888 Holdings Public Limited Company
('888' or the 'Company')
Interim Results for the six months ended 30 June 2008
888, one of the world's most popular online gaming entertainment companies, announces its interim results for the six months ended 30 June 2008.
Financial Summary†
US$ million
|
H1 2008
|
|
H1 2007
|
% change
|
|
|
Net Gaming Revenue
|
|
|
|
|
|
|
Casino
|
70.5
|
|
53.9
|
|
|
|
Poker
|
41.7
|
|
40.8
|
|
|
|
Emerging Offerings
|
19.4
|
|
2.2
|
|
|
|
Total Net Gaming Revenue
|
131.5
|
|
96.8
|
36%
|
|
|
Other Operating Income
|
3.8
|
|
-
|
|
|
|
Total Operating Income
|
135.4
|
|
96.8
|
40%
|
|
|
|
|
|
|
|
|
|
Operating expenses1
|
38.5
|
|
25.2
|
|
|
|
Research and development expenses
|
14.0
|
|
11.5
|
|
|
|
Selling and marketing expenses
|
43.5
|
|
34.3
|
|
|
|
Administrative expenses2,3
|
11.0
|
|
8.4
|
|
|
|
|
|
|
|
|
|
|
EBITDA 1,2,3
|
28.3
|
|
17.4
|
63%
|
|
|
Finance Income exchange gains or losses and loss on sale of fixed assets
Depreciation and Amortisation
|
1.8
(3.8)
|
|
3.3
(1.9)
|
|
|
|
|
|
|
|
|
|
|
Profit Before Tax3
|
26.3
|
|
18.9
|
39%
|
|
|
Basic EPS3 (cents)
|
5.5
|
|
4.0
|
38%
|
|
|
† Totals may not sum due to rounding.
Financial Highlights
EBITDA1,2,3 up 63% to US$28.3m (2006: US$17.4m)
Profit Before Tax3 up 39% to US$26.3m (H1 2007: US$18.9m)
Total Operating Income up 40% to US$135.4m (H1 2007: US$96.8m)
Net Gaming Revenue (NGR) up 36% to US$131.5m (H1 2007: US$96.8m)
Net cash from operating activities up 90% to US$29.5 (H1 2007: US$15.5)
Interim dividend of 2.5c per share (H1 2007: 1.8c) 39% increase
1 Excluding depreciation of US$2.6 million (H1 2007: US$1.9 million) and amortisation of US$1.3 million (H1 2007: nil)
2 Excluding exchange loss of US$0.1 million (H1 2007: gain of US$0.7 million) and capital loss on sale of fixed assets of US$0.1 million (H1 2007: nil)
3 Excluding share benefit charges of US$5.2 million (H1 2007: US$4.1 million)
Operational Highlights
888 now a comprehensive provider of all gaming segments as 888 brand developed through the launch of sports betting platform, 888sport (March 2008), and new bingo brand, 888ladies (February 2008)
Step-change for business-to-business (B2B) activities as 888 leverages assets to become a leading B2B provider to other operators
- Strategic partnerships signed with Sportech PLC and PokerDome
Integration of popular third party games onto the 888 platform continues through agreements with more than ten different providers which will see the launch of tens of new games in coming months
Gigi Levy, CEO of 888 commented:
'The first half of 2008 was very successful for 888 Holdings as our innovative strategy, enhanced offering and strong brand enabled us to achieve record half year results and a seventh consecutive period of quarter on quarter growth. Revenue from our core operations has been boosted by the successful launch of 888ladies and 888sport, and our addition of over 1,000 best of breed games will help increase revenue further.
Complementing our B2C activities, the first half of 2008 has also seen the successful development of our market leading B2B operations, which provide an enormously exciting opportunity for future growth.'
- ends -
Analyst and Investor Conference Call
Gigi Levy, Chief Executive Officer and Aviad Kobrine, Chief Financial Officer, will be hosting an analyst and investor conference call at 09.30 am (BST) today.
Dial-in number: +44(0)20 7806 1950
Passcode: 1618499
An audio replay of the presentation to analysts will be available from the investor relations section of 888's website (http://www.888holdingsplc.com) from late afternoon today.
Contacts and enquiries
888
Gigi Levy Chief Executive Officer +350 200 49800
Aviad Kobrine Chief Financial Officer +350 200 49800
Bell Pottinger Corporate & Financial
Nick Lambert/Andrew Benbow +44 (0) 20 7861 3232
Chief Executive Officer's Review
The first half of 2008 was very successful for 888 Holdings as our innovative strategy, enhanced offering and strong brand enabled us to achieve record half year results and a seventh consecutive period of quarter on quarter growth. Despite an increasingly competitive global market we have reported Total Operating Income of $135 million (H1 2007: US$97 million) and Profit Before Tax1 of US$26 million (H1 2007: US$19 million). Our Total Operating Income for the first half of 2008 is only 14% short of our entire revenue (US$157 million) in 2006, and is 40% up year on year, which demonstrates the pace of growth we can generate.
