Half Yearly Report

RNS Number : 9431K

888 Holdings plc

29 August 2012

 



29 August 2012

888 Holdings Public Limited Company

("888" or the "Company")

Half Yearly Report for the six months ended 30 June 2012

888, one of the world's most popular online gaming entertainment and solutions providers, announces its half yearly results for the six months ended 30 June 2012.

Financial Summary¹

US$ million	H1 2012	H1 2011	% Change
Revenue
B2C
Casino	83.1	69.0	20%
Poker	41.3	24.0	72%
Bingo	26.9	27.6	-2%
Emerging Offering	12.3	10.2	20%
	163.6	130.8	25%
B2B	22.8	23.1	-1%
Revenue	186.4	153.8	21%
Operating expenses2,3	56.8	54.6
Gaming taxes and duties4	5.5	1.4
Research and development expenses	13.9	12.9
Selling and marketing expenses	61.7	49.9
Administrative expenses 3,5,6	12.6	15.1
EBITDA †	36.0	20.0	81%
Goodwill impairment	-	(20.2)
Finance income and expenses, and other	1.3	(8.2)
Depreciation and amortisation	(7.0)	(7.1)
Adjusted Profit (Loss) Before Tax3,4,5	30.3	(15.5)
Basic EPS (cents)7	7.2	1.0

Highlights

·      Interim dividend reinstated at 2.5 cents per ordinary share

·      Revenue up 21% to US$186 million (H1 2011: US$154 million)

·      Revenue B2C up 25% to US$164 million (H1 2011: US$131 million)

·      Revenue B2C Casino up 20% to US$83 million (H1 2011: US$69 million)

·      Revenue B2C Poker up 72% to US$41 million (H1 2011: US$24 million)

·      EBITDA ^† up 81% to US$36 million (H1 2011: US$20 million)

·      EBITDA ^† margin up to 19% (H1 2011: 13%)

·      PBT^3,4,5 increase to US$30 million (H1 2011: loss US$15.5 million)

·      Basic EPS⁷ increase to 7.2 cents (H1 2011: 1.0 cents)

¹ Totals may not sum due to rounding. ² Excluding depreciation of US$4.8 million (H1 2011: US$4.8 million) and amortisation of US$2.2 million (H1 2011 US$2.3 million). ³ Excluding restructuring costs of nil (H1 2011: US$4.9 million out of which US$1.0 from Operating expenses and US$3.9 million from Administrative expenses)^{. 4}Excluding one-off Spanish back gaming duty of US$11.1 million (H1 2011: nil). ⁵ Excluding equity settled share benefit charges US$0.8 million (H1 2011: US$1.6 million).⁶ Excluding goodwill impairment of nil (H1 2011: US$20.2 million). ⁷ See note 4 to the financial statements below.

^† Calculated as Operating profit of US$17.1 million (H1 2011: loss of US$13.9 million) excluding the items set out in footnotes 2,3,4,5 and 6.

Brian Mattingley, Chief Executive Officer of 888, commented:

"This has been an excellent first half of the year. The tremendous increase in customer numbers caused by the improvements in our product offering has led to these record results, with the highest revenues in the history of 888. On the back of this performance, the Board has decided to reinstate the interim dividend, while we retain the cash necessary to continue growing the company.

The second half of the year will see increased investment in Spain, where we will attempt to build on our impressive market share, and also in the United States, where we are preparing for regulatory changes. We will also continue to invest in our technological platform, the cornerstone of our offer, and make improvements to our mobile channel."

Analyst Presentation

A presentation for analysts will be held at 11:00 BST at M:Communications, 11th Floor, 1 Ropemaker Street, London, EC2Y 9AW.

Contacts and enquiries

888
Brian Mattingley, Chief Executive Officer	[phone]
Aviad Kobrine, Chief Financial Officer	[phone]
M:Communications
Ann-marie Wilkinson/Andrew Benbow	[phone]

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These statements contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning. By their nature, forward-looking statements involve risk and uncertainty since they relate to future events and circumstances. Forward-looking statements may and often do differ materially from actual results. All statements, other than statements of historical facts included in this announcement, including, without limitation, those regarding 888's financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to 888's products and services) are forward-looking statements that are based on current expectations. Such forward-looking statements are based on numerous assumptions regarding 888's operating performance, present and future business strategies, and the environment in which 888 will operate in the future. Any forward-looking statements in this announcement reflect 888's view with respect to future events as at the date of this announcement. Save as required by law or by the Listing Rules of the UK Listing Authority 888 expressly disclaims any obligation or undertaking, to disseminate any updates or revisions to any forward-looking statements, contained herein to reflect any change in its expectations, with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Past performance cannot be relied upon as a guide to future performance.

