ended 31 December 2015 to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the financial statements:

• give a true and fair view of the assets, liabilities and financial position of the company as at 31 December 2015 and of its loss for the financial year then ended;

• have been properly prepared in accordance with the relevant financial reporting framework and, in particular, with the requirements of the Companies Act 2014.

Continued on next page/

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Member of Oeloitte Touche Tohmatsu

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Deloitte.

/Continued from previous page

INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF PREMIER LOTTERIES IRELAND LIMITED

Matters on which we are required to report by the Companies Act, 2014

• We have obtained all the information and explanations which we consider necessary for the purposes of our audit.

• In our opinion the accounting records of the company were sufficient to permit the financial statements to be readily and properly audited.

• In our opinion the information given in the directors' report is consistent with the financial statements. • The net assets of the company, as stated in the balance sheet are more than half of the amount of its called

up share capital and, in our opinion , on that basis there did not exist at 31 December 2015 a financial situation which under Section 40 ( 1) of the Companies (Amendment) Act, 1983 would require the convening of an extraordinary general meeting of the company.

Matters on which we are required to report by exception

We have nothing to report in respect of the provisions in the Companies Act, 2014 which require us to report to you if, in our opinion , the disclosures of directors' remuneration and transactions specified by law are not made.

C;~-/-7 Ciaran O'Brien For and on behalf of Deloitte Chartered Accountants and Statutory Audit Firm Dublin

Date: 20 April 2016

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l PREMIER LOTTERl.ES IRELAND LIMITED

STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

Period from Year Ended . 22/05/2013 to

31/12/2015 31/12/2014 Notes €m €m

Gross ticket sales 3 670.4 56.8 Prizes (381.1) (32.7) . Good Causes (188.0) (15.7)

NET INCOME 101.3 8.4

Commissions (41.9) {3:6)

GROSS PROFIT 59.4 4 .8

" Administrative expenses (52.0) (10.2)

OPERATING PROFIT/(LOSS) 4 7.4 (5.4)

Finance expense 6 (27.5) . (14.1)

LOSS BEFORE TAXATION (20.1) (19.5)

Taxation 7 (0.2) 2.1 I

LOSS FOR THE FINANCIAL YEAR/PERIOD AT.TRIBUTABLE · I,

TO SHAREHOLDERS (20.3) (17.4)

Other comprehensive losses:

Cash flow hedging - fair value losses 14 (2.9) Tax relating to components of other comprehensive losses 14 0.4 Actuarial gain on retirement benefit obligations 17 0.1

OTHER COMPREHENSIVE LOSS FOR THE FINANCIAL YEAR/PERIOD, NET OF TAX 0.1 (2.5)

TOTAL COMPREHENSIVE LOSS FOR THE FINANCIAL YEAR/PERIOD (20.2) (19.9)

The results detailed above are all derived from continuing operations.

The notes on pages 13 to 37 are an integral part of these financial statements.

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STATEMENT OF FINANCIAL POSITION AS AT 31DECEMBER2015

ASSETS NON-CURRENT ASSETS Intangible assets Property, plant and equipment Deferred tax assets Financial assets

CURRENT ASSETS Trade and other receivables Financial assets Cash and cash equivalents

TOTAL ASSETS

LIABILITIES CURRENT LIABILITIES Trade and other payables Amounts due to related parties Financial liabilities - borrowings

NON-CURRENT LIABILITIES

Amounts due to related parties Financial liabilities - borrowings Derivative financial liabilities Retirement benefit obligations Provisions for liabilities and charges

TOTAL LIABILITIES

EQUITY CAPITAL AND RESERVES Called up share capital Other reserves Retained earnings

TOTAL EQUITY

TOT AL EQUITY AND LIABILITIES

8 9

19 11

Notes

10 11 12

18 16 15

16 15 14 17 20

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31/12/2015 €m

397.1 13.9 2.3 2.8

416.1

34.6 2.9

15.7

53.2

469.3

67.0 2.8 8.8

78.6

184.7 170.0

2.9 0.2 0.3

358.1

436.7

3.6 66.7

(37.7)

32.6

469.3

The notes on pages 13 to 37 are an integral part -of these financial statements.

31/12/2014 €m

416.8 14.0 2.5 3.6

436.9

21.5 3.5

18.5

43.5

480.4

52.6 7.0 3.2

62.8

169.0 192.5

2.9 0.1 0.3

364.8

427.6

3.6 66.6

(17.4)

52.8

480.4

The financial statements were approved by the Board of Directors .on 22 March 2016 and signed on its behalf

:~ Donal Connell Director Director

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STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIALYEAR ENDED 31DECEMBER2015

Share Other Retained Total capital reserves earnings equity

Notes €m €m €m €m

Balance as at 31 December 2014 3.6 66.6 (17.4) 52.8

Comprehensive income Loss for the financial period (20.3) (20.3) Actuarial gain on retirement benefit obligations 17 0.1 0.1

. Fair value losses on cash flow hedges, net of tax 14

Total comprehensive income 0.1 (20.3) (20.2)

Balance as at 31 December 2015 · 3.6 66.7 (37.7) 32.6

In respect of the prior financial period : Share Other Retained Total

capital reserves earnings equity Notes €m €m €m €m

Balance as at 22 May 2013 Issue of share capital 24 3.6 3.6 Capital contribution received 69.1 69.1

Comprehensive income Loss for the financial period (17.4) (17.4) Fair value losses on cash flow hedges, net of tax 14 (2.5) (2.5)

Total comprehensive income (2.5) (17.4) (19.9}

Balance as at 31 December 2014 3.6 66.6 (17.4} 52.8

The notes on pa.ges 13 to 37 are an integral part of these financial statements.

The Company holds cash flow hedging contracts with the providers of the bank loans to hedge exposure to interest rate fluctuations (see notes 14 and 15). The movement in other reserves represents unrealised gains or losses on fluctuations in the value of the hedging contracts, net of tax. Realised costs of €Nil (2014: €0.1m) have been recognised within finance costs.

