Interim Results
888 Holdings plc
10 September 2007
10 September 2007
888 Holdings Public Limited Company
Interim Results for the six months ended 30 June 2007
888, one of the world's most popular online gaming entertainment companies,
announces its interim results for the six months ended 30 June 2007.
Financial Highlights (continuing business)
• Net Gaming Revenue (NGR) up 24% to $97m (H1 2006: $78m)
• Profit before tax* up 298% to $19m (H1 2006: $5m)
• Profit before tax* margin widened to 19% (H1 2006: 6%)
• Casino NGR of $54m - 22% growth from H1 2006 to H1 2007
• Poker NGR of $41m - 19% growth from H1 2006 to H1 2007
• Operating expenses as a percentage of NGR - down to 28%(H1 2006: 31%)
• Basic EPS* of 5.2c (H1 2006: 1.0c)
• Interim dividend of 1.8c per share (H1 2006: 4.5c)
Operational Highlights
• Continued growth in all games and major territories
• First strategic partnerships signed:
- Rileys Snooker Halls - UK
- Tower Torneos - Latin America
• First ever acquisition completed - the Bingo business of Globalcom
Limited
• Sports betting licence in Italy obtained
• Introduction of backgammon and bingo products
• New casino games launched in all 12 supported languages
• Launch and upgrade of new 3D Poker software
• Unified client introduced enabling users for the first time to access
casino, poker, backgammon and bingo games using the same software
- enabling better cross-selling
• Intense marketing campaign - 888 achieving the highest brand
awareness of all gaming and betting websites in the UK**
< ends >
Gigi Levy, Chief Executive Officer of 888, said:
'I am pleased to report that we have delivered strong interim results with 24%
NGR growth and 298% PBT* growth in our continuing business. These results prove
clearly that in spite of the signing into law of the Unlawful Internet Gaming
Enforcement Act in October last year, which saw the business lose the majority
of our 26 million registered customers and 55% of our revenues, the turnaround
we had begun to achieve at the full year has been successful. We have maintained
our track record of profitability, have achieved a record performance in our
continuing business and continue paying dividend in line with our policy.
H2 has started strongly with record turnover in July 2007 which is a very strong
result in traditionally one of the seasonally weakest months of the year.
This start to the second half, the continuous growth in Bingo, our strategic
partnership deals, current trading and our clear business strategy makes us
confident of delivering further growth in 2007.'
* Excluding share benefit charges of US$4.1 million (H1 2006: $3.9 million)
** 2007 - Marketing, brand and sector review - Millward Brown
Enquiries
888
Gigi Levy, Chief Executive Officer +350 49800
Aviad Kobrine, Chief Financial Officer +350 49800
Bell Pottinger Corporate & Financial
Ann-marie Wilkinson / Nick Lambert / Chris Hamilton +44 (0) 20 7861 3232
Chief Executive Officer's Review
I am pleased to report that we have delivered strong Interim results for the
six months to 30 June 2007. This proves clearly that in spite of the signing
into law of the Unlawful Internet Gaming Enforcement Act (UIGEA) in October last
year, which saw the business lose the majority of our 26 million registered
customers and 55% of our revenues, the turnaround we had begun to achieve at the
full year has been successful and we have maintained our track record of
profitability.
While our overall numbers clearly suffered when we ceased all activity in the
US market, these results show a record performance of our continuing business:
Profit before tax* in H1 2007 was $19 million (H1 2006: $5 million), an
increase of 298% over H1 2006. Net Gaming Revenue ('NGR') was also up
substantially at $97 million (H1 2006: $78 million), an increase of 24% and our
basic earnings per share* was 5.2 cents (H1 2006: 1.0 cents).
These are excellent results and in accordance with the policy set out at the
time of flotation we will be paying an interim dividend of 1.8 cents per share.
Delivering on our strategy
Our success in the first half of 2007 was based on the same strategic principles
that have made us successful in the past: our focus will always be on acquiring
and retaining customers by delivering a compelling, localised, innovative,
unique and entertaining customer experience while being mindful of the complex
regulatory environment in which we operate and the necessary social
responsibilities that come with our industry.