Chief Executive's Review

Introduction

This is my first interim report as Chief Executive of 888 and I am delighted to report that we have had an outstanding first half.  The renewed focus on core competencies that we have instilled throughout the business has paid off with ongoing strength in Poker and Casino helping achieve our highest ever six month revenues, and also making this the most profitable period in the history of 888 since the refocus of our business outside the US market in 2006. 

We have a clear strategy in terms of the customer proposition; in B2C we are targeting high volume, recreational players with high quality products; in B2B the focus now is much more on profits than simply the volume of deals. All of this is supported by an excellent back office with superior technology, which combined are driving more customers to our sites and, in turn, higher profit.

The value of the technology and the intellectual property at the core of the business is key to our success and we remain focused on preserving our technological edge.  Business analytics, using statistical modelling to drive marketing strategies and maximise player values, is a central tenet of our business model and the years of experience and data collection give us a strong competitive edge.  We have increased our investment in our in-house games development capability over the last twelve months, and we will focus on product innovation including new instant games.  It is the success of our platforms, coupled with the product, marketing and operations of our proposition, that attracts B2B partnerships and gives us a strong position in regulated markets.

Results

Revenue increased 21% to US$186 million (H1 2011: US$154 million) driven by strong customer acquisition, with a 48% year on year uplift in first time depositors in Poker and Casino.

EBITDA¹ increased 81% to $36 million.

The final pay-out was made to the Wink vendors and as at 30 June 2012 our cash position was US$22.9 million, net of customers' liabilities.

Given the strength of our financial performance the Board has therefore decided to reinstate the dividend, the payout being in accordance with our stated dividend policy set out at the time of our 2005 flotation, and we will be paying an interim dividend of 2.5 cents per share.

¹ Excluding equity settled share benefit charges of US$0.8 million (H1 2011: US$1.6 million), goodwill impairment of nil (H1 2011: US$20.2 million), restructuring costs of nil (H1 2011: US$4.9 million) and one-off Spanish back gaming duty of US$11.1 million (H1 2011: nil).

B2C Review

Our total B2C revenue was up 25% to US$164 million (H1 2011: US$131 million).

Poker remains the star performer of the product stable with revenue up 72% to US$41 million (H1 2011: US$24 million) and active customer numbers up 63% in Q2 2012, this is in addition to a very strong increase of 90% in active customers in the prior year.  We continue to be ranked 4th in the top ten of global poker liquidity by PokerScout.com.

Early in the year we launched our new casino front end, Casino 50.  Using multiple software platforms developed in-house, we believe it is now one of the most powerful and sophisticated platforms in the industry, offering a wide range of games and dazzling graphics. Casino 50 offers a huge range of online casino games including unique and innovative slot games with branded themes and progressive jackpot as well as new versions of Blackjack and Roulette which are appealing for card & table players. The video poker area offers seven variations of video poker starting up with progressive jackpots and going to 50-Hand Power Play. 

Bingo continues to be challenging and in a very competitive market but we are holding our position as the largest network in the UK, and performing in line with expectations.

Our Sports offering remains an important part of our product suite, and it continues to perform in line with expectations. Targeted marketing has helped to increase revenue year on year and we have seen success in our mobile strategy, with more users now placing bets through our dedicated 888Sport app.

The first half has seen significant progress in European regulated markets. Following the conclusion of discussions with the Spanish authorities regarding gaming duty payable in respect of operations prior to May 2011, 888 made a one-off payment of US$11.1 million. On 1 June 2012 we were awarded a Spanish eGaming licence.  We effectively and efficiently migrated customers to the regulated environment and have quickly built market share, with our poker offer currently number two in the Spanish market with a 24% market share for 888poker.es. In fact we have doubled our poker revenue from Spain compared to the period prior to regulation. We will look to consolidate and build upon this strong position as concerted marketing efforts step up in the second half of the year.