In the prior financial period the Company received capital contributions amounting to €69.1 m from its shareholders, as outlined in Note 23.

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CASH FLOW STATEMENT FOR THE FINANCIAL YEAR ENDED 31DECEMBER2015

Notes CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 25

NET CASH FROM OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment and intangible assets

NET CASH USED IN INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from bank borrowings Shareholder loans issued Proceeds from issuance of ordinary shares 24 Proceeds from shareholder capital contributions Repayments of loans Interest paid on loans

NET CASH (OUTFLOW)/INFLOW GENERATED FROM FINANCING ACTIVITIES

NET (DECREASE)/INCREASE IN CASH AND EQUIVALENTS

Net cash and cash equivalents at the beginning of the period

NET CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 12

Period from Year Ended 22/05/2013

31/12/2015 to 31 /12/2014 €m €m

33.1 21.4

33.1 21.4

(7.5) (427.3)

(7.5) (427.3)

7.0 205.2 163.0

3.6 69.1

(24.6) (5.0) (10.8) (11 .5)

(28.4) 424.4

(2.8) 18.5

18.5

15.7 18.5

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31DECEMBER2015

1. GENERAL INFORMATION

The Company is a private limited company incorporated and domiciled in Ireland. The address of its registered office is Premier Lotteries Ireland Limited, Lower Abbey Street, Dublin 1.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements for the year ended 31 December 2015 are set out below.

a) Basis of preparation . The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards as adopted by the European .Union (IFRSs as adopted by the EU), IFRIC Interpretations and the Companies Act 2014, applicable to companies reporting under IFRS.

The financial statements have been prepared under the historical· cost convention, unless otherwise stated.

The Company's accounting policies were selected by management considering all applicable IFRSs issued by the International Accounting Standards Board (IASB) by 31 December 2015.

i) At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

Title Effective Date

IFRS 5 (Amendment) Non-current Assets Held for Sale and 1 January 2016 Discontinued Operations

IFRS 7 (Amendment) Financial Instruments: Disclosures 1 January 2016

IFRS 9 Financial Instruments 1 January 2018

IFRS 1 O (Amendments) Consolidated Financial Statements 1 January 2016

IFRS 11 (Amendment) Joint Arrangements 1 January 2016

IFRS 12 (Amendment) Disclosure of Interests in Other Entities 1 January 2016

IFRS 14 Regulatory Deferral Accounts 1 January 2016

IFRS 15 Revenue from Contracts with Customers 1 January 2017

IFRS 16 Leases 1 January 2019

/AS 1 {Amendment) Presentation of Financial Statements 1 January 2016

/AS 16 (Amendments) Property, Plant and Equipment 1 January 2016

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE FINANCIAL YEAR ENDED 31DECEMBER2015

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

a) Basis of preparation (continued)

Title

/AS 1 (Amendment) Presentation of Financial Statements

/AS 16 (Amendments) Property, Plant and Equipment

/AS 19 (Amendment) Employee Benefits

/AS 27 (Amendment) Consolidated and Separate Financial Statements

/AS 28 (Amendments) Investments in Associates

/AS 34 (Amendment) Interim Financial Reporting

/AS 38 (Amendment) Intangible Assets

/AS 41 (Amendment) Agriculture

Effective Date

1 January 2016

1 January 2016

1 January 2016

1 January 2016

1 January 2016

1 January 2016

1 January 2016

1 January 2016

None of the standards and interpretations listed above are expected to have a material impact on the Group's results or assets and liabilities.

ii) Critical accounting assumptions and judgements

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting assumptions, and It also requires management to exercise its judgement and to make estimates in the process of applying the Company's accounting policies. The areas requiring a higher degree of judgement or areas where assumptions and estimates are significant to the financial statements are discussed below.

Intangible assets

The Group uses forecast cash flow information and estimates of future earnings to assess whether intangible assets are impaired and to assess useful economic lives. If the results of operations in future periods are less than those used in impairment testing, impairment may be triggered, or the useful economic life of an asset may be reduced. All impairment charges are recognised in the Statement of Comprehensive Income.

Taxation

The Company is primarily subject to corporation tax in Ireland and judgement and estimates of future profitability are required to determine the Company's deferred tax position. If the final tax position is different to that originally assumed, any resulting changes are reflected in the Statement of Comprehensive Income.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015


a) Basis of preparation (continued)

Derivative financial instruments

The Company uses derivative financial instruments to hedge its exposure to interest rate fluctuations. It is not the Company's policy to trade in financial instruments. Derivative financial instruments are recognised initially at fair value and are subsequently re-measured at fair value. At the end of the reporting period the' fair value was estimated by the use of independent valuations from third parties.

b) Segmental reporting

The Company does not publicly trade its equity or debt securities and is not in the process of issuing equity or debt securities in public securities markets. The Company is therefore outside the scope of IFRS 8 'Operating Segments' and as such has not presented operating segment disclosures.

c) Gross ticket sales

Gross ticket sales comprise the wagers placed across a portfolio of games that include drawbased games and scratchcards.

For draw-based games, income is recognised on a draw-by-draw basis, at the point the draw takes place. Where players wager in advance, this income is deferred and only recognised in the Statement of Comprehensive Income once the draw has taken place. ·

Scratchcards ticket income is recognised at the point of sale by agents. The Company's systems provide information when a new pac~ of tickets is opened, but not on the sale of individual tickets . Recognition at the point of sale by retailers is therefore achieved by estimating the level of unsold scratchcards held by the agents, based on an independently calculated statistical extrapolation of stock counts undertaken at a sample of agents at the financial year end.

d) Prizes

The prize structure complies with the requirements of Section 40 of the National Lottery Act, 2013 whereby, the total value of the prizes distributed by the National Lottery in any financial year of the operator shall be equal to or not less than 50 per cent of the total monies received by the operator in that year in respect of the sale of National Lottery tickets or such other greater percentage as may be specified in the licence. Prizes have been provided for as revenue is recognised on the basis of the game's particular prize structure. Any difference between the total amount provided and the amounts actually distributed is included within Trade and other payables in the balance sheet:

Scratchcard prizes are recognised as a percentage of ticket sales in line with the expected prize pay-out for that game.