Pleasingly, we have achieved this increase in Total Operating Income with significant profit growth. Profit Before Tax1 has increased to US$26 million in the first half of the year (H1 2007: US$19 million). Basic earnings per share1 of 7.1 cents is 37% above H1 2007 (5.2 cents per share) and demonstrates clearly that with significant revenue growth we can also expand our margins and ensure further profitability.
These are very good results and in accordance with our stated dividend policy set out at the time of our 2005 flotation, we will be paying an interim dividend of 2.5 cents per share representing a 39% increase on H1 2007 (1.8 cents per share).
1 Excluding share benefit charges of US$5.2 million (H1 2007: US$4.1 million).
Delivering on our strategy
Our continued success in the first half of 2008 was based upon our ability to deliver on all aspects of our strategy, reaping the results from strategic investments made in 2007 both in our offering and brand, which have generated significant growth. In the first half we made additional strategic investments which we expect to deliver further growth in the second half of this year and in 2009.
The most recent development in our growth strategy has been the parallel process of integrating third party games into our platform and leveraging our assets to become a leading business-to-business (B2B) provider to other operators. This has proved very successful so far and will be an increasingly large contributor to our growth over the medium term.
The most important achievement in the first half of 2008 was the enormous change in our product offering. From being a provider of Casino, Poker and partially Bingo in 2007, we are now a comprehensive provider of all gaming segments, including the four cornerstones of online gaming (Casino, Poker, Sportsbetting and Bingo) and additional niche products (Live Dealer Casino and Backgammon). This expansion and diversification of our offering can be seen in the huge growth in our 'Emerging Offerings' segment (including Bingo, Sportsbook, Live Dealer Casino and Backgammon) from only US$2 million in H1 2007 to US$19 million in H1 2008. This market leading offering will continue to be the foundation of our future growth.
Further significant developments in our offering have included opening our platform to integration with games from other vendors. We have invested heavily both on the technical side in building our integration framework, and in signing games-integration contracts with more than ten different providers, giving us access to more than 1,000 games. We launched the first group of these games in Q2, and plan to launch many more in H2. We believe this innovative approach will increase customer loyalty and life-time value, as well as assisting us in customer acquisition. In parallel we continue to develop our core platform as well as launching additional games built in-house. This dual approach will remain our core strategy as we aim to continue building 'blockbusters' in-house whilst generating a 'long tail' of games through integration. This will also enable us to introduce games easily with a local flavour in our target markets.
H1 2008 also saw the launch of various new initiatives surrounding our brand and marketing. As part of the launch of our new offerings we have launched two new sub-brands under our 888.com umbrella brand. These are 888ladies, aimed at the female segment, and 888sport, our designated brand for sport fans. We have also continued to promote our traditional 888casino and 888poker brands in more than 30 countries globally. H1 2008 was also the first period in which we have invested resources in promoting our brand and offering via TV advertising in the UK. This high profile campaign, especially the award-winning 888ladies advertisement featuring Vic Reeves, has proved to be very successful and is a blueprint for greater TV advertising in the future.
The period also included more local marketing activities and campaigns than ever before ranging from significant offline campaigns to direct response online marketing. This has been complemented by an additional focus on Customer Relationship Management and loyalty programmes. These marketing efforts have helped us to achieve our highest number of active customers in the second quarter of the year, typically a weaker period. We are most satisfied with this growth across all our various markets and will continue investing in localised, integrated marketing and Customer Relationship Management in the second half of the year, as we penetrate new markets.
As previously stated, our most significant strategic move in 2007 was the move from a pure business-to-consumer (B2C) model to a combined approach which includes working with carefully selected strategic partners who are aiming to become online gaming 'virtual' operators. Given the current regulatory landscape, we expect new market participants in regulated jurisdictions and feel we are well positioned to partner with these new entrants to our mutual advantage. In 2007 we launched our first three partnerships; with Rileys in the UK, Tower Torneos in Latin America and Kamay in Central Europe. We continued the development of this new line of business in the first half of the year and, as illustrated by the recently announced deal with Sportech and partnership with PokerDome, we see this as a key growth area.
Regulation
The first six months of 2008 saw some further developments from the regulatory perspective. In Europe, we witnessed continued pressure from the EU Commission on EU Member States to liberalise their gaming markets. This culminated in the EU Commission initiating two new infringement proceedings against Sweden and Germany and two 'Reasoned Opinions' to Greece and the Netherlands. These moves signify positive progress towards a legal framework that will allow EU licensed operators like 888 to work openly in the EU. This pressure has resulted in several EU Member States contemplating and, in some cases advancing, a liberalised gaming sector. These Member States include France, Spain, Sweden, Greece and Denmark. Other EU Member States such as Ireland, Cyprus, Belgium, Estonia, the Czech Republic and Bulgaria are also considering revising their gaming laws to potentially regulate online gaming.
