Interim Results

RNS Number : 1688C
888 Holdings plc
28 August 2008
 



 



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$131.5(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 NetherlandsThese 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 FranceSpainSwedenGreece and Denmark. Other EU Member States such as IrelandCyprusBelgiumEstonia, 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
30 June

2008


Six months

ended
30 June

2007


Year 

ended
31 December

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
30 June

2008

(unaudited)


Six months

ended
30 June

2007

(unaudited)


Year 

ended
31 December

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
200
8


30 June

2007


31 December

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
capital


Share
premium

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
3
0 June
200
8

(unaudited)


Six month

 ended
30 June

2007

(unaudited)


Year 

ended
31 December

2007

(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



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
31 December

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
30 June
200
8

Period ended
30 June
200
8

Period ended
30 June
200
8

Period ended
30 June

2007

Year ended
31 December

2007


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


    Operating profit 




Period ended
30 June

2008


Period ended
30 June

2007


Year ended
31 December

2007


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
3
0 June

2008


Period ended
30 June

2007


Year ended
31 December

2007



US$'000

(unaudited)

US$'000

(unaudited)

US$'000

(audited)

Administrative expenses (income)

 

-

(152)

552

 

 

 

 

 

Profit /(loss)from discontinued operations

 

-

152

(552)



    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.


    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.                


 


US$'000

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


Period ended

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










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