Under the terms of the licence to operate the National Lottery, if prizes remain unclaimed for 90 days from either the draw date for draw-based games or the close of a Scratchcard game, they become expired and can be utilised for the promotion of the National Lottery.

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e) Good causes

Amounts charged to the Statement of Comprehensive Income represent the amounts arising due to the Good Causes based on cumulative accounting sales less prizes as recognised in accordance with the accounting policy set out in (d) above. The amounts recognised are calculated in line with the framework provided for in the operating Licence and the National Lottery Act 2013 under which the Company has operated during the financial year.

f) Net income

Income arises across a portfolio of games that includes draw-based games and scratchcards. All income is derived from and originates in Ireland. The presentation of net income is consistent with common practice within the gaming industry; ticket sales are accounted for under IAS 39 'Financial Instruments: Recognition and Measurement'. Net income is recorded and disclosed net of prize costs and amounts due to the Good Causes.

g) Intangible assets

All intangible assets are stated at cost less any accumulated amortisation and impairment losses.

Internally generated intangible assets

Costs relating to the development of software and The National Lottery website, including design a'nd content development, are capitalised as intangible assets only when the future economic benefits expected to arise are deemed probable and the costs can be reliably measured. Development costs not meeting these criteria are expensed in the Statement of Comprehensive Income as incurred. Capitalised development costs are amortised on a straight line basis over the period gaining economic benefit from the expenditure once the related product is available for use. Research costs are charged to the Statement of Comprehensive Income as incurred. Interactive development costs that relate to channels other than the website are also capitalised on the same basis. Assets under construction are not amortised until they are brought into use.

Separately acquired intangible assets

Intangible assets include the cost of purchasing the licence to operate the National Lottery, and directly attributable costs. The cost of the licence is being amortised on a straight line basis over the term of the operating licence, which runs to 2034.

Intangible software assets purchased separately , such as software licences that do not form an integral part of related hardware, are capitalised as intangible assets at cost and amortised over their useful economic life. Costs associated with maintaining software are charged to the Statement of Comprehensive Income as incurred.

Amortisation is provided on all intangible assets at such rates as to write off the cost of these assets in equal instalments, either over their expected useful lives or the rema ining operating Licence period thro'ughout which benefit is anticipated to be derived from the asset. The operating Licence runs to 2034.

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g) Intangible assets (continued)

The value of separately acquired and internally generated intangible assets is amortised in equal instalments as follows:

Operating Licence: - Operating Licence

Other Software: - Central gaming software and

Interactive software - Other software

Impairment of intangible assets

The period to the end of the operating Licence

The period to the end of the operating Licence or planned replacement date if earlier The shorter of four years and the period to the end of the operating Licence

The Company uses forecast cash flow information and estimates of future earnings to assess whether intangible assets are impaired with reference to their · useful economic lives. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. All impairment charges are recognised in the Statement of Comprehensive Income. ·

h) Property, plant and equipment

Property, plant and equipment is stated at cost less depreciation. The cost of property, plant and equipment includes the estimated cost of removing and disposing of the terminal assets held at retailer sites. Assets under construction are not depreciated until they are brought into use.

Depreciation is provided on all property, plant and equipment on a straight line basis to write off the cost of these assets in equal instalments either over their expected useful lives or the operating Licence period which runs to 2034.

The depreciation basis for the principal asset categories are as follows:

Terminal. related assets Lottery terminals

Media screens Permanent point-of-sale equipment

The period to the end of the operating Licence or planned replacement date if earlier 3 years The shorter of 2 - 5 years and the period to the end of the operating Licence

Computer equipment and other plant and equipment Computer hardware (excluding central gaming) The shorter of four years, and the

period to the end of the operating Licence

Central gaming systems and interactive hardware

Fixtures and fittings Other plant and equipment

The period to the end of the operating Licence or planned replacement date, if earlier 5 years Between 2 - 5 years, or planned replacement date, if earlier

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h) Property, plant and equipment (continued)

The residual values and useful economic lives of property, plant and equipment are reviewed annually. If an asset's carrying amount is greater than its estimated recoverable amount, the carrying amount is immediately written-down.

i) Operating lease rentals

Operating lease rentals are charged to the Statement of Comprehensive Income on a straight line basis over the lease term. Operating lease incentives are recognised as a reduction in the .rental expense over the lease term.

j) Financial assets

As required under the Euromillions Agreement, PLI and the other participating lotteries in the EuroMillions game have each established a EuroMillions Trust account. This is used for the settlement of all amounts due and for holding amounts in respect of future prizes as well as for holding deposits made by each lottery to safeguard against non-performance of its payment and other obligations. The Law Debenture Trust Corporation pie is the independent trustee which operates the trust accounts established by PLI and the other participating lotteries to protect the interests of prize winners and players.

The trust account and interest received thereon is subject to first fixed and floating charges in favour of the Trustee. The monies held in the trust accounts, which are not available to the Company in the course of its business, are managed by the Trustee in line with the investment guidelines issued by S.L.E who manage the operation of the EuroMillions game.

k) Trade and other receivables

Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows. The carrying amount of the asset is reduced through the use of a doubtful debtor provision, and the amount of the loss is recognised in the Statement of Comprehensive Income within 'administrative expenses'. When a trade receivable subsequently becomes uncollectible, it is written off against the doubtful debtor provision, in the financial year in which the bad debt is identified. Subsequent recoveries of amounts previously written off are credited against 'administrative expenses' in the Statement of Comprehensive Income. If collection is expected in one year or less they are classified as current assets. If not, they are presented as non-current assets.

I) Trade and other payables

Payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Trade payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

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m) Financial instruments (Cash and cash equivalents & borrowings)

Exposure to credit, interest rate, currency and liquidity risks that arise in the normal course of the Company's business are minimised by PLl's policies and controls, as disclosed in note 13.