Outside Europe we see initial progress towards greater regulation in Asia Pacific, Latin America and South Africa. Progress in these jurisdictions could permit us to work in a properly-licensed environment. We still believe that the formation of a regulatory framework is the most sensible evolution for the online gaming and entertainment industry. We will continue monitoring the regulatory landscape and look for opportunities to operate in regulated markets.
On 5 June 2007 the Group announced that it had initiated preliminary discussions with the United States Attorney's Office for the Southern District of New York. It remains too early to assess any particular outcome of these discussions.
Responsible gaming
The first half of 2008 saw ongoing investment in our responsible gaming initiatives and further focus on the prevention of problem and underage gambling. We have invested significant resources in developing further automated tools enabling us to detect problematic gambling activity and hope these tools will strengthen our leading performance in this critical area. In addition, our educational efforts via the launch of a responsible gambling site, '888responsible.com', have increased further. This site now features a film aimed at helping parents detect underage gambling.
H2 2008 - Focus
The second half of 2008 will see the ongoing execution of our strategy with additional innovation around both our B2C and B2B activities.
We will continue to improve our offering, extend our platform, leverage our integration capabilities and sign exciting contracts with game providers. We expect to launch our first wave of new games in the coming months with a focus on local games, which will materially enhance existing customers' loyalty and help us to acquire new customers in new territories.
On the B2C side of the business, we will continue investing in the promotion of our brand and services and plan to focus special marketing activities and promotions on the seasonally strong fourth quarter. We have already launched our partnership with PokerDome and plan to launch the new Sportech offering to customers in the coming months. Finally, we have a strong pipeline of deals and expect to be able to close more deals in the second half of the year.
Outlook
The third quarter has started as expected, led by the Emerging Offerings as well as stronger Poker Net Gaming Revenue following the lower activity we saw throughout June and the Euro 2008 football championship. This is very reassuring given that Q3 is traditionally one of the seasonally weaker periods of the year and leads us to believe that we will see additional growth throughout H2.
Our Emerging Offerings will continue to be a main growth driver during the second half whilst we also expect to see growth in our core products of Casino and Poker. There will be many new game launches in H2 based on our integration platform and the deals announced with ten separate games providers.
Our B2B business is continuing to grow. The PokerDome and Sportech deals are on track and coupled with our pipeline of new deals makes us certain that B2B will become an increasingly important contributor to our H2 growth and in years to come.
Given current trading, the continuous growth in our Emerging Offerings, our successful B2B business, and our clear business strategy, we remain confident of delivering future growth in 2008.
Unaudited Financial Statements
Condensed Consolidated Income Statement
for the period ended 30 June 2008
|
|
Six months ended 2008 |
Six months ended 2007 |
Year ended 2007 |
|
Note |
US$'000 (unaudited) |
US$'000 (unaudited) |
US$'000 (audited) |
Net Gaming Revenue |
2 |
131,531 |
96,816 |
213,383 |
Other operating income |
2 |
3,826 |
- |
3,563 |
Total operating income |
|
135,357 |
96,816 |
216,946 |
|
|
|
|
|
Operating expenses |
|
42,312 |
27,110 |
64,864 |
Research and development expenses |
|
14,027 |
11,498 |
23,496 |
Selling and marketing expenses |
|
43,510 |
34,290 |
70,897 |
Administrative expenses |
|
16,368 |
11,800 |
24,660 |
Operating Profit before share benefit charges |
|