In Italy our market share has grown on the back of controlled investment. We will continue to increase our marketing investment throughout the second half of the year, which will also see the launch of slot machines into the Italian market.

We have also applied to receive an interactive gaming service provider licence from the Nevada Gaming Control Board, allowing us to offer our 888 brands in Nevada (in conjunction with licensed land based operators) once the market opens.

Whilst our focus has been on achieving good opening positions in regulated markets we have also been developing our mobile offering.  Our products are now available on mobile with bingo due to be released during the fourth quarter.  Currently 17% of our sportsbook bets are generated on mobile, and this is something that we will look to move towards across our product offering, helping to boost both new customer acquisition and total spend.  We will continue to make improvements to our mobile platform in the second half.

Mytopia, our social gaming business, has been fully integrated into 888, and the team there is now working alongside our excellent product developers. Social gaming remains a nascent industry, and one in which we are well positioned to remain ahead of the curve. We will continue to review our product suite, and expect Mytopia to continue to progress.

Dragonfish Review

As we expected, B2B revenues decreased 1% in H1, reflecting the impact of phasing out smaller unprofitable licenses as we focus on quality rather than quantity.

We are already operating Caesars Interactive Entertainment's (CIE) World Series of Poker online poker brand in the UK, a collaboration which received the approval of the Nevada Gaming Control Board (which included a finding of suitability for 888 by the Board). In addition, we announced a deal in January that extends our relationship with Caesars and will see Dragonfish power a selection of CIE's established and recognised poker brands including the "WSOP", once online gaming is permitted under the new regulatory regime.

This non-exclusive agreement marked the first strand in our US online strategy and indicated the strong platform that we can use to sign with further potential US partners. 

Following on from this, just after the period end, we announced a strategic agreement with gaming content and slots supplier WMS Gaming Inc.  The quoted US group is a major supplier of electronic games content and slot machines to the land based gaming industry internationally but in particular to the US. WMS has also been building up its online capability through a combination of acquisitions and strategic relationships. The deal involves us providing our online poker platform to WMS who will then market and distribute it to the group's land based casino customers. Initially the deal will involve play for fun but when the regulatory environment allows real money will be offered.  Whilst the true value of the deal with WMS will only be realised if online poker legislation develops positively, the deal reflects our growing presence in the US market.

Current Trading and Outlook

Trading during the 2012 London Olympic Games was in line with expectations with revenue during the period July-August 2012 higher by approximately 5% than the corresponding period last year.

In the second half of the year, margins will be impacted by investment in marketing as we consolidate and grow our positions in Spain and Italy and investment in our technological infrastructure ahead of delivering announced deals in the United States. 

We believe we are well placed for the future.  We have the right product offering and superior back office capabilities to grow and sustain market share and are confident of achieving further value for shareholders.

Brian Mattingley

Chief Executive Officer

29 August 2012

Condensed Consolidated Income Statement

For the six months ended 30 June 2012

				Six months ended 30 June				Year ended  December 31
				2012		2011		2011
		Note		US$'000		US$'000		US$'000
				(unaudited)				(audited)
Revenue		2		186,445		153,841		331,150
Operating expenses				63,774		62,726		122,634
Gaming taxes and duties				16,604		1,428		7,319
Research and development expenses				13,860		12,869		29,908
Selling and marketing expenses				61,706		49,892		102,262
Administrative expenses				13,430		40,857		54,441
Operating profit before impairment charges, Spanish back gaming duty, restructuring costs and equity settled share benefit charges				29,009		12,828		42,582
Impairment charges				-		(20,173)		(20,673)
Spanish back gaming duty				(11,097)		-		-
Restructuring costs				-		(4,949)		(4,949)
Equity settled share benefit charges				(841)		(1,637)		(2,374)
Operating profit (loss)				17,071		(13,931)		14,586
Finance income				369		90		233
Finance expenses				(1,456)		(8,300)		(13,281)
Release of deferred and contingent consideration				2,372		-		4,225
Share of post-tax profit of equity accounted joint ventures				7		41		84
Profit before tax before impairment charges, Spanish back gaming duty, release of contingent consideration, restructuring costs and equity settled share benefit charges				27,929		4,659		29,618
Impairment charges				-		(20,173)		(20,673)
Spanish back gaming duty				(11,097)		-		-
Release of deferred and contingent consideration				2,372		-		4,225
Restructuring costs				-		(4,949)		(4,949)
Equity settled share benefit charges				(841)		(1,637)		(2,374)
Profit (loss) before tax				18,363		(22,100)		5,847
Taxation				2,722		1,156		3,912
Profit (loss) after tax for the period attributable to equity holders of the parent				15,641		(23,256)		1,935