In the first half of 2007 we continued to pursue the strategic elements which
are the cornerstones of our strategy. We continued our investment in our
Enhanced and Innovative Offering - and offered for the first time in the
industry a single software client encompassing all casino games, poker,
backgammon and bingo, enabling us to easily cross sell between our different
products and expand the customer segments we serve.
We continued delivering on our commitment for at least one new game each month
with our video slots, our recent introduction of backgammon and our bingo
product, based on the integration of the Bingo acquisition into our offering.
We upgraded and launched our innovative 3D Poker client with avatars, chat tools
and its unique 'rotating table' feature, which became an immediate hit with
customers.
We secured the award of a sports betting license in Italy and will continue
working towards launching sports betting in additional markets. Our integrated
offering is already best in class today and the addition of a sports betting
product will give us a full, unrivalled proposition.
Our marketing refocus in the first half of 2007 was invaluable in our efforts to
turn the company around, based on our focus of delivering State of the art
Integrated Marketing. We have activated more marketing campaigns outside the US
than ever before, with a strategic focus on key local target markets. These
include the extremely successful brand-building Sevilla and World Snooker
Championship sponsorships. The success of these sponsorship activities is
demonstrated in a recent survey showing 888.com with the highest level of brand
awareness of any gaming and betting web sites in the UK**, which continues to be
the industry's most important market. The first half of 2007 has seen a
concerted drive to test and evaluate many new and innovative marketing campaigns
including blogs, viral marketing and user generated content resulting in a
broader approach to new segments. We continue to leverage our unique
propositions to leading affiliates and have enhanced our extensive broadcasting
of 888 TV content in various markets. This is all complemented with great
rankings in search engine results for key words around the world.
The most significant strategic advance in the period is our move into
white-labelling with a select group of strategic partnerships. The first,
announced in February, with Riley's snooker halls in the UK where we partnered
to create in-hall live poker tournaments and on-line, powering
www.rileyspoker.com. We have followed this recently with Tower Torneos, one of
the leading gaming operators in Latin America. These marketing achievements
and innovative activities helped us grow in the first half of 2007 and will
continue pushing us forward in future.
Our withdrawal from the US, meant that our principle of Thinking Global while
Acting Local became more important than ever. With customers all around the
world and a need to grow in a number of markets simultaneously, we had to
enhance our local focus quickly. Through the first half of the year we
introduced new casino games in all of the 12 languages we support and completed
our new language infrastructure which will enable us to launch all future casino
and poker versions concurrently in 12 languages. We have also implemented a
module in our payments system which allows quick introduction of new payment
methods and real time optimisation for a localised deposit and cash-out
experience as well as optimal deposit approval rates. With several partnerships
in place to introduce local games as an integral part of our offering, the first
half of the year sets a new standard in terms of our ability to act locally in
our target markets.
Throughout the period we kept providing our Market-Leading customer service.
While the reduced headcount stretched our abilities, we were able to maintain
our unique service level and received better than ever results in customer
satisfaction surveys. This is a great achievement given the need to expand
support in non-English languages.
Ensuring our commitment to Customer Intimacy, we have continued our practice of
meeting our customers in the first half of 2007 as well as conducting extensive
market research. With our new Data Warehouse and analytical tools in place, we
continue to analyse customer behaviours and needs, providing us the insight
required to make the right marketing and customer retention decisions. These
capabilities continue to be pivotal to our success.
To meet our targets, our 2007 budget called for us to continue being a Focused,
Efficient and Effective Organization. We have continued our cost reduction plans
and enhanced our budget control, both aimed to ensure we can maintain high
profitability levels.
Last but not least, we continue being thankful to our employees for delivering
on our commitments and turning the company around and remain committed to our
Employer of Choice philosophy. The great employees who remained with us through
this difficult crisis as well as the top talent we recruited in the past few
months prove the success of this philosophy.
