Interim Results
FOR IMMEDIATE RELEASE 30 January 2004
BETINTERNET.COM PLC
('the Company' or 'betinternet')
INTERIM RESULTS FOR 26 WEEKS TO 30 NOVEMBER 2003
betinternet.com plc, the global on-line gaming group, today announces interim
results for the 26 weeks to 30 November 2003.
Highlights of the results are:
* Turnover (including share of joint venture) increased 65% to £40.8m (2002:
£24.8m).
* Euro Off-Track turnover increased from £314,000 to £14.6m. First time
profit of £338,000 (group share £169,000) compared with 2002 loss of £
296,000 (group share of loss £148,000).
* Fixed Odds betting turnover increased 7.4% to £26.2m (2002: £24.4m).
* Abnormal results at start of European soccer season caused decline in gross
trading margin from 7.9% (2002) to 4.3%.
* Gross profit £1.1m (2002: £1.9m).
* Substantial cost saving programme implemented.
* Loss before tax and goodwill amortisation £1.1m (2002: loss £135,000).
* Basic and diluted loss per share 1.00p (2002: 0.12p).
* Customer accounts at period end increased 15.5% to 65,850.
Commenting on the results, Denham Eke, Chairman of betinternet, said 'These
results can only be described as very disappointing. However, in the last three
months, our gross margin has returned to the levels previously experienced, and
this should substantially improve the trading performance in the second half of
the year. On a further positive note, I am pleased to report that Euro
Off-Track achieved profitability during the period.'
ENDS
For further information:
betinternet.com plc Tel: 01624 629699
Paul Doona, Managing Director
Waughton Tel: 020 7796 9999
Robin Hepburn/Sorrel Davies
Notes to editors:
The following are attached:
* Interim Report
* Consolidated Profit & Loss Accounts
* Consolidated Balance Sheets
* Consolidated Cash Flow Statements
* Notes to the Accounts
N.B. Pari-mutuel (or `tote' wagering) refers to wagering into a `pool' where
dividends are paid to winners and the operator retains a percentage of the
`pool'.
INTERIM REPORT
CHAIRMAN'S STATEMENT
In my first statement as Chairman, which followed the publication of our
results for the period to 1st June 2003, I was able to report on a period of
substantial progress for your company. With equal candour, I have to report
that despite progress in many areas, the financial results for the 26 weeks to
30 November 2003 can only be described as very disappointing.
We were encouraged by our performance in 2002/03, and optimistic about the
prospects of our Scandinavian acquisition, Oddsalive.com. As a result, we
entered the new financial year in June 2003 with a cost base which assumed a
similar growth in Internet turnover to our previous experience, and the
attainment of a gross margin percentage in line with that achieved in the
previous financial year. Fixed Odds turnover did, in fact, increase to £26.2m
(2002: £24.4m). Unfortunately, following an abnormal run of results at the
start of the European soccer season, the margin from fixed-odds gaming (4.3%
compared with 7.9% in the same period last year), did not generate sufficient
surplus to absorb our overheads, and this has resulted in the loss reported
today. Accordingly, the directors do not recommend the payment of a dividend.
As a result, we have implemented a substantial cost saving programme, including
a 23% reduction in our staff. Planned expenditure has been cut back in other
areas; and all non-committed spend is being kept under review.
Running parallel with this, and having sought specialist external advice, we
have taken a number of initiatives designed to improve our management of risk.
We have continued to curtail our telephone wagering activity, thus further
substantially reducing the volatility of our operations.
During the last three months, our gross margin percentage has returned to the
levels previously experienced and, provided this is maintained, this should
substantially improve the trading performance in the second half of the
financial year.
On a further positive note, I am pleased to report that our joint venture
operation, Euro Off-Track, achieved profitability during the period. We have,
therefore, received, after the period-end, the first instalment of the amount
due to the company under the joint venture agreement. I am confident that Euro
Off- Track will contribute a steadily increasing stream of profit to your
company.