Earnings per share
Basic				4.5¢		(6.7)¢		0.6¢
Diluted				4.4¢		(6.7)¢		0.6¢

Condensed Consolidated Income Statement of Comprehensive Income

For the six months ended 30 June 2012

		Six months ended 30 June				Year ended December 31
		2012		2011		2011
		US$'000		US$'000		US$'000
		(unaudited)				(audited)
Profit (loss) for the period		15,641		(23,256)		1,935
Actuarial losses on defined benefit pension plan		-		(239)		(443)
Total comprehensive income (loss) for the period attributable to equity holders of the parent		15,641		(23,495)		1,492

Condensed Consolidated Balance Sheet

At 30 June 2012

		30 June					December 31
		2012		2011			2011
		US$'000		US$'000			US$'000
		(unaudited)					(audited)
Assets
Non-current assets
Intangible assets		145,254			142,888		141,900
Property, plant and equipment		18,216			19,564		17,059
Investment in equity accounted joint venture		1,247			1,260		1,243
Available for sale investment		175			175		175
Deferred taxes		233			690		435
		165,125			164,577		160,812
Current assets
Cash and cash equivalents		69,179			60,867		81,852
Trade and other receivables		21,776			22,879		26,468
		90,955			83,746		108,320
Total assets		256,080			248,323		269,132
Equity and liabilities
Equity attributable to equity holders of the parent
Share capital		3,177			3,145		3,163
Share premium		65			65		65
Capital redemption reserve		24			24		24
Retained earnings		134,535			92,361		118,067
Total equity attributable to equity holders of the parent		137,801			95,595		121,319
Liabilities
Current liabilities
Trade and other payables		71,351			58,596		65,462
Customer deposits		46,260			40,984		44,954
Contingent and deferred consideration		668			53,148		37,397
		118,279			152,728		147,813
Total equity and liabilities		256,080			248,323		269,132

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2012

						Capital
		Share		Share		redemption			Retained
		capital		premium		reserve			earnings		Total
		US$'000		US$'000		US$'000			US$'000		US$'000
Balance at 1 January 2011 (audited)		3,145		65		24			113,716		116,950
Equity settled share benefit charges		-		-		-			1,637		1,637
Equity settled share benefit charges (included within restructuring cost)		-		-		-			503		503
Total comprehensive loss for the period		-		-		-			(23,495)		(23,495)
Balance at 30 June 2011 (unaudited)		3,145		65		24			92,361		95,595
Equity settled share benefit charges		-		-		-			737		737
Issue of shares		18		-		-			(18)		-
Total comprehensive income for the period		-		-		-			24,987		24,987
Balance at 1 January 2012 (audited)		3,163		65		24			118,067		121,319
Equity settled share benefit charges		-		-		-			841		841
Issue of shares		14							(14)		-
Total comprehensive income for the year		-		-		-			15,641		15,641
Balance at 30 June 2012 (unaudited)		3,177		65		24			134,535		137,801

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.

Share premium - represents the amount subscribed for share capital in excess of nominal value.

Capital redemption reserve - represents amounts transferred from the share capital reserve following the buy-back and cancellation of equity shares.

Retained earnings - represents the cumulative net gains and losses recognized in the consolidated income statement.

Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2012

		Six months ended 30 June				Year ended  December 31
		2012		2011		2011
		US$'000		US$'000		US$'000
		(unaudited)				(audited)
Cash flows from operating activities
Profit (loss) before income tax		18,363		(22,100)		5,847
Adjustments for:
Impairment charges		-		20,173		20,673
Depreciation		4,812		4,796		9,039
Amortisation		2,202		2,326		3,998
Interest received		(367)		(90)		(221)
Interest expense		965		4,754		7,411
Share of post-tax profit of equity accounted joint venture		(7)		(41)		(84)
Foreign exchange differences on deferred consideration		595		2,794		1,739
Release of deferred and contingent consideration		(2,372)		-		(4,225)
Equity settled share benefit charges		841		2,140		2,877
		25,032		14,752		47,054
Decrease (increase) in trade receivables		3,772		(485)		(4,865)
Decrease in other accounts receivables		921		1,950		2,741
Increase in trade payables		2,491		13,934		23,128
Increase in customer deposits		1,306		6,259		10,229
Increase in other accounts payables		3,113		7,463		4,794
Cash generated from operations		36,635		43,873		83,081
Income tax paid		(2,286)		(2,037)		(4,341)
Net cash generated from operating activities		34,349		41,836		78,740
Cash flows from investing activities
Consideration paid on acquisitions		(36,343)		(36,013)		(46,080)
Purchase of property, plant and equipment		(5,969)		(2,813)		(4,575)
Interest received		367		90		221
Acquisition of intangible assets		(201)		(103)		(201)
Internally generated intangible assets		(3,834)		(2,993)		(4,079)
Net cash used in investing activities		(45,980)		(41,832)		(54,714)
Cash flows from financing activities
Interest paid		(1,042)		(657)		(3,694)
Net cash used in financing activities		(1,042)		(657)		(3,694)
Net (decrease) increase in cash and cash equivalents		(12,673)		(653)		20,332
Cash and cash equivalents at the beginning of the period		81,852		61,520		61,520
Cash and cash equivalents at the end of the period		69,179		60,867		81,852

Notes to the Condensed Consolidated Financial Statements

1      Basis of preparation

The condensed consolidated half-yearly 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 ending 31 December 2012 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 2011. The Group's forecasts and projections show that the Group should be able to continue its ordinary course of business within its available financial resources.

The Group complies with IAS 34 in the presentation of the half-yearly 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 2011 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 and did not contain statements under Section 10(2) of the Gibraltar Companies Accounts Act 1999 or Section 182(1)(a) of the Gibraltar Companies Act.

The condensed consolidated set of financial statements included in this half-yearly financial report is unaudited and does not constitute statutory accounts.

The risks and uncertainties and significant estimates and judgements faced by the Group have not changed significantly since the 2011 Annual Report was published and are not expected to change significantly during the remaining six months of the financial year.

Presentation of half year comparatives

Following the changes to presentation of the consolidated statement of income made at the 2011 year end and followed in this statement, comparative figures for the six months ended 30 June 2011 have been amended accordingly.  The amendments were as follows:

(a)   In light of the increased regulated markets in which the group operates the gaming duties and taxes not directly related to profit have been separately disclosed on the face of the Consolidated Income Statement under the heading "gaming taxes and duties".

(b)   Foreign exchange gains and losses arising on foreign currency denominated assets and liabilities, and settlement of forward exchange contracts are now included in finance income and finance charges as they relate to financing decisions made by the Group.

Previously both items were included in administrative expenses. The effect of the changes on the comparative figures for the six months from that previously reported has been to reduce operating expenses by $1,428k and increase gaming taxes and duties by $1,428k, reduce administrative expenses by $3,054k, and increase finance expenses by $3,054k.

2        Segment information

			Six months ended 30 June 2012
			B2C								B2B		Consolidated
							Emerging
		Casino		Poker		Bingo	offerings		Total B2C
		US$'000		US$'000		US$'000	US$'000		US$'000		US$'000		US$'000
			(unaudited)
Revenue		83,070		41,337		26,939	12,287		163,633		22,812		186,445
Result
Segment result									80,589		12,961		93,550
Unallocated corporate expenses1													75,824
Operating Profit													17,071
Finance expenses, net													(1,087)
Share of post-tax profit of equity accounted joint venture													7
Release of contingent consideration													2,372
Tax expense													(2,722)
Profit  for  the period													15,641
Assets
Unallocated corporate assets													256,080
Total assets													256,080
Liabilities
Segment liabilities									43,991		2,269		46,260
Unallocated corporate liabilities													72,019
Total liabilities													118,279

¹ Including equity settled share benefit charges of US$ 841,000 and Spanish back gaming duty of US$11,097,000