Bingo acquisition
Our first ever acquisition was completed in May and we are glad to report that
the acquired assets were successfully integrated into the 888 group. With NGR of
US$2 million during the six weeks ended 30 June 2007 the bingo business we
acquired is doing phenomenally well and coupled with the immediate successful
introduction of our own bingo proposition this is proving to be a very lucrative
acquisition for us. The current outlook is for the acquired business to continue
delivering above our expectations also in the second half of 2007, as we plan to
extend Bingo offering to additional markets.
Our H2 focus
Aiming to be a global multi-channel entertainment and community destination, in
H2 we will continue developing new and innovative elements to our offering. H2
plans include additional games with a focus on local games, a content delivery
platform which will provide our active customers with premium content free of
charge and at least one additional channel to market on top of Internet, Mobile
and Airplane-entertainment (for non-real-money games) which we have already
launched. We will improve our localization with Casino and Poker upgraded
versions in all languages and introduce our first non-English Bingo offering.
We are confident in the success of our Italian sports betting product and
continue working on the introduction of sports betting in additional markets.
Marketing wise, Q4 will also see a new marketing campaign across Europe in
accordance with our strategic direction and we intend to continue expanding our
strategic partnership business.
Regulation
While the regulatory landscape remains unstable in some regions, the first
six months of 2007 saw some positive developments from the regulatory
perspective. In Europe, the Placanica ruling restated the importance of EU
regulations to our industry; coupled with the recent infringement warnings and
position letters from the EC this marks a very positive turn in the ability of
EU licensed operators like us to work openly in the EU. Outside of Europe we see
initial signs of positive regulation both in Asia Pacific and Latin America,
where the newly formed regulation in some jurisdictions could permit us to work
in a properly-licensed environment. These are all positive developments, as we
witness the formation of a regulatory framework as the most sensible evolution
for this highly popular form of online entertainment. 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 has 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.
Outlook
H2 has started strongly with record turnover in July 2007. This strong result,
for what is traditionally one of the seasonally weakest months of the year,
leads us to believe that we will see additional growth in H2.
While the conversion of players is far from over, the recently introduced second
strategic partnership deal with Tower Torneos, a major player in the Latin
American poker market, is already contributing to our poker liquidity. We expect
our strategic partnership business to continue growing in the coming months.
As stated earlier this year, we are on track to introduce our first sports
betting proposition in Italy and continue working on introducing sports betting
in additional markets.
Finally, as previously mentioned, our acquired Bingo business has been growing
rapidly based both on the growth in the core acquired business and on the growth
of the 888 Bingo product.
Given the good start to Q3, the continuous growth in Bingo, our strategic
partnership deals, current trading and our clear business strategy, we remain
confident of delivering further growth in 2007.
Gigi Levy
Chief Executive Officer
Consolidated Income Statement
for the period ended 30 June 2007
Six months Six months Year
Ended Ended Ended
30 June 30 June 31 December
2007 2006 2006
US$'000 US$'000 US$'000
Note (unaudited) (unaudited) (unaudited)
Continuing operations
Net Gaming Revenue 2 96,816 78,206 157,000
Operating expenses 27,110 24,212 49,448
Research and development
expenses 11,498 9,165 19,381
Selling and marketing
expenses 34,290 27,519 51,037
Administrative expenses 11,800 18,079 28,653
-------- -------- ---------
Operating profit before share
benefit charges 16,264 3,112 17,310
-------- -------- ---------
Share benefit charges 4,146 3,881 8,829
-------- -------- ---------
Operating profit (loss) 3 12,118 (769) 8,481
Finance income 2,600 1,622 4,883
-------- -------- ---------
Profit before tax 14,718 853 13,364
Taxation 1,337 1,431 3,117
-------- -------- ---------
Profit (loss) from continuing
operations 13,381 (578) 10,247
-------- -------- ---------
Profit from discontinued
operations 4 152 43,280 64,254
-------- -------- ---------
Profit after tax for the
period attributable to equity
holders of parent 13,533 42,702 74,501
-------- -------- ---------
Earnings per share from
continuing operations 5
Basic 4.0c (0.1)c 3.0c
Diluted 3.9c (0.1)c 3.0c
-------- -------- ---------
Earnings per share from
discontinued operations
Basic 0.0c 12.8c 19.1c
Diluted 0.0c 12.6c 18.8c
-------- -------- ---------
Total earnings per share 5
Basic 4.0c 12.7c 22.1c
Diluted 3.9c 12.5c 21.8c
-------- -------- ---------
The notes on pages 9 to 16 form part of this report.