The following policies for financial instruments have been applied in the preparation of the Company's financial statements. · ··

Cash and cash equivalents For the purpose of preparation of the Statement of Cash Flows,."cash and cash equivalents includes cash at bank and in hand, short-term deposits with ari original maturity period of three months or less and certain amounts classified as borrowings, .as detailed below.

Bank overdrafts that are an integral part of the Company's cash management are included in cash and cash equivalents where they have a legal right of set-off against positive cash balances. If the cash position after the set-off of the overdrafts. amounts to a net overdraft, these amounts are classified as borrowings, but are still classified ·as cash and cash equivalents for the purposes of the Statement of Cash Flows.

Borrowings Borrowings comprise amounts drawn down against the Co!llpariy's bank facilities, amounts (other than trade payables) due to related party undertakings and any bank overdrafts as defined above. They are recognised initially at fair value, ne.t. of tr?nsactions costs incurred .. Borrowings are stated at amortised cost; any. difference · between the proceeds (net of transaction costs) and the redemption amount is recognised in t!ie Statement of Comprehensive Income over the period of the borrowings using a straight line method. Borrowings are classified as current liabilities unless the Company has an uncondition.al right to defer settlement of the liability for at least 12 months after the balance sheet date.

n) Pensions ·-~ .. .

The Company provides pensions to its employees under ¢efin.ed benefit superannuation schemes and a defined contribution scheme. , ...

. In relation to the defined contribution scheme, contributions are accrued and recognised in operating profit or loss in the period in which they are earned by the relevant employees.

For the defined benefit schemes, the difference between the market value -of the schemes' assets and the actuarially assessed present value of the scM~mes' . liabilities, calculated using the projected unit credit method, is disclosed as a_n asset/liability on the statement of financial position.

The amount charged to operating profit or loss is the actuarially determined cost of pension benefits promised to employees earned during the year plus any benefit improvements granted to members during the year.

The expected return on the pension schemes' assets· during the year and the increase in the schemes' liabilities due to the unwinding of the discount rate during the year are shown as financing costs in the profit and loss account.

Any difference between the expected return on assets and that actually achieved and any changes to the liabilities due to changes in assumptions or because actual experience during the year was different to that assumed, are recognised as actuarial gains and losses in other comprehensive income.

19

PREMIER LOTIERIES IRELAND LIMITED



o) Taxation

Current tax is recognised based on the amounts expected to be paid or recovered under the tax rates and laws that have been enacted or substantively enacted at the balance sheet date.

Deferred income tax is provided in full, using the liability method, on temporary differences that arise between the carrying amounts of assets and liabilities for financial reporting purposes and their corresponding tax base. A temporary difference is a taxable temporary difference if it will give rise to taxable amounts in the future when the asset or liability is settled. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the asset can be offset. Deferred tax assets and liabilities recognised are not discounted. Deferred tax liabilities and assets are classified as non-current irrespective of the expected timing of the reversal of the underlying taxable temporary difference. Current tax assets and liabilities are shown separately on the face of the Balance Sheet.

p) Foreign currency

Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The financial statements are presented in Euro (€m}, which is the Company's functional and presentation currency.

Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the trading are recognised in the Statement of Comprehensive Income. All other foreign exchange gains and losses are presented in the Statement of Comprehensive Income within 'finance income or expense'. All other foreign exchange gains and losses are presented in the Statement of Comprehensive Income within administrative expenses.

q) Derivative financial instruments and hedging activities

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

The Company designates certain derivatives as hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge).

20

PREMIER LOTTERIES IRELAND LIMITED ·


... I •

"i

I:.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) . ;

q) Derivative financial instruments and hedging activities (continued)

The Company documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management' .objectives and strategy for undertaking various hedging transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. The fair values of various derivative instruments used for hedging purposes are disclosed in note 14. Movements on the hedging reserve in other comprehensive income are shown in note 14. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged item is less than 12 .months. Trading derivatives are classified as a current asset or liability.

Cash flow hedges ,• .. :

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income .. The gain or loss relating to the ineffective portion is recognised immediately in the Statement of Comprehensive Income. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss ·(for example, when the .forecast sale. that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a nonfinancial asset (for example, fixed assets), the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement .of the cost of the asset. The deferred amounts are ultimately recognised in depreciation int.he case of fixed assets. When a hedging instrument expires or is sold, or when a hedge no longer. meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recogn i~ed : .When a forecast transaction is no l.onger expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the Statement of Comprehensive lnc;ome.

3. GROSS TICKET SALES

The Company is operated and managed as a single business segment i.n one geographical area, Ireland, across a portfolio of games aimed to maximise the reach of the Natiorial Lottery. Gross ticket sales by type of game are analysed as follows:

Draw based games Scratchcard games incl IWG

YearEnd~d 31/12/2015

€m

.482.5 .· 187:9 t .

' 67.0.4

Period from 22/05/2013 to

31/12/2014 €m

39.3 17.5

56.8

21

., '

I



4. OPERATING PROFIT/(LOSS) Period from Year Ended 22/05/2013 to

31/12/2015 31 /12/2014 €m €m

Operating profit/(loss) is stated after charging:

On-line facilities and services costs 7.2 0.5 Employee expenses - Note 5 7.7 0.6 Accommodation costs 1.8 0.2 Other overheads 11.5 1.0 Transition costs 0.1 6.0 Amortisation of intangibles - Note 8 ·22.2 1.8 Depreciation on property, plant and equipment - Note 9 1.5 0.1

Administrative expenses 52.0 10.2

Other overheads includes: €'000 €'000

Operating lease rentals - land & buildings 829 61 Directors remuneration

€'000 €'000 Auditors' Remuneration

Audit of the company financial statements 81 25 Other assurance 17 Tax advisory Non-audit services

98 25

5. EMPLOYEE EXPENSES AND NUMBERS

On 30 November 2014, the management team and staff of the incumbent operator of the National Lottery, transferred to PLI. Prior to that date, the Company did not have any employees ..