2        Segment information (continued)

			Six months ended 30 June 2011
			B2C								B2B		Consolidated
							Emerging
		Casino		Poker		Bingo	offerings		Total B2C
		US$'000		US$'000		US$'000	US$'000		US$'000		US$'000		US$'000
			(unaudited)
Revenue		68,980		23,989		27,562	10,230		130,761		23,080		153,841
Result
Segment result before impairments									70,289		12,943		83,232
Impairments									(20,173)		-		(20,173)
Segment result									50,116		12,943		63,059
Unallocated corporate expenses1													76,990
Operating loss													(13,931)
Finance expenses, net													(8,210)
Share of post-tax profit of equity accounted joint venture													41
Tax expense													(1,156)
loss for the period													(23,256)
Assets
Unallocated corporate assets													248,323
Total assets													248,323
Liabilities
Segment liabilities									34,493		6,496		40,989
Unallocated corporate liabilities													111,739
Total liabilities													152,728

¹ Including equity settled share benefit charges of US$1,637,000 and restructuring costs of US$4,949,000

2        Segment information (continued)

			Year ended December 31, 2011
			B2C									B2B		Consolidated
							Emerging
		Casino		Poker		Bingo	offerings			Total B2C
		US$'000		US$'000		US$'000	US$'000			US$'000		US$'000		US$'000
			(audited)
Revenues		148,034		60,620		53,957	21,592			284,203		46,947		331,150
Result
Segment result before impairments										151,973		27,782		179,755
Impairments										(20,673)		-		(20,673)
Segment result										131,300		27,782		159,082
Unallocated corporate expenses1														144,496
Operating profit														14,586
Finance expenses, net														(13,048)
Release of contingent consideration														4,225
Share of post-tax profit of equity accounted joint venture														84
Tax expense														(3,912)
Profit for the year														1,935
Assets
Unallocated corporate assets														269,132
Total assets														269,132
Liabilities
Segment liabilities										39,062		5,888		44,950
Unallocated corporate liabilities														102,863
Total liabilities														147,813

¹ Including equity settled share benefit charges of US$2,374,000 and restructuring costs of US$4,949,000

Other than where amounts are allocated specifically to the B2C and B2B segments above, the expenses, assets and liabilities relate jointly to all segments. These amounts are not discretely analyzed between the two operating segments as any allocation would be arbitrary.

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:

		Six months ended 30 June				Year ended  December 31
		2012		2011		2011
		US$'000		US$'000		US$'000
		(unaudited)				(audited)
Revenue by geographical market1
UK		80,086		74,783		153,090
Europe (excluding UK)		70,970		55,358		124,187
Americas		14,740		8,873		26,488
Rest of World		20,649		14,827		27,385
Total operating income		186,445		153,841		331,150

¹Allocation of geographical segments is based on Net Revenue Commission received by the Group.

3        Operating profit

		Six months ended 30 June				Year ended  December 31
		2012		2011		2011
		US$'000		US$'000		US$'000
		(unaudited)				(audited)
Operating profit is stated after charging:
Staff costs		38,400		44,397		86,831
Directors remuneration including total share benefit charges1,2		1,898		1,850		4,094
Audit fees		172		210		474
Other fees paid to auditors in respect of taxation services		10		-		12
Depreciation (within operating expenses)		4,812		4,796		9,039
Amortization (within operating expenses)		2,202		2,326		3,998
Chargebacks		1,722		1,891		3,379
Payment service providers' commissions		11,195		8,417		18,769
Spanish back gaming duty		11,097		-		-
Restructuring costs1		-		4,949		4,949
Goodwill impairment		-		20,173		20,673

¹ Following the departure of the former CEO on 30 April 2011, the Group restructured its management team resulting in aggregated terminated staff and related costs of US$4,949,000 for the period ended 30 June 2011 and for the year ended 31 December 2011 of which US$3,909,000 are in relation to the former CEO. Total costs include $503,000 in respect of accelerated equity settled share benefit charges arising on termination.

² Directors remuneration including total share benefit charges excludes termination costs included within restructuring costs.

4        Earnings per share

Basic earnings per share

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 period.

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 average share price during the period and it would not be advantageous for the holders to exercise the option. The number of options excluded from the diluted EPS calculation is 3,205,587 (2011: Half year - nil, Full year - 1,305,779).