Consolidated Balance Sheet
at 30 June 2007
30 June 30 June 31 December
2007 2006 2006
US$'000 US$'000 US$'000
Note (unaudited) (unaudited) (unaudited)
Assets
Non-current assets
Intangible assets 41,746 - -
Property, plant and equipment 15,526 9,449 13,033
Deferred taxes 672 461 546
-------- -------- ---------
57,944 9,910 13,579
Current assets
Cash and cash equivalents 87,285 11,874 114,356
Trade and other receivables 12,847 11,746 9,669
-------- -------- ---------
100,132 128,620 124,025
-------- -------- ---------
Total assets 158,076 138,530 137,604
-------- -------- ---------
Equity and liabilities
Equity attributable to equity
holders of the parent
Share capital 3,084 3,068 3,073
Share benefit reserve 9,191 6,028 9,332
Retained earnings 62,324 69,817 74,597
-------- -------- ---------
Total equity attributable to
equity holders of the parent 74,599 78,913 87,002
-------- -------- ---------
Liabilities
Current liabilities
Trade and other payables 60,584 29,589 27,931
Member deposits 22,893 30,028 22,671
Total liabilities 83,477 59,617 50,602
-------- -------- ---------
Total equity and liabilities 158,076 138,530 137,604
-------- -------- ---------
Approved by the Board and authorised for issue on 10 September 2007.
Gigi Levy Aviad Kobrine
Chief Executive Officer Chief Financial Officer
The notes on pages 9 to 16 form part of this report.
Consolidated Statement of Changes in Equity
for the period ended 30 June 2007
Share Share benefit Retained
Capital Reserve Earnings Total
US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2005 3,066 - 27,113 30,179
Profit for the year - - 48,015 48,015
Dividend paid - - (63,100) (63,100)
Redemption of preference share
capital (1) - - (1)
Share benefit charge - 17,234 - 17,234
Transfer of shares granted on
IPO - (15,087) 15,087 -
Redenomination translation 3 - - 3
effect
--------- --------- -------- --------
Balance at 1 January 2006 3,068 2,147 27,115 32,330
--------- --------- -------- --------
Profit for the year - - 74,501 74,501
Dividend paid - - (28,658) (28,658)
Issue of shares 5 (5) - -
Lapsed share benefit charge - (1,639) 1,639 -
Share benefit charge - 8,829 - 8,829
--------- --------- -------- --------
Balance at 31 December 2006 3,073 9,332 74,597 87,002
--------- --------- -------- --------
Profit for the period - - 13,533 13,533
Dividend paid - - (30,082) (30,082)
Issue of shares 11 (11) - -
Lapsed share benefit charge - (4,276) 4,276 -
Share benefit charge - 4,146 - 4,146
--------- --------- -------- --------
Balance at 30 June 2007 3,084 9,191 62,324 74,599
--------- --------- -------- --------
The notes on pages 9 to 16 form part of this report.