Employee expenses Wages and salaries Social welfare costs Other pension costs (Note 17)

Key Management Personnel Costs Salaries and short term employee benefits

Year Ended 31/12/2015

€m

6.4 0.4

. 0.9

7.7

1.2


31 /12/2014 €m

0.5 0.0 0.1

0.6

0.1

Key management is considered to be the Executive Team, which comprises the CEO and Heads of departments, who meet regularly to discuss the Company's performance and make key operating decisions.

22

r

PREMIER LOTTERIES IRELAND LIMITED :


5. EMPLOYEE EXPENSES AND NUMBERS (CONTINUED)

Average number of employees Marketing and distribution Administration

2015 Number

40 50

90

2014* Number

36 45

81

*Employees transferred to PLI on 30 November, 2014, so these reflect the average for the period from that date to 31 December 2014.

6.

7.

FINANCE EXPENSE Period from Year Ended 22/05/2013 to 31/12/2015 31/12/2014

€m €m

Interest payable on term loans 11.1 6.4 Amortisation of loan fees 0.7 0.5 Interest expense on loans due to related parties .. 15.7 7.2

Finance expense 27.5 14.1

TAXATION Period from Year-Ended 22/05/2013 to 31/12/2015 31/12/2014

€m €m a) Corporation tax

Current taxation credit on income for the year/period 0.0 0.0 Deferred tax charge/(credit) (Note 19) 0.2 (2.1)

0.2 (2.1)

The taxation credit is based on a corporation tax rate of 12.5% for the financial year ended 31 December 2015. All taxable temporary differences have been recognised and are reflected in the deferred taxation balance. ·

b) Reconciliation of tax (charge)/credit

Loss before taxation

Taxation on loss at the standard rate of 12.5% (2014: 12.5%) (2015: 12.5%. 2014: 1~.5%)

Factors affecting charge: Expenses not deductible for tax purposes

Total taxation charge/(credit)

Year Ended 31/12/2015

€m

(20.1)

(2.5)

2.7

0.2


31/12/2014 €m

(19.5)

(2.4)

0.3

(2.1)

23



8. INTANGIBLE ASSETS Operating

Licence €m

Cost At 31 December 2014 408.6 Additions 0.0

At 31 December 2015 408.6

Accumulated amortisation At 31 December 2014 1.7 Charge for the financial year 20.5


Net book value



Computer software Total

€m €m

10.0 418.6 2.5 2.5

12.5 421 .1

0.1 1.8 1.7 22.2

1.8 24.0

10.7 397.1

9.9 416.8_

The intangible assets balance represents the investment in the Operating Licence to run the National Lottery, including associated costs and computer software.

In respect of the prior financial period :

Operating Computer Licence software Total

€m €m €m Cost Additions 408.6 ·10.0 418.6

At 31 December 2014 408.6 10.0 418.6

Accumulated amortisation Charge for the financial period 1.7 0.1 1.8

At 31 December 2014 1.7 0.1 1.8

Net book value

At 31 December 2014 406.9 9.9 416.8

24

PREMIER LOTTERIES IRELAND LIMITED .


9. PROPERTY, PLANT AND EQUIPMENT

Terminal related assets

€m Cost At 31 December 2014 12.2 Additions 0.5


Accumulated depreciation At 31 December 2014 0.1 Charge for the financial year 1.2


Net book value



In respect of the prior financial period :

Terminal related assets

€m Cost Additions 12.2


Accumulated depreciation Charge for the financial period 0.1


Net book value


'· .

·Computer equipment and other plant and

equipment Total €m . €m

2.0 14.2 0.8 1. .3

2.8 15.5

0.0 0.1 0.3 1.5

0.3 1.6

2.5 13.9

1,.9 14.0

Computer equipment and other pl~nt and

equipment Total €m €m

1.9 14.1 .

1.9 14.1

0.0 0.1

0.0 0.1

1.9 14.0

25

PREMIER LOTTERIES IRE_LAND LIMITED


10. TRADE AND OTHER RECEIVABLES:

Amounts falling due within one year

Trade receivables Amounts owed by the National Lottery Fund Prepayments

Trade receivables represent amounts due from agents.

31/12/2015 €m

19.9 13.3

1.4

34.6

31/12/2014 €m

14.4 5.9 1.2

21.5

As at 31 December 2014, trade receivables of €3.8m were not yet due for payment. All trade receivables balances that are past due but not impaired or provided for are between 1 and 3 months old. The recoverability of trade receivables held with agents is assessed on bank guarantees, and deposits held, the retailers' level of credit risk and impaired accordingly. Receivable balances that are past due are considered impaired when it is deemed uneconomical to pursue recoverability of the debt. At 31 December 2015, €60k of trade receivables were considered impaired or provided for (2014: Nil).

11. FINANCIAL ASSETS

Financial assets represent cash held in trust. As required by the Euromillions agreement, PLI has placed cash on deposit with approved financial institutions. The funds are held in trust by The Law Debenture Trust Corporation and are not freely available to the company for use in the operation of its business. The amounts are stated at fair value, being the actual cash amounts held in the accounts at the end of the financial period.

a) Non-current assets: amounts falling due after more than one year:

EuroMillions Deposit

31/12/2015' €m

2.8

31/12/2014 €m

3.6

The purpose of the EuroMillions deposit is to provide assurance to other EuroMillions participants for PLl's EuroMillions payment and other obligations. This amount (which may vary over time) will be repayable to PLI in accordance with the Trust Deed and will remain on deposit until the end of the operating Licence at which point it will be payable to the Irish Government.

b) Current assets: amounts falling due within one year:

EuroMillions Trust Funds held for prizes

This represents the funds held for the payment of prizes.

31/12/2015 €m

2.9

31 /12/2014 €m

3.5

26

PREMIER LOTTERIES IRELAND LIMITED .


12. CASH AND CASH EQUIVALENTS

Cash at bank and in hand

31/12/2015 €m

15.7

31 /12/2014 €m

18.5

Included within the Cash at bank and in hand balance at the end of the year is an amount of €11.6m (2014: €16.4m) relating to cash held for prizes.