Denham Eke, Chairman 30th January 2004
OPERATING REVIEW
Overview of results
During the period to 30 November 2003, group turnover, including our share of
the Euro Off-Track joint venture, was 64% greater than for the similar period
last year, at £40.8m (2002: £24.8m). Excluding the joint venture, the turnover
increase was 7.4%.
As a result of the adverse trading conditions referred to in the Chairman's
Statement, gross trading margin fell to 4.3% for the period (2002: 7.9%). This
has resulted in a reduction in gross profit from £1.9m (2002) to £1.1m.
Overheads increased, in line with plan, by 23% (excluding amortisation of
goodwill) compared with the same period last year. As mentioned above,
overheads have now been reduced to a level commensurate with current levels of
activity.
Fixed Odds Wagering
The strategy of increasing our Internet business whilst reducing our dependence
on telephone wagering has continued. During the period Internet wagering
increased by 11.5% to reach £23.2m and its share of fixed odds turnover was
89%. Telephone turnover was 19% less than the same period last year at £3.0m.
The trend away from telephone wagering is likely to continue as the board
believes that telephone wagering is best managed as one of a number of routes
to market for its core Internet customers, rather than as a `stand-alone'
operation. Internet and telephone wagering are now being managed as one
operation with a common risk management approach. Back office systems are
currently being adapted to reflect this.
Fixed Odds turnover has increased by 7% compared with the previous period, but,
as reported above, gross margin fell to 4.3%, compared with 7.9% in the similar
period last year.
The number of bets wagered over the Internet grew by 16.5% when compared with
the 26 weeks to 1 December 2002, and totalled 1.05m. This is an encouraging
increase considering that the corresponding period included the 2002 Soccer
World Cup. Customer numbers also grew and were 65,850 at the period end, a
15.5% increase during the 26 week period.
Whilst this period has also proved tough for our competitors, your company has
suffered more than most due to its specialist soccer focus. In particular, the
low margin Asian Handicap proposition (i.e. eliminating the possibility of a
draw) made the company vulnerable to the results from a protracted period of
favourite teams winning in all the major European leagues.
Following an internal review, and with the help of external expert advice, the
company has refined its trading policies and is cautiously optimistic that
fixed odds margins will be restored to their previous levels. Indeed, in the 13
weeks prior to this report, the fixed odds operation achieved a gross margin of
7.9%.
The Scandinavian operations of Oddsalive.com have been fully absorbed within
betinternet. The number of active customers wagering and the region's
profitability have been materially below expectation, and have been a major
contributory reason for our failure to absorb overheads in the first half. As a
result, we no longer have any directly employed staff in the region and have
scaled back our marketing expenditure to reflect a more realistic out-turn from
the area. Despite this performance, Scandinavia remains our second largest
market, after the Far East, and will not be ignored.
The UK is our third largest market and our market share will only grow further
if we invest substantially in marketing. The board believes such action would
be to the detriment of our major Far East market, where we continue to see
better returns.
Pari - Mutuel Wagering
After a number of false dawns, it is pleasing to report that the Euro Off-Track
operation was profitable during the period under review. A net profit of £
338,000 was earned, of which the betinternet group share, was £169,000.
This business is still in a growth phase and efforts to establish a sustainable
business model, although much nearer fruition, continue to be hampered by both
regulatory uncertainty in the USA, and internal manoeuvrings in the US
thoroughbred industry. Nevertheless, we believe that Euro Off-Track is uniquely
placed to offer itself as a legitimate, recognised medium to access the vast US
pari-mutuel market and provide the means by which US operators can offer their
product to international customers.
Regulation
In our latest annual report we described the regulation of gaming around the
world as confused. It remains so. We continue to provide a properly controlled
and regulated environment for this leisure activity, and regularly review and
improve our payment systems to minimise the possibility of money laundering.
The Board believes regulation will eventually coalesce and success will come to
those who operate in a fully regulated jurisdiction, contribute their share of
duty, and provide a safe environment for players to enjoy spending their
leisure pound. We believe we already meet all these operational criteria from
our Isle of Man base.