24,323 |
16,264 |
40,829 |
Share benefit charges |
|
5,183 |
4,146 |
7,800 |
|
|
|
|
|
Operating Profit Finance income |
|
19,140 1,977 |
12,118 2,600 |
33,029 4,957 |
Profit before tax before share benefit charges |
|
26,300 |
18,864 |
45,786 |
Share benefit charges |
|
5,183 |
4,146 |
7,800 |
|
|
|
|
|
Profit before tax |
|
21,117 |
14,718 |
37,986 |
Taxation |
|
2,243 |
1,337 |
3,199 |
Profit from Continuing operations |
|
18,874 |
13,381 |
34,787 |
Profit/(Loss) from Discontinued operations |
|
- |
152 |
(552) |
Profit after tax for the period attributable to equity holders of parent |
|
18,874 |
13,533 |
34,235 |
|
|
Six months ended 2008 (unaudited) |
Six months ended 2007 (unaudited) |
Year ended 2007 (audited) |
Earnings per share |
|
|
|
|
Continuing operations |
|
|
|
|
Basic |
|
5.5¢ |
4.0¢ |
10.3¢ |
Diluted |
|
5.4¢ |
3.9¢ |
10.1¢ |
Discontinued operations |
|
|
|
|
Basic |
|
0.0¢ |
0.0¢ |
(0.2)¢ |
Diluted |
|
0.0¢ |
0.0¢ |
(0.2)¢ |
Total |
|
|
|
|
Basic |
|
5.5¢ |
4.0¢ |
10.1¢ |
Diluted |
|
5.4¢ |
3.9¢ |
9.9¢ |
Condensed Consolidated Balance Sheet
at 30 June 2008
|
|
|
30 June 2007 |
|
|
|
US$'000 (unaudited) |
US$'000 (unaudited) |
US$'000 (audited) |
Assets |
|
|
|
|
Non-current assets |
|
|
|
|
Intangible assets |
|
42,211 |
41,746 |
40,656 |
Property, plant and equipment |
|
17,019 |
15,526 |
16,496 |
Financial assets |
|
344 |
- |
654 |
Deferred taxes |
|
654 |
672 |
537 |
|
|
60,228 |
57,944 |
58,343 |
Current assets |
|
|
|
|
Cash and cash equivalents |
|
87,931 |
87,285 |
104,308 |
Trade and other receivables |
|
22,840 |
12,847 |
19,530 |
|
|
110,771 |
100,132 |
123,838 |
Total assets |
|
170,999 |
158,076 |
182,181 |
|
|
|
|
|
Equity and liabilities |
|
|
|
|
Equity attributable to equity holders of the parent |
|
|
|
|
Share capital |
|
3,115 |
3,084 |
3,097 |
Share premium |
|
43 |
- |
- |
Available for sale reserve |
|
(415) |
- |
(105) |
Retained earnings |
|
96,716 |
71,515 |
89,735 |
Total equity attributable to equity holders of the parent |
|
99,459 |
74,599 |
92,727 |
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
39,075 |
60,584 |
63,040 |
Customer deposits |
|
32,465 |
22,893 |
26,414 |
Total liabilities |
|
71,540 |
83,477 |
89,454 |
Total equity and liabilities |
|
170,999 |
158,076 |
182,181 |
Condensed Consolidated Statement of Changes in Equity
for the period ended 30 June 2008
|
Share |
Share |
Available for sale reserve |
Retained earnings |
Total |
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
Balance at 1 January 2007 |
3,073 |
- |
- |
83,929 |
87,002 |
Net Profit for the period |
- |
- |
- |
13,533 |
13,533 |
Dividend paid |
- |
- |
- |
(30,082) |
(30,082) |
Issue of shares |
11 |
- |
- |
(11) |
- |
Share benefit charges |
- |
- |
- |
4,146 |
4,146 |
Balance at 30 June 2007 |
3,084 |
- |
- |
71,515 |
71,515 |
Valuation losses of available for sale investments |
- |
- |
(105) |
- |
(105) |
Net Profit for the period |
- |
- |
- |
20,072 |
20,072 |
Dividend paid |
- |
- |
- |
(6,123) |
(6,123) |
Issue of shares |
13 |
- |
- |
(13) |
- |
Share benefit charges |
- |
- |
- |
3,654 |
3,654 |
Balance at 1 January 2008 |
3,097 |
- |
(105) |
89,735 |
92,727 |
Valuation losses of available for sale investments |
- |
- |
(310) |
- |
(310) |
Net Profit for the period |
- |
- |
- |
18,874 |
18,874 |
Dividend paid |
- |
- |
- |
(17,058) |
(17,058) |
Issue of shares |
18 |
- |
- |
(18) |
- |
Exercise of market value options |
- |
43 |
- |
- |
43 |
Share benefit charges |
- |
- |
- |
5,183 |
5,183 |
Balance at 30 June 2008 |
3,115 |
43 |
(415) |
96,716 |
99,459 |
|
|
|
|
|
|
The following describes the nature and purpose of each reserve within equity.
Share Capital - represents the nominal value of shares allotted, called-up and fully paid for.
Share premium - represents the amount subscribed for share capital in excess of nominal value.
Available for sale reserve - represents the gain or loss arising from a change in the fair value of an available-for-sale financial assets.
Retained earnings - represents the cumulative net gains and losses recognised in the consolidated income statement.
