Final Results
betinternet.com PLC
30 November 2005
BETINTERNET.COM PLC
('the company' or 'betinternet')
PRELIMINARY RESULTS FOR THE YEAR ENDED 29 MAY 2005
betinternet.com plc, the global on-line gaming group, today announces
preliminary results for the year ended 29 May 2005
Highlights of the results are:
• Group turnover rose to £93.7m (2004: £45.5m) - an increase of 106%
• European Wagering Services ('EWS') turnover of £45.8m in 48 weeks following
acquisition.
• Casino and Games turnover of £18.7m in 24 weeks following launch.
• Administration expenses reduced 27.6% on 'like for like' basis.
• Operating loss before amortisation reduced sharply to £1.1m (2004: £2.0m).
• Group Loss of £1.9m same as last year, after increased amortisation charge of
£0.7m (2004: £0.2m)
• Enhanced platform with diversity of sports and games being developed.
• Decision taken to accept US wagers.
• Continued support of principal shareholder - arrangements for share placing
being finalised
Commenting on the results, Denham Eke, chairman of betinternet, said: 'We have
reacted positively to what we believe is a temporary setback in the otherwise
excellent progress of European Wagering Services and have directed our attention
creatively on the performance of the sportsbook. I am confident that the
combination of an enhanced sportsbook platform, soon to be accepting wagers from
US customers, and the return to full potential of European Wagering Services
during 2006, will hold betinternet.com on its course of developing one of the
most compelling and exciting one-stop gaming and entertainment platforms
available to customers across the world.'
ENDS
For further information:
betinternet.com plc Tel: 01624 698141
Paul Doona, Managing Director
Britton Financial PR Tel: 020 7251 2544
Tim Blackstone
Notes to editors:
The following are attached:
* Chairman's statement
* Operational Review
* Consolidated Profit & Loss Accounts
* Consolidated Balance Sheets
* Consolidated Cash Flow Statements
* Notes to the Accounts
Chairman's Statement
Introduction
Following the announcement of promising interim results in January 2005, the
remainder of the financial year, which ended on 29 May 2005, offered some
significant challenges. On the basis of excellent results from European Wagering
Services in the first half of the year, it was your board's intention to
concentrate on developing this risk-free and potentially very lucrative side of
the business further. Our strategy was to grow the global link between major
track operators, content providers and customers wishing to make use of the
wagering platform, multi-currency and technical services that the company offers
through the Isle of Man hub.
Unfortunately, the company was mentioned in news reports relating to legal
proceedings which took place in New York in January 2005. Two of the individuals
under investigation were officers of the International Players Association, an
organisation which had for two years referred 'high rolling' players to Euro
Off-Track, now European Wagering Services. As a result of the unwelcome
publicity and reaction of the tracks, we had no option but to cease this
activity. This had a detrimental effect on our turnover and profitability.
I should emphasise that your company was not in any way involved in the legal
proceedings and we were not contacted by any legal or regulatory authority in
respect of them. Our probity was not in question. Indeed, some six months before
these matters became public your board had reported its concerns regarding one
of the defendants in the later proceedings, to the appropriate regulatory
authority. It is our belief that this action led, in part, to the chain of
events which was triggered in January 2005.
Since the year-end we have modestly begun to offer incentives to a small base of
customers, but this is restricted to greyhound racing only.
As part of the process of rebuilding the potential of our wagering services and
to maintain our good reputation as a global online gaming group, we invited the
US Thoroughbred Protective Bureau (TRPB) - which body is, in effect, the
conscience of US racecourses - to carry out an audit of our business. We are
fully confident of the results of the audit which are to be reported later in
2005.
Strategy
As progress in European Wagering Services is temporarily held back, we have
focused the company's energies on developing the performance of the sportsbook
side of the business. Notably, we have decided to take wagers from US customers
and will do so as soon as our new sportsbook platform, referred to below, is
complete. We expect that this will be early in 2006.