The Future
The board intends to ensure that the core sports-book business returns to
profitability. The second half of the year will see the lucrative European club
competitions for football reaching their climax. With a return to more usual
margin levels and with the benefit from the reduction in the cost base, the
company's trading performance should improve substantially.
The board also intends to build upon the success of Euro Off-Track by
establishing other strategic alliances. With our partners, we are seeking ways
to exploit the technical lead provided by our `totalisator' hub, based in the
Isle of Man.
Despite the disappointing nature of these results, your board, having taken
appropriate corrective action, remains confident about the future prospects for
the company.
Paul Doona, Managing Director 30th January 2004
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
For the 26 weeks ended 30 November 2003
Note Before Goodwill Unaudited Unaudited Audited
goodwill amortisation 26 weeks
amortisation Total to 1 52 weeks
December to
2002
1 June
2003
£000 £000 £000 £000 £000
Turnover including share
of joint venture
Betting stakes received
Internet 1 23,203 - 23,203 20,751 50,375
Telephone 1 2,993 - 2,993 3,690 6,688
Joint Venture 14,566 - 14,566 314 1,016
40,762 - 40,762 24,755 58,079
Less share of joint (14,566) - (14,566) (314) (1,016)
venture turnover
Total group turnover 26,196 - 26,196 24,441 57,063
Cost of sales
Winnings paid and bets 1 (25,054) - (25,054) (22,487) (52,826)
laid off
Betting duty paid 1 (23) - (23) (32) (76)
Gross profit 1,119 - 1,119 1,922 4,161
Administration expenses (2,349) (109) (2,458) (1,913) (4,060)
Gross operating (loss)/ (1,230) (109) (1,339) 9 101
profit
Share of operating 169 - 169 (148) (239)
profit/(loss) in joint
venture
Total operating loss (1,061) (109) (1,170) (139) (138)
including share of joint
venture
Interest 3 - 3 4 8
Loss on ordinary (1,058) (109) (1,167) (135) (130)
activities before and
after taxation and
retained loss for the
period
Basic and diluted loss 3 (1.00) (0.12) (0.12)
per share (pence)
CONSOLIDATED BALANCE SHEET
As at 30 November 2003
Unaudited Unaudited * Audited
30 November 1 December 1 June
2003 2002 2003
£000 £000 £000
Fixed Assets
Intangible Assets 328 - 437
Tangible Assets 743 817 841
1,071 817 1,278
Current Assets
Debtors 1,161 1,042 1,611
Cash at bank and in hand 781 1,645 1,852
1,942 2,687 3,463
Creditors: amounts falling due within (1,484) (1,506) (1,876)
one year
Net Current Assets 458 1,181 1,587
Provision for Liabilities and Charges
Investment in joint venture
- share of gross assets 390 86 194
- share of gross liabilities (765) (539) (738)
- share of net liabilities (375) (453) (544)
Net Assets 1,154 1,545 2,321
Capital and Reserves
Called up share capital 1,167 1,087 1,167
Share Premium 6,928 6,237 6,928
Profit and loss account (6,941) (5,779) (5,774)
Equity Shareholders' Funds 1,154 1,545 2,321
* The unaudited balance sheet as at 1 December 2002 has been amended to
reflect the reclassification of development costs, previously classified as
intangible assets, as tangible assets.