Condensed Consolidated Statement of Cash Flows
for the period ended 30 June 2008
|
Six month ended (unaudited) |
Six month ended (unaudited) |
Year ended (audited) |
|
US$'000 |
US$'000 |
US$'000 |
Cash flows from operating activities |
|
|
|
Profit before income tax |
21,117 |
14,870 |
37,434 |
Adjustments for |
|
|
|
Depreciation |
2,556 |
1,864 |
4,192 |
Loss on sale of property, plant and equipment |
74 |
- |
- |
Amortisation |
1,252 |
- |
1,550 |
Interest received |
(2,205) |
(2,959) |
(5,434) |
Share benefit charges |
5,183 |
4,146 |
7,800 |
|
27,977 |
17,921 |
45,542 |
Decrease/(increase) in trade receivables |
2,278 |
(1,669) |
(7,241) |
Increase in other accounts receivables |
(5,588) |
(1,509) |
(2,620) |
Increase in trade payables |
1,733 |
1,508 |
2,186 |
Increase in member deposits |
6,051 |
222 |
3,743 |
(Decrease)/increase in other accounts payables |
(844) |
464 |
7,663 |
Cash generated from operations |
31,607 |
16,937 |
49,273 |
Income tax paid |
(2,069) |
(1,424) |
(3,075) |
Net cash generated from operating activities |
29,538 |
15,513 |
46,198 |
Cash flows from investing activities |
|
|
|
Acquisition of assets comprising of the online bingo business of Globalcom Limited |
(25,145) |
(11,104) |
(17,142) |
Purchase of property, plant and equipment |
(3,182) |
(4,357) |
(7,574) |
Development of intangible assets |
(2,807) |
- |
- |
Proceeds from sale of property, plant and equipment |
29 |
- |
- |
Interest received |
2,205 |
2,959 |
5,434 |
Acquisition of available for sale assets |
- |
- |
(759) |
Net cash used in investing activities |
(28,900) |
(12,502) |
(20,041) |
Cash flows from financing activities |
|
|
|
Exercise of share options |
43 |
- |
- |
Dividends paid |
(17,058) |
(30,082) |
(36,205) |
Net cash used in financing activities |
(17,015) |
(30,082) |
(36,205) |
Net decrease in cash and cash equivalents |
(16,377) |
(27,071) |
(10,048) |
Cash and cash equivalents at the beginning of the period |
104,308 |
114,356 |
114,356 |
Cash and cash equivalents at the end of the period |
87,931 |
87,285 |
104,308 |
Notes to the Condensed Consolidated Financial Statements
1 Basis of preparation
The consolidated interim financial information of the Group has been prepared in accordance with International Financial Reporting Standards, including International Accounting Standards ('IAS') and Interpretations (collectively 'IFRS'), adopted by the International Accounting Standards Board ('IASB') and endorsed for use by companies listed on an EU regulated market. The half yearly report has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority.
These results have been prepared on the basis of accounting policies expected to be adopted in the Group's full financial statements for the year ended 31 December 2008 which are not expected to be significantly different to those set out in note 2 to the Group's audited financial statements for the year ended 31 December 2007. In respect of development costs, the Group continues to follow the guidance of IAS 38 Intangible Assets in respect of capitalization of these costs. During the period the Group have put in place processes and placed procedures that enable it to ascertain technological feasibility before development costs are incurred and therefore be in a position to capitalize costs incurred after that point. The Group estimates the useful life of these assets as between 3 and 5 years.
The Group has adopted IAS 34 in the preparation of the interim financial statements.
The financial information is presented in thousands of US dollars (US$'000) because that is the currency the Group primarily operates in.
The comparatives for the year ended 31 December 2007 are not the Group's full statutory accounts for that year. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies in Gibraltar and is also available from the company's website. The auditors' report on those accounts was unqualified but it referred to a matter concerning the regulatory position of the Group to which the auditors' drew attention by way of emphasis without qualifying their report. The details concerning this matter are given in note 7.
The condensed set of financial statements included in this half-yearly financial report is unaudited and does not constitute statutory accounts.