This strategic move will involve us in relocating our sportsbook servers to a
different jurisdiction, Curacao, which encourages the acceptance of wagers from
the USA. The majority of our sportsbook staff and European Wagering Services
will continue to operate from the Isle of Man, which we continue to believe
provides a supportive environment for the majority of our activities.
Since the year-end, significant progress has been made in developing an improved
platform with a more complete sports offering and a comprehensive suite of both
casino and 'fun' games for our customers. After detailed investigation we chose
as software development partner, IGW, a Florida-based company whose experience
in developing software for the US market and knowledge of the Curacao
jurisdiction is likely to prove invaluable. Accordingly, we are confident of
seeing a significant boost to performance within the sportsbook during the
current financial year.
We report in more detail on these positive achievements, and provide an account
of other strategic investments, in the Operational Review that follows.
Overview of results
Group turnover rose to £93.7m (2004: £45.5m), an increase of 106%. However,
after taking account of a sharply increased amortisation charge of £0.7m (2004:
£0.2m), the group loss was £1.9m, the same as the previous period.
The results are more fully analysed in the Operational Review.
Fund-raising
The strategy for the first half of the year, which focused on the full
acquisition and development of Euro Off-Track - now called European Wagering
Services - was supported through a placement of shares to Burnbrae Ltd in
December 2004. To support recent developments within the sportsbook business,
the board is in the process of finalising arrangements for Burnbrae to subscribe
for a further placement of shares, details of which will be circulated to
shareholders within the next few weeks.
Board and executive changes
We announced shortly after the end of the financial period that Hugh Mac Giolla
Ri, a non-executive director, had tendered his resignation, due to ill health.
We wish Hugh a speedy recovery and would like to thank him for his valuable
contribution as a non-executive director since he joined the board in April
2003.
Also in June 2005, we were delighted to appoint Garry Knowles as Sportsbook
Director. He joined us initially in November 2003 as Head of Trading Operations.
Of immediate importance to Garry is the responsibility for leading the projects
to upgrade the sportsbook platform and its relocation to Curacao.
We strengthened our executive team with two senior appointments. On 30 March,
Simon Nicholls was appointed as Chief Operating Officer of European Wagering
Services. Simon was previously Managing Director of GG.com, the Internet arm of
GG Media which holds the media rights to ten independent UK racecourses. At the
same time, we also welcomed Tony Elder, previously a management consultant with
Whitechapel Corporate Services, who was appointed Financial Controller of
betinternet.com plc.
Following the establishment of this new management team, our Managing Director,
Paul Doona, felt able to stand down from the role of leading the company, which
he has undertaken for the last three years. Paul will step down from the board
at the conclusion of the forthcoming annual general meeting, and will be
succeeded by Garry Knowles. We wish Paul every success as he pursues new
interests.
Summary
The setback in the otherwise excellent progress of European Wagering Services
was a disappointment but it has served to direct our attention creatively on the
performance of the sportsbook. I am confident that the combination of a
strengthened sportsbook and the return to full potential of European Wagering
Services during 2006, will hold betinternet.com on its course of developing one
of the most compelling and exciting one-stop gaming and entertainment platforms
available to customers across the world.
I should like to add my thanks to all betinternet staff for their hard work and
commitment during the year. Together, we have many opportunities to explore and
enjoy.
Chairman
Operational Review
The focus on strengthening the attraction and performance of the sportsbook side
of the business during the last year and since the year end is progressing well.
The Board's decision to take play from the US required us to site the company's
servers in a new jurisdiction and we have selected Curacao for this purpose.
This decision was also influenced by the presence in Curacao of IGW Software, a
company based in Miami which has substantial experience in designing and
powering software specifically for sportsbook applications. We are currently
working with IGW Software to create a new and dynamic sportsbook website which
will enable us to diversify and build our range of sports and games for
customers all over the world. The site in its revamped form will be launched
early in 2006.