13. FINANCIAL RISK MANAGEMENT

Exposure to credit, interest rate, liquidity and capital risks arise in the normal course of the Company's business. The likely impact of these risks on the Company's performance is deemed to be immaterial and therefore no sensitivity analysis has been presented in these financial statements

a) Credit risk

Bank guarantees and cash. deposits are in place with certain of the Company's agents and management has a credit policy in place which ensures the credit risk is monitored on an ongoing basis. Amounts invoiced to agents are collected within four working days. Agent agreements set out the Company's credit policy for late payments. New agreements were put in place with all agents with effect from 30 November 2014.

The credit policy has been approved by the Board and will be reviewed on a regular basis to ensure the Company's exposure to credit risk is minimised.

At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each class of financial assets in the balance sheet. The carrying value of financial assets approximates to fair value.

b) Interest rate risk

The Company ensures that the exposure to changes in interest rates is minimal. The Company has in place bank loan facilities. During the financial year, interest rates incurred on the facility loans have ranged from 4.50% to 5.31 %. ·

The Company's loan facilities are at floating rates of interest although the terms of the Company's borrowings require no less than 70% of interest exposure on these loans to be hedged until July 2023. This hedging has been achieved by cash flow hedging using interest rate swaps under which the Company receives EURIBOR and pays 0.735% on the hedged amount until June 2018, thereby significantly reducing exposure to interest rate risk. Restrictive covenants on the level of leverage and interest cover exist on these facilities. ·

During the prior financial period, the Company drew down on loan agreements with three related parties, Ontario Teachers' Pension Plan Board (OTPP), An Post and An Post Pension Plan. All three loan arrangements incur interest at a fixed rate of 9'.0% until maturity. All borrowings in the financial year were denominated in Euros.

27

: '



13. FINANCIAL RISK MANAGEMENT (CONTINUED)

c) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. This risk is managed to ensure that sufficient funding and liquidity is available to meet the expected needs of the Group together with a prudent level of headroom to allow for cash flow variations

The Company's current credit facilities comprise related party loans of €184. 7m (2014: €169m) and bank loans of €182.5m (2014: €196.1 ). The banking facilities include covenants.to maintain leverage below a set maximum minimum levels of interest cover and the Company plans to meet the required levels. The undrawn level of the banking facility loans, together with the Company's cash balances are the key measures of the Company's liquidity.

Regular review of cash flow forecasts, strategic plans and budgets guide the considerations of the adequacy of these facilities and determine the potential draw down of each.

Management monitors rolling forecasts of the Company's liqu idity position and cash and cash equivalents on the basis of expected cash flows . Cash flow forecasts are produced up to one year in advance and revised regularly. The Company's cash is subject to daily, weekly and monthly cycles that are factored into long~range cashflow forecasts which are regularly updated and reviewed by management.

The table below analyses the Company's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed are the contractual undiscounted cashflow. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

At 31 December 2015 Facility loan A Facility loan B Facility loan C Facility loan E Related party loans Trade and other payables

d) Capital risk

Mature in less than 1 year

€m

7.4

1.6 0.5 1.1

68.7

Mature between 1 and 2 years

€m

9.4

1.6 0.5

Mature between 2 and 5 years

€m

29.0

7.4 2.4

Mature in greater than 5

years €m

2.3 118.3

1.6 0.5

184.7

As part of the Company set-up, PLI entered into financing arrangements with a syndicate of five banks, which includes access to the loan facilities described in note 15. Under these arrangements the Company's surplus cash flow is predominantly utilised in the repayment of the loan facilities .

At 31 December 2015, the Company has loan facilities totalling €220m in place, of which €182.6m is outstanding. The Company has secured adequate capital resources through its trading a.nd banking facilities to continue in operational existence for the foreseeable future.

28



13. FINANCIAL RISK MANAGEMENT (CONTINUED)

e) Fair value estimation

The Company has in place interest swap arrangements which are held at fair value, by valuation method. The levels have been defined as follows:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 - Inputs other than quoted prices included within level 1 that are ob"Servable for the asset or liability, either directly (that is, as prices) or indirectly (derived from prices)

Level 3 - Inputs for the asset or liability that are not based on observable market data

The following table presents the Company's assets and liabilities that are measured at fair value at 31 December 2015.

Liability Level 1

€m Level2

€m Level3

€m Total

€m At 31 December 2015 Derivative liability used for hedging 2.9 Total liabilities 2.9

Specific valuation techniques applied to value financial instrumen.ts include the fair value of interest rate swaps, calculated as the present value of the estimated future cash ,flows based on observable yield curves.

There were no movements between levels between the prior financial p'eriod and the current financial year.

14. DERIVATIVE FINANCIAL INSTRUMENTS

Interest rate swaps: Cash flow hedges Tax relating to components of other comprehensive losses

31/12/2015 €m

2.9 (0.4)

2.5

31/12/2014 €m

2.9 (0.4)

2.5

The Company is required to hedge at least 70% of the interest cost on the floating rate bank facility loan debt and therefore has contracts in place with each of the bank loan providers to fix an element of the floating interest rates on its outstanding bank loans. At 31 December 2015, it had interest rate swaps executed with a notional principal of €144.6m fix.ing EURIBOR at 0.735%.

The hedging contracts are valued independently based on interest rate yield curves. As at 31 December 2015 the value of the swap contracts is €(2.9}m. Fluctuations in the value of the hedging contract are recognised through Other Reserves, refer to the Statement of Changes in Equity.