The risks and uncertainties faced by the Group have not changed significantly since the 2007 Annual Report was published and still continue to represent risk during the remaining six months of the financial year.
2 Segment information
Business segments
|
Period ended 30 June 2008 |
|||
|
Casino |
Poker |
Emerging Offerings |
Consolidated |
|
US$'000 (unaudited) |
US$'000 (unaudited) |
US$'000 (unaudited) |
US$'000 (unaudited) |
Net Gaming Revenue |
70,474 |
41,659 |
19,398 |
131,531 |
Other operating income |
2,405 |
1,421 |
- |
3,826 |
Total operating income |
72,879 |
43,080 |
19,398 |
135,357 |
|
|
|
|
|
Result Segment result |
51,892 |
19,997 |
8,503 |
80,392 |
Unallocated corporate expenses1 |
|
|
|
61,252 |
Operating Profit |
|
|
|
19,140 |
Finance income |
|
|
|
1,977 |
Tax expense |
|
|
|
2,243 |
Profit for the period - continuing operations |
|
|
|
18,874 |
Profit for the period - discontinued operations (Note 4) |
|
|
|
- |
Profit for the period |
|
|
|
18,874 |
Assets |
|
|
|
|
Unallocated corporate assets |
|
|
|
170,999 |
Total assets |
|
|
|
170,999 |
Liabilities |
|
|
|
|
Segment liabilities - Poker2 |
|
|
|
24,161 |
Segment liabilities - Casino2 |
|
|
|
5,576 |
Segment liabilities - Emerging Offerings |
|
|
|
2,728 |
Unallocated corporate liabilities |
|
|
|
39,075 |
Total liabilities |
|
|
|
71,540 |
1 Including share benefit charges of US$5,183,000
2 Included in segment liabilities are amounts owed in respect of discontinued operations. Poker US$19,000 and Casino US$3,000
|
Period ended 30 June 2007 |
|||
|
Casino |
Poker |
Emerging Offerings |
Consolidated |
|
US$'000 (unaudited) |
US$'000 (unaudited) |
US$'000 (unaudited) |
US$'000 (unaudited)
|
Net Gaming Revenue |
53,852 |
40,808 |
2,156 |
96,816 |
Other operating income |
- |
- |
- |
- |
Total operating income |
53,852 |
40,808 |
2,156 |
96,816 |
|
|
|
|
|
Result Segment result |
33,051 |
21,547 |
1,494 |
56,092 |
Unallocated corporate expenses1 |
|
|
|
43,974 |
Operating Profit |
|
|
|
12,118 |
Finance income |
|
|
|
2,600 |
Tax expense |
|
|
|
(1,337) |
Profit for the period - continuing operations |
|
|
|
13,381 |
Profit for the period - discontinued operations (Note 4) |
|
|
|
152 |
Profit for the period |
|
|
|
13,533 |
Assets |
|
|
|
|
Unallocated corporate assets |
|
|
|
158,076 |
Total assets |
|
|
|
158,076 |
Liabilities |
|
|
|
|
Segment liabilities - Poker2 |
|
|
|
16,608 |
Segment liabilities - Casino2 |
|
|
|
6,215 |
Segment liabilities - Emerging Offerings |
|
|
|
70 |
Deferred acquisition liability - Emerging Offerings |
|
|
|
30,643 |
Unallocated corporate liabilities |
|
|
|
29,941 |
Total liabilities |
|
|
|
83,477 |
1 Including share benefit charges of US$4,146,000.
2 Included in segment liabilities are amounts owed in respect of discontinued operations. Poker US$288,000 and Casino US$102,000
|
Year ended 2007 |
|||
|
Casino |
Poker |
Emerging offerings |
Consolidated |
|
US$'000 (audited) |
US$'000 (audited) |
US$'000 (audited) |
US$'000 (audited) |
Net Gaming Revenue |
118,120 |
80,817 |
14,446 |
213,383 |
Other operating income |
2,111 |
1,452 |
|
3,563 |
Total operating income |
120,231 |
82,269 |
14,446 |
216,946 |
|
|
|
|
|
Result Segment result |
74,061 |
41,814 |
5,547 |
121,422 |
Unallocated corporate expenses1 |
|
|
|
88,393 |
Operating Profit |
|
|
|
33,029 |
Finance income |
|
|
|
4,957 |
Tax expense |
|
|
|
(3,199) |
Profit for the year - continuing operations |
|
|
|
34,787 |
Loss for the year - discontinued operations (Note 4) |
|
|
|
(552) |
Profit for the year |
|
|
|
34,235 |
Assets |
|
|
|
|
Unallocated corporate assets |
|
|
|
182,181 |
Total assets |
|
|
|
182,181 |
Liabilities |
|
|
|
|
Segment liabilities - Poker2 |
|
|
|
20,013 |
Segment liabilities - Casino2 |
|
|
|
5,533 |
Segment liabilities - Emerging Offerings |
|
|
|
868 |
Deferred acquisition liability - Emerging Offerings |
|
|
|
25,145 |
Unallocated corporate liabilities |
|
|
|
37,895 |
Total liabilities |
|
|
|
89,454 |
1 Including share benefit charges of US$7,800,000.
2 Included in segment liabilities are amounts owed in respect of discontinued operations. Poker US$82,000 and Casino US$13,000
Other than where amounts are allocated specifically to the Casino, Poker and Emerging Offerings segments above, the expenses, assets and liabilities relate jointly to all segments. Any allocation of these items would be arbitrary.