Last December we launched an online casino in partnership with CasinoWebcam and
this has proved very successful. To add to the potential which this
demonstrated, we have contracted with Real Time Gaming, a provider of gaming
software to some of the most successful internet casino sites, to launch a
random number casino and slots offering on the new sportsbook platform. Last
year we also introduced a new game, Play Football, offering virtual football
matches and this too has proved popular, especially in the summer months,
traditionally our quiet period. We are continually seeking new betting
opportunities and will be adding to the suite of sports and new leagues during
the forthcoming year to develop our customer-base in Asia, while enhancing the
platform in Europe and the US.
In March 2005, we announced an agreement to take a 22.5 per cent stake in
Coresports (Global Coresports Limited). This is a company established to exploit
artificial intelligence technology to create a virtual reality gaming experience
which can be played in real-time and on demand in a multi-player format. The
system architecture has been developed by a team of six leading Cambridge
academics, all of whom have extensive experience of start-up ventures,
particularly in the area of biotechnology. The first application, to be launched
in the current financial year, is an exciting football management game, the
technology for which can be adapted for other team sports.
As these ventures demonstrate, we are working at the forefront of online gaming
technology and, in due course, will offer a sportsbook platform that is utterly
compelling to customers.
Part of our strategy has been to invest in order to develop opportunities in
promising new territories. Last year we announced the formation of a joint
venture company, Isle of Man Tote Limited, with Phumelela Gold Enterprises of
South Africa. This was created to exploit the opportunities of our Isle of
Man-based hub and to provide an international service for South African
thoroughbred racing. In due course the venture is intended to host pool betting
on a variety of tote activities. Although progress has been slower than
anticipated, we have seen the start of an income stream in the period following
the end of the financial year.
Results
Our financial performance was severely impacted by events within European
Wagering Services, which are more fully described by the Chairman in his earlier
statement. This was particularly frustrating as turnover increased significantly
and underlying administration expenses were reduced sharply.
Group turnover increased by 106% to £93.7m (2004: £45.5m). Turnover from
European Wagering Services contributed £45.8 during the 48 weeks it was wholly
consolidated. However, much of this growth was made during the first half of the
year before the termination of contracts in the US and the cessation of rebating
had taken effect. It is likely that the downturn in turnover will continue for
at least the first half of the current year after which we expect significant
revival and further growth.
The margin achieved from pari-mutuel business (2.3%) reflects its risk-free
nature and the gross profit earned, before betting duty, was £1.1m for the 48
weeks that the operation was consolidated.
Turnover from the fixed odds business, including casino and games, was £47.9m
(2004: £45.5m). The blended margin for the fixed odds business fell to 4.8%
(2004: 5.5%) due to the lower margin arising from casino and games.
Gross margin before betting duty, was £2.1m, compared with £2.5m in the previous
period.
Administration expenses, which included 48 weeks for European Wagering Services,
were £4.2m, a reduction of 6.7% compared with the previous period. Stripping out
those additional expenses, the period on period reduction was 27.6%.
The group operating loss before amortisation was therefore reduced sharply to
£1.1m from £2.0m in the previous period.
The overall loss at £1.9m was identical to the previous period, but takes into
account a substantially increased amortisation charge arising as a result of the
European Wagering Services acquisition of £0.7m; (2004: £0.2m) and the loss from
the joint venture prior to its acquisition.
Having spent the last three years involved in developing the strategy, trading
philosophy and systems that are now in place in your Company, it is my intention
to step down from the Board following the conclusion of the forthcoming annual
general meeting. I am delighted that Garry Knowles has agreed to succeed me as
Managing Director. I am particularly confident in the steer that will be
provided by Garry and Simon Nicholls as they develop the fortunes of
betinternet.com's sportsbook and European Wagering Services, respectively.