Consolidated Statement of Cash Flows
for the period ended 30 June 2007
Six months Six months Year
Ended Ended Ended
30 June 30 June 31 December
2007 2006 2006
US$'000 US$'000 US$'000
(unaudited) (unaudited) (unaudited)
Cash flows from operating
activities
Profit before tax 14,870 44,133 77,618
Adjustments for
Depreciation 1,864 1,883 3,801
Loss on sale of property, plant and
equipment - - 29
Interest received (2,959) (1,551) (4,879)
Share benefit charges 4,146 3,881 8,829
--------- --------- ---------
17,921 48,346 85,398
(Increase) decrease in trade
receivables (1,669) 5,144 6,346
Decrease in related party balances - 1,331 1,331
Increase in other accounts
receivable (1,509) (1,877) (1,002)
Increase(decrease) in trade 1,508 7,172 (1,439)
payables
Increase(decrease) in member
deposits 222 703 (6,654)
Increase (decrease) in other
accounts payable 464 (2,903) 3,527
--------- --------- ---------
Cash generated from operations 16,937 57,916 87,507
Tax paid (1,424) (1,804) (3,052)
--------- --------- ---------
Net cash generated from operating
activities 15,513 56,112 84,455
Cash flows from investing
activities
Purchase of intangibles on business
acquisition (11,104) - -
Purchase of property, plant and
equipment (4,357) (2,991) (8,621)
Proceeds from sale of property,
plant and equipment - - 99
Interest received 2,959 1,551 4,879
--------- --------- ---------
Net cash used in investing
activities (12,502) (1,440) (3,643)
Cash flows from financing
activities
Dividends paid (30,082) - (28,658)
--------- --------- ---------
Net cash used in financing
activities (30,082) - (28,658)
Net (decrease) increase in cash and
cash equivalents (27,071) 54,672 52,154
Cash and cash equivalents at the
beginning of the period 114,356 62,202 62,202
--------- --------- ---------
Cash and cash equivalents at the
end of the period 87,285 116,874 114,356
--------- --------- ---------
The notes on pages 9 to 16 form part of this report.
Notes to the Consolidated Financial Statements
1 Basis of preparation
The consolidated interim financial information of the Group has been prepared in
accordance with International Financial Reporting Standards, including
International Accounting Standards ('IAS') and Interpretations (collectively
'IFRS'), adopted by the International Accounting Standards Board ('IASB') and
endorsed for use by companies listed on an EU regulated market.
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 2007 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 2006 with the exception of the following matters:
• Emerging games is a new segment added during the period which comprises
mainly of 888's Backgammon offering and the newly acquired Bingo business;
• Net Gaming Revenue from Emerging games is defined as the commission
charged from winnings or entry fees charged for participation in a
tournament. In the case of White label activity, Revenue is the net
commission charged.
The Group has not 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 2006 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 financial information contained in this interim announcement is
unaudited and does not constitute statutory accounts.
Presentation of continuing and discontinued operations
As a result of enactment of the Unlawful Internet Gambling Enforcement Act
('UIGEA') in October 2006, the Group withdrew from offering real-money activity
to the US facing market.
Although the Group did not operate the US facing business as a separate
business, it was a separate geographical segment of the Group's business and in
accordance with IFRS 5 - 'Non-Current Assets Held for Sale and Discontinued
Operations' the income statement and related notes are required to show
continued and discontinued operations separately.
Net Gaming Revenue and certain direct costs associated with the discontinued
operations, which are of distinct nature, were allocated accordingly. Other
costs (such as R&D expenses, IT expenses, Share benefit charges, office rent and
associated cost, depreciation of fixed assets, gaming duty, Directors and
Officers insurance, Directors' fees and tax), which are not distinguishable,
were all allocated to the continuing operations and not to the discontinued
business. In allocating the rest of the costs of the Group between the two
operations, management has applied reasonable estimates in accordance with
applicable accounting standards. However, as estimates have necessarily been
used in disclosing a geographical segment as a discontinued operations, the
results do not necessarily reflect the financial performance which would have
been achieved had the discontinued operations been managed as a stand-alone
business.
2 Segment information
Business segments - continuing operations
Six months ended 30 June 2007
Emerging games Casino Poker Consolidated
US$'000 US$'000 US$'000 US$'000
(unaudited) (unaudited) (unaudited) (unaudited)
Net Gaming Revenue 2,156 53,852 40,808 96,816
---------- --------- --------- ---------
Result
Segment result 1,494 33,051 21,547 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 152