29

2.9 2.9

• '



15. FINANCIAL LIABILITIES - BORROWINGS

The financial liabilities of the Company consist of .bank facilities provided by a syndicate of banks.

a) Current liabilities: amounts falling due within one year;

Term loan A Term loan C Term loan E Fees incurred on arranging term loans

31/12/2015 €m

7.4 1.6 0.5

(0.7)

8.8

31/12/2014 €m

2.7 1.0 0.2

(0.7)

.3.2

The carrying value of current financial liabilities approximate to fair value. The current portion of the bank facility loans represents the amount repayable within a year of the balance sheet date.

b) Non-current liabilities: amounts falling due after one year;

Term loan A Term loan B Term loan C Term loan E Fees incurred on arranging term loans

31/12/2015 €m

40.7 118.3

10.6 3.4

(3.0)

170.0

31/12/2014 €m

51.3 126.0

15.0 3.9

(3.7)

192.5

Non-current liabilities represent the balances repayable on the term loans falling due after one year less the unamortised fees incurred on arranging the facilities. The loan balances are repayable in instalments up until the loan termination dates of 29 January 2021. The fees incurred on arranging the borrowing facilities are amortised over the terms of the loans using the straight line method. The lenders have fixed and floating charges over all of the Company's assets with the exception of the Licence itself, gaming cash (being amounts held by the Company in respect of liabilities to players), amounts held in Trust in respect of the EuroMillions game and certain other items as set out in the Licence.

c) Interest rate profile of financiai liabilities

The interest rate profile of borrowings is as follows:

Liabilities 2015

Term loan A, C and E

Term loan B

Interest rate swaps

Net fixed/floating principal

Capitalised fees

Total borrowings

Floating rate Fixed rate % €m % €m

EURIBOR + 4.5% 64.2 EURIBOR + 5.0% 118.3

--------------~

182.5 Receive EURIBOR _ _ ..._(1_4_4_.6..._) ___ 0_.7_3_5°_Yo _ __ 1_4_4_.6_

37.9 144.6 (3.7)

37.9 140.9

The current margins of 4.5%/5.0% shown above will reduce as the Company's leverage reduces.

30


. NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

16. AMOUNTS DUE TO RELATED PARTIES

..

During the financial year the Company has drawn down on loans with three of its shareholder, OTPP, An Post and An Post Pension Plan.

a) Current liabilities: amounts falling due within one year

Shareholder loans Amounts due to other related parties

31112/2015 €m

1.1 1.7

2.8

31 /12/2014 €m

1.1 5.9

7.0

\:,··. . The carrying value of current financial liabilities approximate to fair val.ue. Amounts above do norincur interest, and are repayable on demand. See note 23. ,.~ :- ..

'. : .

b) Non-current liabilities: amounts falling due after one year

Shareholder loans

31/12/2015 €m

:,· 184.7 f: ~.

,;:,.,

31 /12/2014 €m

169.0

Non-current liabilities represent the balances repayable to OTPP, An P9st and An Post Pension Plan, which are repayable by 2034 and bear interest at a rate of 9%. See note 23 .

17. RETIREMENT BENEFIT OBLIGATIONS

. . , ' .

The pension entitlements of employees arise under a number of defined benefit and defined contribution pension schemes, the assets of which are vested in independent trustees appointed by the Company for the sole benefit of employees and their dependents. Annual contributions are based on the advice of a professionally qualified actuary. i:· .,

/ ):· · .

The amounts charged in the statement of comprehensive income durih'g the year was as follows:

Defined benefit schemes Defined contribution scheme

~~- . .. 31/12/2015

€m

0.9

. 0.9

31/12/2014 €m

0.1

0.1

31

• 0

''



17. RETIREMENT BENEFIT OBLIGATIONS (CONTINUED)

The pension costs of the defined benefit scheme are assessed in accordance with the advice of an independent professionally qualified actuary. The first valuation of the scheme is due to be completed in 3 years of the commencement date. Therefore the Company and Trustees took initial funding advice in advance of the first actuarial valuation and the outcome of this advice was that the Company pay a contribution rate of 14.4% of pensionable salaries.

The financial assumptions used to calculate the retirement benefit liabilities under IAS 19 were as follows:

Valuation method Discount Rate Inflation Rate of salary increases Increase to pensions in payment

31/12/2015 Projected Unit

2.4% 1.8% 1.5% 1.5%

31/12/2014 Projected Unit

2.1% 1.8% 1.6% 1.6%

The mortality assumption for retired members is based on 98%PNLOO + CSO 2013 improvements post 2010. This follows the results of a longevity study completed by the Society of Actuaries in 2013. This longevity assumption has been adopted when determining the service cost for 2015. The expected lifetime of a participant who is age 65 and a participant who will be age 65 in 25 years time are shown in years below based on the above mortality tables:

Age

65 65 in 25years

Male

20.8 24.0

Female

23.3 26.0

As the scheme commenced on 30 November 2014, no contributions had been made into the scheme at 31 December 2014.

The market value of the assets of the scheme were as follows :

Equities Bonds Other

Fair value of Pension scheme assets Present value of defined benefit obligations

Pension liability

Movement in fair value of pension scheme assets :

Fair value of pension scheme assets at start of financial year Employer contributions Members contributions

Fair value of Pension scheme assets at end of financial year

31/12/2015 €m 0.5 0.2 0.1

0.8 (1.0)

(0.2)

31/12/2015 €m

0.7 0.1

0.8

31/12/2014 €m

(0.1)

<o.1)

31 /12/2014 €m

32



17. RETIREMENT BENEFIT OBLIGATIONS (CONTINUED)

18.

Movement in present value of defined benefit obligations :

Defined· benefit obligations at start of financial year Current. service costs Members contributions Actuarial gain

Defined benefit obligations at end of financial year

TRADE AND OTHER PAYABLES

Current liabilities

Prize liability Amounts payable National Lottery Fund Trade payables Other Payables VAT payable PRSI payable Accrual for scratchcard stocks held by agents . Accruals Deferred income

Trade and other payables

19. DEFERRED TAXATION

''

31/12/2015 31/12/2014 •, €m €m

(0.1) ~' . (0.9) (0.1)

(0.1) '!: 0.1

•' (1 .0) (Q.J)

. 31/1'2/2015 31 /12/2014 : €m €m

24.6 26.3 19.2 13.7 5.1 1.8 1.0 .0.6

" 0.2 .Q.2 0.2 0.1 5.1 4.1 5.9 1.4 5.7 4.4

67.0 52.6

Deferred taxation assets and liabilities are offset when there is a legally enforceable right to offset current taxation assets with the current tax liabilities.

Outstanding offset amounts are as follows:

31/12/2015 31/1 2/2014 Deferred tax asset €m €m

Tax losses 2.2 2.4 Other timing differences (0.3) (0.3) Tax relating to cash flow hedge 0.4 0.4

At 31 December 2.3 2.5

33

<. -'\

' .