Paul Doona
Managing Director
Consolidated Profit and Loss Account
for the period ended 29 May 2005
Continuing
operations Acquisitions 2005 2004
Note £000 £000 £000 £000
Turnover including share of joint venture
Betting stakes received
Fixed odds 29,157 - 29,157 45,494
Pari-Mutuel 1,403 45,794 47,197 22,513
Casino & Games 18,747 - 18,747 -
---------- ---------- ---------- ----------
49,307 45,794 95,101 68,007
Less: share of joint venture (1,403) - (1,403) (22,513)
---------- ---------- ---------- ----------
1
Total group turnover 47,904 45,794 93,698 45,494
Cost of sales
Winnings paid and bets laid off 1 (45,836) (44,728) (90,564) (43,004)
Betting duty paid 1 (50) (32) (82) (53)
---------- ---------- ---------- ----------
1
Gross profit 2,018 1,034 3,052 2,437
Administration expenses (3,236) (933) (4,169) (4,467)
---------- ---------- ---------- ----------
Operating loss before amortisation (1,218) 101 (1,117) (2,030)
Amortisation of good will (675) (219)
---------- ----------
Operating loss after amortisation (1,792) (2,249)
Share of operating (loss)/profit in joint venture (105) 354
---------- ----------
Total opening loss including share of joint (1,897) (1,895)
venture
Interest 5 1
---------- ----------
Loss on ordinary activities before and after
taxation and retained loss for the year
(1,892) (1,894)
---------- ----------
Basic and diluted loss per share (pence) 2 (1.4) (1.6)
---------- ----------
Consolidated Balance Sheet
for the period ended 29 May 2005
2005 2005 2004 2004
£000 £000 £000 £000
Fixed assets
Intangible assets 541 219
Tangible assets 351 620
Investments 83 -
---------- ----------
975 839
---------- ----------
Current assets
Debtors 207 851
Cash at bank and in hand 650 444
---------- ----------
857 1,295
---------- ----------
Creditors
Amounts falling due within one year (1,611) (1,517)
---------- ----------
(222)
Net current liabilities (754) ----------
----------
Provision for liabilities and charges
Investment in joint venture
Share of gross assets - 446
Share of gross liabilities - (636)
---------- ----------
Share of net liabilities - (190)
Creditors
Amounts falling due after more than one year (63) -
---------- ----------
Net assets 158 427
---------- ----------
Capital and reserves
Called up share capital 1,505 1,167
Share premium 8,213 6,928
Profit and loss account (9,560) (7,668)
---------- ----------
Equity shareholders' funds 158 427
---------- ----------
Consolidated Cash Flow Statement
for the period ended 29 May 2005
2005 2004
Note £000 £000
Net cash outflow from operating activities 3 (1,182) (984)
Returns on investments and servicing of finance 5 1
Capital expenditure (94) (345)
Acquisition 4 328 -
---------- ----------
Cash outflow before use of liquid resources and (943) (1,328)
financing
Financing 4 985 -
---------- ----------
Increase/(decrease) in cash during the period 42 (1,328)
---------- ----------
Reconciliation of net cash flow to movement in net funds
2005 2004
£000 £2004
Operating net funds 437 1,765
Increase/(decrease) in cash during the period 42 (1,328)
---------- ----------
5
Closing net funds 479 437
---------- ----------
Notes to the Accounts
1 Segmental Analysis
Period ended 29 May 2005
Fixed Odds Pari-Mutuel Casino & Games Total
£000 £000 £000 £000
(48 weeks)* (24 weeks)**
Betting stakes received 29,157 45,794 18,747 93,698
Winnings paid and bets laid off (27,460) (44,728) (18,376) (90,564)
---------- ---------- ---------- ----------
Gross Margin 1,697 1,066 371 3,134
---------- ---------- ----------
% 5.8% 2.3% 2.0%
Betting Duty (82)
----------
Gross Profit
3,052
----------
Period ended 30 May 2004 Fixed Odds Total
£000 £000
Betting stakes received 45,494 45,494
Winnings paid and bets laid off (43,004) (43,004)
---------- ----------
Gross margin 2,490 2,490
----------
% 5.5%
Betting duty (53)
----------
Gross profit 2,437
----------
*Pari-Mutuel operations are the activities of European Wagering Services Limited. In previous periods,
these activities were undertaken by way of joint venture. The group acquired the 50% of European
Wagering Services Limited, not previously owned, on 28 June 2004. From that date, the activities were
fully consolidated.