---------- --------- --------- ---------
Profit for the
period 13,533
---------- --------- --------- ---------
Assets
Unallocated
corporate
assets 158,076
---------- --------- --------- ---------
Total assets 158,076
---------- --------- --------- ---------
Liabilities
Segment liabilities
Poker 16,608
Segment liabilities
Casino 6,215
Segment liabilities
Emerging Games 70
Unallocated
corporate
liabilities 60,584
Total liabilities 83,477
---------- --------- --------- ---------
1 Including share benefit charges of US$4,146,000.
Six months ended 30 June 2006
Casino Poker Consolidated
US$'000 US$'000 US$'000
(unaudited) (unaudited) (unaudited)
Net Gaming Revenue 44,027 34,179 78,206
--------- --------- ---------
Result
Segment result 24,387 20,331 44,718
--------- ---------
Unallocated corporate expenses1 45,487
--------- --------- ---------
Operating loss (769)
Finance income 1,622
Tax expense (1,431)
--------- --------- ---------
Loss for the period - continuing
operations (578)
Profit for the period -
discontinued
operations 43,280
--------- --------- ---------
Profit for the period 42,702
--------- --------- ---------
Assets
Unallocated corporate assets 138,530
--------- --------- ---------
Total assets 138,530
--------- --------- ---------
Liabilities
Segment liabilities - Poker 20,432
Segment liabilities - Casino 9,596
Unallocated corporate liabilities 29,589
--------- --------- ---------
Total liabilities 59,617
--------- --------- ---------
1 Including share benefit charges of US$3,881,000
Year ended 31 December 2006
Casino Poker Consolidated
US$'000 US$'000 US$'000
(unaudited) (unaudited) (unaudited)
Net Gaming Revenue 88,760 68,240 157,000
--------- --------- ---------
Result
Segment result 52,101 41,374 93,475
--------- ---------
Unallocated corporate expenses1 84,994
--------- --------- ---------
Operating profit 8,481
Finance income 4,883
Tax expense (3,117)
--------- --------- ---------
Profit for the period - continuing
operations 10,247
Profit for the period -
discontinued
operations 64,254
--------- --------- ---------
Profit for the period 74,501
--------- --------- ---------
Assets
Unallocated corporate assets 137,604
--------- --------- ---------
Total assets 137,604
--------- --------- ---------
Liabilities
Segment liabilities - Poker 15,445
Segment liabilities - Casino 7,226
Unallocated corporate liabilities 27,931
--------- --------- ---------
Total liabilities 50,602
--------- --------- ---------
1 Including share benefit charges of US$8,829,000
Other than where amounts are allocated specifically to the Casino, Poker and
emerging games segments above, the expenses, assets and liabilities relate to
all segments. Any allocation of these items would be arbitrary.
Geographical segments
The Group's performance can also be reviewed by considering the geographical
markets and geographical locations within which the Group operates. This
information is outlined below:
Revenue by geographical market
Six months Six months Year
Ended Ended Ended
30 June 30 June 31 December
2007 2006 2006
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
UK 41,199 36,593 70,562
Europe (excluding UK) 40,062 27,093 57,056
Americas (excluding US) 8,100 9,328 17,601
Rest of World 7,455 5,192 11,781
---------- ---------- ---------
Net Gaming Revenue - Continuing
operations 96,816 78,206 157,000
Net Gaming Revenue - Discontinued
operations (US) - 85,305 132,907
---------- ---------- ---------
Net Gaming Revenue 96,816 163,511 289,907
---------- ---------- ---------
3 Operating profit (loss) from continuing operations
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2007 2006 2006
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Operating profit (loss) is stated
after charging:
Staff costs 28,307 27,195 52,131
Depreciation 1,864 1,883 3,801
Chargebacks and returned
e-cheques 998 1,275 2,507
Exchange gains (741) (14) (4,742)
Payment service providers'
commissions 5,737 4,440 9,140
Share benefit charges - all
equity settled 4,146 3,881 8,829
-------- -------- ---------
4 Discontinued operations
Consolidated Income Statement
Six months Six months Year
Ended Ended Ended
30 June 30 June 31 December
2007 2006 2006
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
---------- ---------- ---------
Net Gaming Revenue - 85,305 132,907
Operating expenses - 17,605 28,086
Selling and marketing expenses - 21,489 33,283
Administrative expenses (income) (152) 2,931 7,284
---------- ---------- ---------
Operating profit before reorganisation
costs 152 43,280 68,287
---------- ---------- ---------
Charges in respect of reorganisation
costs - - 4,033
---------- ---------- ---------
Profit before tax 152 43,280 64,254
Taxation - - -
---------- ---------- ---------
Profit from discontinued operations 152 43,280 64,254
---------- ---------- ---------
5 Earnings per share
Basic earnings per share from continuing operations
Basic earnings per share have been calculated by dividing the profit (loss)
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 averaged share price during the period and
therefore are anti - dilutive.