		Six months ended 30 June					Year ended  December 31
		2012			2011		2011
		US$'000			US$'000		US$'000
		(unaudited)					(audited)
Profit  (loss) for the period attributable to equity holders of the parent		15,641			(23,256)		1,935
Weighted average number of Ordinary Shares in issue		348,179,269			345,707,313		346,385,511
Effect of dilutive Ordinary Shares and Share options		3,402,203			-		3,597,516
Weighted average number of dilutive Ordinary Shares		351,581,472			345,707,313		349,983,027
Basic		4.5¢			(6.7)¢		0.6¢
Diluted		4.4¢			(6.7)¢		0.6¢

4        Earnings per share (continued)

Adjusted earnings per share

The Directors believe that EPS excluding impairment charges, Spanish back gaming duty, restructuring costs, equity settled share benefit charges and release of deferred and contingent consideration better reflects the underlying performance of the business and assists in providing a clearer view of the performance of the Group.

Reconciliation of profit to profit excluding impairment charges, Spanish back gaming duty, restructuring costs, equity settled share benefit charges and release of deferred and contingent consideration:

		Six months ended 30 June				Year ended  December 31
		2012		2011		2011
		US$'000		US$'000		US$'000
		(unaudited)				(audited)
Profit  (loss) for the period attributable to equity holders of the parent		15,641		(23,256)		1,935
Impairment charges		-		20,173		20,673
Spanish back gaming duty		11,097		-		-
Restructuring costs		-		4,949		4,949
Equity settled Share benefit charges		841		1,637		2,374
Release of deferred and contingent consideration		(2,372)		-		(4,225)
Profit excluding equity settled share benefit charges, Spanish back gaming duty, restructuring costs, impairment charges and release of deferred and contingent consideration		25,207		3,503		25,706
Weighted average number of Ordinary Shares in issue		348,179,269		345,707,313		346,385,511
Weighted average number of dilutive Ordinary Shares		351,581,472		349,138,105		349,983,027
Basic earnings per share excluding equity settled share benefit charges		7.2¢		1.0¢		7.4¢
Diluted earnings per share excluding equity settled share benefit charges		7.2¢		1.0¢		7.3¢

5       Contingent and deferred consideration

During the period the Group completed the settlement of the deferred consideration payable in respect of the Wink acquisition. Following negotiations with the vendors the final amount payable was reduced and as a result $2,372k was released to the consolidated Income Statement.

The Group has also recognised consideration arising in the period following commercial negotiations between the group and one of its former B2B white label customers, under which the group acquired the customers domain name and brands as at 1 January 2012 for consideration of $600k, and contingent consideration estimated at $920k. All amounts have been attributed to intangible assets acquired. The acquisition is deemed immaterial in respect of IFRS3 disclosure requirements.

6       Contingent liabilities and regulatory issues

(a)        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.

(b)        Given the nature of the legal and regulatory landscape of the industry, from time to time the Group has received notices, communications and legal actions from a small number of regulatory authorities and other parties in respect of its activities. The Group has taken legal advice as to the manner in which it should respond and the likelihood of success of such actions. Based on this advice and the nature of the actions, the Board is unable to quantify reliably any material outflow of funds that may result, if any. Accordingly, no provisions have been made.

(c)        The Group operates in numerous jurisdictions. Accordingly, the Group is filing tax returns, providing for and paying all taxes it believes are due based on local tax laws, transfer pricing agreements and tax advice obtained. The Group is periodically subject to audits and assessments by local taxing authorities. The Board is unable to quantify reliably any exposure for additional taxes, if any, that may arise from the final settlement of such assessments. Accordingly no additional provisions have been made.

7        Dividends

		Six months ended 30 June				Year ended  December 31
		2012		2011		2011
		US$'000		US$'000		US$'000
		(unaudited)				(audited)
Dividends paid		-		-		-

The Board of Directors has declared a half-yearly dividend of 2.5 cents per share payable on 18 October 2012.

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 half-yearly management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the UK Financial Services Authority.

A list of the current Directors is maintained on the 888 Holdings Public Limited Company Website: www.888holdingsplc.com

Independent Review Report to 888 Holdings Public Limited Company

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement, and related explanatory notes 1 to 7.

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, 'Half-Yearly 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 Half- Yearly Financial Information Performed by the Independent Auditor of the Entity', issued by the Auditing Practices Board for use in the United Kingdom. A review of half-yearly 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 2012 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.

BDO LLP

Chartered Accountants and Registered Auditors

55 Baker Street

London W1U 7EU

United Kingdom

29 August 2012

 

END

 

 

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