**As explained more fully in the Operation Review, casino and games activities, not previously offered
by the sportsbook platform were launched in December 2004.
2 Loss per share
The basic loss per share is calculated by dividing the losses attributable to ordinary shareholders by
the weighted average number of ordinary shares during the year.
Calculation of loss per share is based on losses of £1,892,156 (2004: £1,893,941) and the weighted
average number of ordinary shares being the equivalent of 135,217,660 (2004: 116,687,254) ordinary 1p
shares. The diluted loss per share is the same as the basic loss per share as the adjustment to assume
conversion of dilutive ordinary shares would decrease the loss per share.
3 Reconciliation of operating loss to net cash outflow from operating activities
2005 2004
£000 £000
Operating loss (1,792) (2,249)
Depreciation and amortisation charges 1,140 785
Decrease in debtors 537 760
Decrease in creditors (1,067) (280)
---------- ----------
Net cash outflow from operating (1,182) (984)
activities
---------- ----------
4 Analysis of cash flows for headings netted in the cash flow statement
2005 2004
£000 £000
Acquisition
Investment (83) -
Cash acquired from subsidiary 411 -
---------- ----------
328 -
---------- ----------
Financing
Issue of new shares including share 922 -
premium
Amounts falling due after more than one 63 -
year
---------- ----------
985 -
---------- ----------
5 Analysis of net funds At 30 May 2004 Cash Flow At 29 May 2005
£000 £000 £000
Cash in hand and at bank 444 206 650
Bank overdraft (7) (164) (171)
---------- ---------- ----------
437 42 479
---------- ---------- ----------
6 Basis of preparation of the final statements
(i) The results for the period ended 29 May 2005 are prepared in accordance with applicable UK accounting
standards, using the same account policies as set out in the group accounts for the year ended 30 May
2004. These preliminary statements are unaudited, but have been reviewed, in accordance with Auditing
Practices Board guidance by the Auditors, KPMG Audit LLC, whose report will be included in the report
and accounts to be sent to shareholders.
(ii) The abridged accounts for the year to 30 May 2004 are an extract from the full group accounts for that
period on which an unqualified report was made by the group's auditors and which have been delivered to
the Registrar of Companies.
(iii) In preparing these financial statements the directors considered the adequacy of the cash resources and
working capital available to the group for the next 12 months.
The Directors noted that the group is in the process of arranging for a placing of new ordinary shares
with Burnbrae Limited in order to raise further funding of £1.5 million (before issue costs). The
proceeds of this issue will be used to repay a working capital facility which Burnbrae has provided to
allow the company to proceed with the strategies described in the Chairman's Statement. It is
anticipated that this will result in additional funds of £965,000 (before issue costs) being received.
The placing will be subject to, and conditional upon, the approval of the independent shareholders to
the waiver of the requirements of Rule 9 of the City Code.
7 Other information
(i) All profits derive from continuing activities.
(ii) The preliminary statement was approved by the board on 29 November 2005.
(iii) The report and accounts upon which KPMG Audit LLC will deliver their report will be posted to
shareholders on 29 November 2005. Following posting, copies will be available for inspection at the
Company's Registered Office; Viking House, Nelson Street, Douglas, Isle of Man IM1 2AH.
(iv) The Company's nominated advisor and broker is Williams de Broe, PO Box 515, 6 Broadgate, London EC2M
2RP.
End
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