Half Yearly Report
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%)
· PBT3,4,5 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). 4Excluding 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 |
+350 200 49800 |
|
Aviad Kobrine, Chief Financial Officer |
+350 200 49800 |
|
|
|
|
M:Communications |
|
|
Ann-marie Wilkinson/Andrew Benbow |
+44 (0)20 7920 2344 |
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$'000 |
|
|
|
(unaudited) |
|
(audited) |
||
|
|
|
|
|
|
|
|
|
Operating profit is stated after charging: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staff costs |
|
38,400 |
|
44,397 |
|
86,831 |
|
Directors remuneration including total share benefit charges1,2 |
|
1,898 |
|
1,850 |
|
4,094 |
|
Audit fees |
|
172 |
|
210 |
|
474 |
|
Other fees paid to auditors in respect of taxation services |
|
10 |
|
- |
|
12 |
|
Depreciation (within operating expenses) |
|
4,812 |
|
4,796 |
|
9,039 |
|
Amortization (within operating expenses) |
|
2,202 |
|
2,326 |
|
3,998 |
|
Chargebacks |
|
1,722 |
|
1,891 |
|
3,379 |
|
Payment service providers' commissions |
|
11,195 |
|
8,417 |
|
18,769 |
|
Spanish back gaming duty |
|
11,097 |
|
- |
|
- |
|
Restructuring costs1 |
|
- |
|
4,949 |
|
4,949 |
|
Goodwill impairment |
|
- |
|
20,173 |
|
20,673 |
4 Earnings per share
Basic earnings per share
Basic earnings per share have been calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of shares in issue during the period.
Diluted earnings per share
In accordance with IAS 33, 'Earnings per share', the weighted average number of shares for diluted earnings per share takes into account all potentially dilutive shares and share options granted, which are not included in the number of shares for basic earnings per share. In addition, certain employee options have also been excluded from the calculation of diluted EPS as their exercise price is greater than the weighted average share price during the period and it would not be advantageous for the holders to exercise the option. The number of options excluded from the diluted EPS calculation is 3,205,587 (2011: Half year - nil, Full year - 1,305,779).
|
|
|
Six months ended 30 June |
|
Year ended December 31 |
|||
|
|
|
2012 |
|
2011 |
|
2011 |
|
|
|
|
US$'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
This information is provided by RNS
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