Geographical segments
The Group's performance can also be reviewed by considering the geographical markets and geographical locations within which the Group operates. This information is outlined below:
Total operating income by geographical market
|
Net Gaming Revenue |
Other operating income |
Total operating income |
Total operating income |
Total operating income |
|
Period ended |
Period ended |
Period ended |
Period ended |
Year ended |
|
US$'000 (unaudited) |
US$'000 (unaudited) |
US$'000 (unaudited) |
US$'000 (unaudited) |
US$'000 (audited) |
UK |
53,988 |
1,627 |
55,615 |
41,199 |
93,001 |
Europe |
58,907 |
1,924 |
60,831 |
40,062 |
90,067 |
Americas (excluding USA) |
10,655 |
275 |
10,930 |
8,100 |
18,028 |
Rest of World |
7,981 |
- |
7,981 |
7,455 |
15,850 |
Total operating income |
131,531 |
3,826 |
135,357 |
96,816 |
216,946 |
3 Operating profit
|
Period ended |
Period ended |
Year ended |
|
US$'000 (unaudited) |
US$'000 (unaudited) |
US$'000 (audited) |
Operating profit is stated after charging: |
|
|
|
Staff costs |
38,366 |
28,307 |
61,301 |
Audit fees |
247 |
161 |
349 |
Other fees paid to auditors in respect of taxation services |
8 |
- |
26 |
Depreciation |
2,556 |
1,864 |
4,192 |
Amortisation |
1,252 |
- |
1,550 |
Chargebacks and returned e-cheques |
2,251 |
998 |
2,846 |
Exchange loss/(gains) |
86 |
(741) |
(1,117) |
Capital loss on sale of fixed assets |
74 |
- |
- |
Payment service providers' commissions |
8,098 |
5,737 |
13,359 |
Share benefit charges - all equity settled |
5,183 |
4,146 |
7,800 |
4 Discontinued operations
Condensed Consolidated Income Statement
|
|
Period ended 2008 |
Period ended 2007 |
Year ended 2007 |
|
|
US$'000 (unaudited) |
US$'000 (unaudited) |
US$'000 (audited) |
Administrative expenses (income) |
|
- |
(152) |
552 |
|
|
|
|
|
Profit /(loss)from discontinued operations |
|
- |
152 |
(552) |
5 Earnings per share
Basic earnings per share from continuing operations
Basic earnings per share have been calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of shares in issue during the year.
Diluted earnings per share
In accordance with IAS 33, 'Earnings per share', the weighted average number of shares for diluted earnings per share takes into account all potentially dilutive shares and share options granted, which are not included in the number of shares for basic earnings per share. In addition, certain employee options have also been excluded from the calculation of diluted EPS as their exercise price is greater than the weighted averaged share price during the year and it would not be advantageous for the holders to exercise the option. The number of options excluded from the diluted EPS calculation is 4,270,906 (2007: 4,194,206).
|
Six months
ended
30 June
2008
|
Six months
ended
30 June
2007
|
Year
ended
31 December
2007
|
|
US$’000
(unaudited)
|
US$’000
(unaudited)
|
US$’000
(audited)
|
Profit from continuing operations attributable to ordinary shareholders
|
18,874
|
13,381
|
34,787
|
Weighted average number of Ordinary Shares in issue
|
340,627,981
|
338,097,734
|
338,837,328
|
Weighted average number of dilutive Ordinary Shares
|
347,363,994
|
344,209,550
|
346,069,425
|
Continuing operations
|
|
|
|
Basic
|
5.5¢
|
4.0¢
|
10.3¢
|
Diluted
|
5.4¢
|
3.9¢
|
10.1¢
|
Discontinued operations (Note 4)
|
|
|
|
Basic
|
0.0¢
|
0.0¢
|
(0.2)¢
|
Diluted
|
0.0¢
|
0.0¢
|
(0.2)¢
|
Total
|
|
|
|
Basic
|
5.5¢
|
4.0¢
|
10.1¢
|
Diluted
|
5.4¢
|
3.9¢
|
9.9¢
|
|
|
|
|
Earnings per share excluding share benefit charges
Reconciliation of profit to profit excluding share benefit charges:
|
Six months
ended
30 June
2008
|
Six months
ended
30 June
2007
|
Year
ended
31 December
2007
|
|
US$’000
(unaudited)
|
US$’000
(unaudited)
|
US$’000
(audited)
|
Profit from continuing operations attributable to ordinary shareholders
|
18,874
|
13,381
|
34,787
|
Share benefit charges
|
5,183
|
4,146
|
7,800
|
Profit excluding share benefit charges
|
24,057
|
17,527
|
42,587
|
Weighted average number of Ordinary Shares in issue
|
340,627,981
|
338,097,734
|
338,837,328
|
Weighted average number of dilutive Ordinary Shares
|
347,363,994
|
344,209,550
|
346,069,425
|
Continuing operations
|
|
|
|
Basic earnings per share excluding share benefit charges
|
7.1¢
|
5.2¢
|
12.6¢
|
Diluted earnings per share excluding share benefit charges
|
6.9¢
|
5.1¢
|
12.3¢
|
Discontinued operations (Note 4)
|
|
|
|
Basic earnings per share excluding share benefit charges
|
0.0¢
|
0.0¢
|
(0.2)¢
|
Diluted earnings per share excluding share benefit charges
|
0.0¢
|
0.0¢
|
(0.2)¢
|
Total
|
|
|
|
Basic earnings per share excluding share benefit charges
|
7.1¢
|
5.2¢
|
12.4¢
|
Diluted earnings per share excluding share benefit charges
|
6.9¢
|
5.1¢
|
12.1¢
|
6 Contingent liabilities
From time to time the Group is subject to legal claims and actions against it. The Group takes legal advice as to the likelihood of success of such claims and actions.
Regulatory issues
As part of the Board's ongoing regulatory compliance and operational risk assessment process, the Board continues to monitor legal and regulatory developments, and their potential impact on the business, and continues to take appropriate advice in respect of these developments.