Six months Six months Year
Ended Ended Ended
30 June 30 June 31 December
2007 2006 2006
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Profit (loss) from continuing
operations attributable to ordinary
shareholders 13,381 (578) 10,247
Weighted average number of Ordinary
Shares in issue 338,097,734 337,096,320 337,223,724
Weighted average number of dilutive
Ordinary Shares 344,209,550 342,886,703 341,834,214
---------- --------- ---------
Continuing operations
Basic 4.0c (0.1)c 3.0c
Diluted 3.9c (0.1)c 3.0c
---------- --------- ---------
Discontinued operations
Basic 0.0c 12.8c 19.1c
Diluted 0.0c 12.6c 18.8c
---------- --------- ---------
Total
Basic 4.0c 12.7c 22.1c
Diluted 3.9c 12.5c 21.8c
---------- --------- ---------
Earnings per share excluding share benefit charges
Six months Six months Year
Ended Ended Ended
30 June 30 June 31 December
2007 2006 2006
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Profit (loss) from continuing
operations attributable to ordinary
shareholders 13,381 (578) 10,247
Share benefit charges 4,146 3,881 8,829
---------- --------- ---------
Profit excluding share benefit
charges 17,527 3,303 19,076
Weighted average number of Ordinary
Shares in issue 338,097,734 337,096,320 337,223,724
Weighted average number of dilutive
Ordinary Shares 344,209,550 342,886,703 341,834,214
---------- --------- ---------
Continuing operations
Basic earnings per share excluding
share benefit charges 5.2c 1.0c 5.7c
Diluted earnings per share
excluding share benefit charges 5.1c 1.0c 5.6c
---------- --------- ---------
Discontinued operations
Basic earnings per share excluding
share benefit charges 0.0c 12.8c 19.1c
Diluted earnings per share
excluding share benefit charges 0.0c 12.6c 18.8c
---------- --------- ---------
Total
Basic earnings per share excluding
share benefit charges 5.2c 13.8c 24.8c
Diluted earnings per share
excluding share benefit charges 5.1c 13.6c 24.4c
---------- --------- ---------
6 Acquisitions made during the period
Online Bingo business of Globalcom Limited
On 16 May 2007 the Group acquired the online Bingo business of Globalcom Limited
by way of assets acquisition for an all cash consideration.
In calculating the goodwill arising on acquisition, the fair value of the net
assets of the online Bingo business of Globalcom Limited has been recognised in
accordance with IFRS 3 and adjustments from book value have been made where
necessary. These adjustments are summarised as follows:
Book value Fair value
On acquisition Adjustments Fair value
US$'000 US$'000
Tangible assets 81 - 81
Intangible assets 200 4,114 4,314
--------- --------- --------
Net assets 281 4,114 4,395
--------- --------- --------
The fair value adjustments relate to the recognition of customer lists, royalty
agreements, licensing agreements and other intangible assets acquired as part of
the acquisition. These intangibles are being amortised over their estimated
useful economic lives of between one month and four years.
US$'000
Fair value of net assets acquired 4,395
Goodwill 37,432
-----------
Fair value of consideration including expenses 41,827
-----------
Which is represented by:
Cash consideration to Globalcom Limited 10,723
Deferred cash consideration to Globalcom Limited (included with
other
payables) 21,593
Potential earn-out payment (included with other payables) 1 9,050
Expenses 461
-----------
Total cash consideration 41,827
1 A further earn-out payment of up to US$11.05 million may be payable in cash 12
months from completion on the basis of actual performance during financial year
2007, of which $9.05million has been recognised at 30 June 2007.
7 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 has 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.
8 Interim dividend
The directors have declared an interim dividend of 1.8c per share payable on 31
October 2007 to shareholders on the registrar at 12 October 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
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