20. PROVISIONS FOR LIABILITIES AND CHARGES Non Current

At start of the year Charged to the Statement of Comprehensive income

At end of the year

31/12/2015 €m 0.3

0.3

31/12/2014 €m

0.3

Provisions are recognised where the Company has legal or constructive present obligations as a result of past events. The provision held at 31 December 2015 represents the cost of decommissioning terminals and related equipment at agent sites, and the disposal of these assets. Provisions are discounted when the effect of the time value of money is material.

21. FINANCIAL COMMITMENTS AND CONTINGENT LIABILITIES

At the 31 December 2015, capital expenditure relating to the purchase of property, plant and equipment totalling €Nil (2014 : €Nil} was contracted for in the year but not yet incurred.

Fixed and floating charges have been given on the Euromillions trust account to the Trustee and on all other assets to the Company's lenders (see notes 2j) and 15b ).

Other than those noted above, there are no significant contingent _liabilities pertaining to the Company.

22. OPERATING LEASES

At the date of the statement of financial position, the Group has commitments under non-cancellable operating leases that fall due as follows:

Within one year Between two and five years After five years

At 31 December

31/12/2015 Property

€m

0.7 2.8 2.8

6.3

31/12/2014 Property

€m

0.8 2.8 3.5

7.1

34



23. RELATED-PARTY TRANSACTIONS

...

The Company is controlled by Premier Lotteries Ireland Holdings Limited. The Company's ultimate owner is Ontario Teachers' Pension Plan Board (OTPP).

Loans due to related parties

The loans incur a fixed rate of interest of 9.0% and are repayable by 2034. The Company has not made any repayments or interest payments during the financial year under review. In accordance with the terms of the loans, interest is capitalised within the loan balance on a quarterly basis. The outstanding balances including capitalised interest, and accrued but not yet capitalised interest, are as follows:

31/12/2015 31/12/2015 31/12/2014 31/12/2014 Accrued Capital Accrued Capital interest balance interest balance

€m ·Em €m €m

Ontario Teachers' Pension Plan 1.1 145.3 1.1 133.0 An Post 0.2 , 19.5 0.1 17.9 An Post Pension 0.2 19.5 0.1 17.9

1.5 18~.3 1.3 :!68.8

Included within the capital balances due to related parties is €21.4m of capitalised interest (2014: €5.9m).

Trading transactions with related parties

The An Post Group, is a related party by virtue of being a shareholder, provides the company with postal services on an ongoing basis. An Post also acts as an agent for the Company whereby it makes sales and pays prizes on behalf of the company in accordance with the standard terms and conditions and remuneration structure common to all of the Company's agents. The value of these services was €1.3m (2014: €0.3m) and amounts owed to An Post at 31 December 2015 Was €0.5m (2014: €0.3m).

Camelot Global Services Limited is a UK company whose ultimate owner is Ontario Teachers' Pension Plan. During the period, Camelot Global services Limited provided systems implementation and support services to PLI through its Irish registered branch, Camelot Global Services Ireland. The value of these services during the period was €5.6m (2014: €5.6m) and amounts owed to Camelot Global Services Ireland at 31 December 2015 was €1 .2m (2014: €5.6m).

24. SHARE CAPITAL

a) Authorised and allotted share capital

Authorised Ordinary shares divided into: 'A' shares €0.01 'B' shares €0.01

500,000,000 500,000,000

31/12/2015 €

5,000,000 5,000,000

10,000,000

31/12/2014 €

5,000,000 5,000,000

10,000,000

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f

'. PREMIER LOTTERIES IRELAND LIMITED


24. SHARE CAPITAL

Allotted, issued and folly paid Ordinary shares divided into: 'A' shares €0.01 'B' shares €0.01

b) Rights· and obligations

With regards to income:

363,586,700 11,000

31/12/2015 €

3,635,867 110

3,635,977

31/12/2014 €

3,635,867 110

3,635,977

Income is distributed amongst the holders of all A Ordinary Shares and B Ordinary Shares subject to the condition that the holders of B Ordinary Shares shall be entitled to a maximum dividend of . CAD$22,222 per annum and shall carry no further right to participate in income.

With regards to capital:

Capital is distributed firstly to the holders of B Ordinary Shares, the sum of €0.01 in respect of each ordinary share and the remainder amongst the A Ordinary Shareholders in proportion to the amounts paid up on the A Ordinary Shares.

With regards to voting and other rights:

In respect of voting and all other rights, the A Ordinary Shares shall confer on each holder the right to receive notice of and to attend, speak and vote at all general meetings of the Company save that, in respect of a general meeting at which a director is to be elected, the A Ordinary Shareholders shall not be entitled to participate in that part of the meeting which relates to the election of a director and shall have no right to vote on any such election. The B Ordinary Shares confer on each holder the right to receive notice of and to attend and speak but not vote at any general meeting of the Company, except that in a meeting at which a director is to be elected or removed, they shall have one vote per B Ordinary Share held.

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PREMIER LOTTERIES IRELAND LIMITED "

NOTES TO THE FINANCIAL STATEMENTS .(CONTINUED) FOR THE FINANCIAL YEAR ENDED 31DECEMBER2015

25. CASH GENERATED FROM OPERATIONS

Operating Profit/(Loss) for the financial year/period Adjustments for: - Depreciation and amortisation - Non Cash pension cost - Trade and other receivables - Trade and other payables - Cash in Trust

Cash generated from operations

26. ULTIMATE PARENT UNDERTAKING

Period from Year Ended 22/05/2013 to

31/12/2015 31/12/2014 €m €m

7.4 (5.4)

23.7 1.9 0.2 0.1

(12.8) (21.5) 13.3 .53.4

1.3 (7.1)

33.1 21.4

The immediate parent undertaking and controlling party is Premier Lotteries Ireland Holdings Limited, which is the parent undertaking of the smallest and largest group to consolidate these financial statements. The ultimate parent is Ontario Teachers Pension Plan Board (OTPP).

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