Following the enactment of the UIGEA on 13 October 2006, the Group stopped taking any deposits from customers in the US and barred such customers from wagering real-money on all of the Group's sites.
Notwithstanding this, there remains a residual risk of an adverse impact arising from the Group having had customers in the US prior to the enactment of the UIGEA. The Board is not able to identify reliably at this stage what if any liability may arise and accordingly no provision has been made.
On 5 June 2007 the Group announced that it had initiated preliminary discussions with the United States Attorney's Office for the Southern District of New York. It is too early to assess any particular outcome of these discussions.
7 Related party transactions
During the period the Group paid US$155,000 (2007: US$115,000) in respect of rent and office expenses to companies of which Mr John Anderson is a Director. At 30 June 2008 the amount owed to those companies was US$27,000 (2007: US$nil).
Remuneration paid to the Directors during the period totaled US$1,355,000 (2007: US$1,326,000). These figures exclude provision for performance based bonuses which depend on full year results.
Share benefit charge in respect of awards granted to the Directors totaled US$1,247,000 (2007: US$2,011,000).
8 Acquisition made during the prior year
Online Bingo business
On 16 May 2007 the Group acquired the assets comprising the online Bingo business of Globalcom Limited ('Bingo Business') for an all cash consideration.
In calculating the goodwill arising on acquisition, the fair value of the net assets of the Bingo business has been valued by a professional valuation firm and recognised in accordance with IFRS 3 and adjustments from book value have been made where necessary. These adjustments are summarized as follows:
|
Book Value on acquisition US$'000 |
Fair value adjustments US$'000 |
Fair Value US$'000 |
|
|
|
|
Property, plant and equipment |
81 |
- |
81 |
Intangible assets |
200 |
4,114 |
4,314 |
Net assets |
281 |
4,114 |
4,395 |
|
|
|
|
The fair value relates to the recognition of customer lists (US$888,000), royalty agreements (US$1,113,000), licensing agreements (US$2,113,000) and other intangible assets (US$200,000) acquired as part of the acquisition. These intangibles are being amortised over their estimated useful economic lives of between three months and four years. All intangible assets on acquisition have been identified and fair valued. The remaining goodwill represents the access to future trade with the Bingo customers.
|
|
Fair value of net assets acquired |
4,395 |
Goodwill |
37,892 |
Fair value of consideration including expenses |
42,287 |
|
|
Which is represented by: |
|
Cash consideration to Globalcom Limited (paid during the year 2007) |
10,723 |
Deferred cash consideration to Globalcom Limited (paid during the year 2007) |
5,398 |
Deferred cash consideration to Globalcom Limited (paid during the year 2008) |
16,095 |
Earn-out payment (paid during the year 2008) |
9,050 |
Expenses & other costs |
1,021 |
Total cash consideration |
42,287 |
The revenue and operating profit generated from this acquisition in the post-acquisition period to 31 December 2007 were $14.4 million and $5.2 million, respectively. Had the business been owned for the entire year, the revenue and operating profit would have been $20.2 million and $8.3 million respectively.
9 Option to acquire controlling interest in a business partner
With effect from 4 January 2008, the Group has an option to acquire the entire issued share capital of a third party company and consequently has control of this company under IAS27. The Group has not consolidated this company as it would have an insignificant impact on the results of the Group.
10 Dividends
|
Period ended 30 June 2008 |
30 June 2007 |
Year ended 31 December 2007 |
|
US$'000 (unaudited) |
US$'000 (unaudited) |
US$'000 (audited) |
Dividends paid |
17,058 |
30,082 |
36,205 |
The Board of Directors have declared an interim dividend of 2.5 cents per share payable on 31 October 2008.
Statement of Directors' Responsibilities
The directors confirm , to the best of their knowledge, that this condensed set of unaudited financial statements 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 4.2.7 and DTR 4.2.8.
The directors of 888 Holdings plc are listed in the Group's annual report and accounts for the year ended 31 December 2007 on page 32.
By order of the Board
Gigi Levy Chief Executive Officer |
Aviad Kobrine Chief Financial Officer |
Independent Review Report to 888 Holdings Public Limited Company
Introduction
We have been instructed by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity and related explanatory notes 1 to 10.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and has been approved by the directors.
The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements in respect to half-yearly financial reporting in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Preformed by the Independent Auditor of the Entity', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material aspects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Emphasis of matter - Regulatory issues
In forming our review conclusion, which is not qualified, we have considered the adequacy, and drawn attention to, the disclosures made in note 6 to the financial information concerning the residual risk of adverse action arising from the Group having had customers in the US prior to the enactment of the Unlawful Internet Gambling Enforcement Act. Note 6 includes a statement that the Group has not been able to quantify any potential impact of the regulatory uncertainty on the financial information for the period ended 30 June 2008.
BDO Stoy Hayward LLP
Chartered Accountants and Registered Auditors
55 Baker Street
London WIU 7EU
United Kingdom
28 August 2008