CONSOLIDATED CASH FLOW STATEMENTS
For the 26 weeks to 30 November 2003
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks to
to to
30 1 December 1 June
November
2003 2002 2003
Note £000 £000 £000
Net cash outflow from operating 4 (900) (513) (995)
activities
Returns on investments and servicing 3 4 8
of finance
Capital expenditure 5 (128) (127) (377)
Acquisition of subsidiary - - 77
Cash outflow before use of liquid (1,025) (636) (1,287)
resources and financing
Financing 5 - 447 1,218
Decrease in cash in the period (1,025) (189) (69)
Reconciliation of net cash flow to movement in net
funds
30 1 December 1 June
November
2003 2002 2003
Note £000 £000 £000
Opening net funds 1,765 1,484 1,484
Decrease in cash in the period (1,025) (189) (69)
Cash outflow from movement in - 350 350
borrowings
Closing net funds 6 740 1,645 1,765
NOTES TO THE ACCOUNTS
1. Segmental analysis
Telephone Internet Total
26 weeks to 30 November 2003 £000 £000 £000
Betting stakes received 2,993 23,203 26,196
Winnings paid and bets laid off (2,896) (22,158) (25,054)
Betting duty paid (1) (22) (23)
Gross profit 96 1,023 1,119
Margin 3.2% 4.4% 4.3%
Telephone Internet Total
26 weeks to 1 December 2002 £000 £000 £000
Betting stakes received 3,690 20,751 24,441
Winnings paid and bets laid off (3,213) (19,274) (22,487)
Betting duty paid (8) (24) (32)
Gross profit 469 1,453 1,922
Margin 12.7% 7.0% 7.9%
2. Taxation
No provision for tax is required due to the availability of losses brought
forward.
3. Loss per share
The earnings per share calculation is based on the loss for the period after
taxation and the weighted average
number of shares in issue throughout the period.
Calculation of loss per share is based on losses of £1,167,000 (2002: £135,000)
and the weighted average
number of ordinary shares, being the equivalent of 116,687,027 (2002:
108,295,723) ordinary 1p shares.
The diluted loss per share is the same as the basic loss per share as the
adjustment to assume conversion of
dilutive ordinary shares would decrease the loss per share.
4. Reconciliation of operating (loss)/profit to net cash outflow from operating
activities
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
30 November 1 December 1 June
2003 2002 2003
£000 £000 £000
Operating (loss)/profit (1,339) 9 100
Depreciation and amortisation 335 287 544
charges
Decrease/(increase) in debtors 450 (219) (787)
Decrease in creditors (346) (590) (852)
Net cash outflow from operating (900) (513) (995)
activities
NOTES TO THE ACCOUNTS
Continued
5. Analysis of cash flows for headings netted in the cash flow statement
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
30 November 1 December 1 June
2003 2002 2003
£000 £000 £000
Capital Expenditure
Payments to acquire tangible fixed (128) (127) (382)
assets
Receipts from sale of tangible - - 5
fixed assets
(128) (127) (377)
Financing
Issue of shares including share - 797 1,568
premium
Repayment of borrowings - (350) (350)
- 447 1,218
6. Analysis of net funds
At 1 June Cash At 30
November
2003 Flow 2003
£000 £000 £000
Cash in hand and at bank 1,852 (1,071) 781
Bank overdraft (87) 46 (41)
1,765 (1,025) 740
7. Basis of preparation of the financial statements
The results for the period ended 30 November 2003 are prepared in accordance
with applicable accounting standards, using the same accounting policies as set
out in the group accounts for the year end 1 June 2003. The interim statements
are unaudited, but have been reviewed, in accordance with Auditing Practices
Board guidance by the Auditors, KPMG Audit LLC, whose report is included in the
interim report to be sent to shareholders.
The directors have considered the adequacy of the cash resources and working
capital available to the Group for the next 12 months and, having also taken
cognisance of the recent improvement in trading margins, are satisfied that the
Group has adequate resources to meet its obligations as they fall due. On this
basis the directors have concluded that it is appropriate to prepare the
financial statements on a going concern basis.
8. Other information
i) The comparative figures for the 52 weeks ended 1 June 2003 are not the
company's statutory accounts for that financial period. Those accounts have
been reported on by the company's auditors and delivered to the Companies
Registry. The report of the auditors was unqualified.
ii) All profits derive from continuing activities.
iii) The interim statement was approved by the board on 30th January, 2004.
iv) The interim statement will be posted to shareholders on 6th February 2004.
Further copies will be available for inspection from the Company's Head Office;
Viking House, Nelson Street, Douglas, Isle of Man IM1 2AH; and the Company's
Registered Office, Burleigh Manor, Peel Road, Douglas, Isle of Man, IM1 5EP.
V) The Company's nominated advisor and broker is Williams de Broe, PO Box 515,
6 Broadgate, London
EC2M 2RP.
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