RNS Number:7231R
Leisure & Gaming plc
26 September 2005
26th September 2005
Leisure & Gaming plc
Maiden Interim Results for the six months ended 30th June 2005
Leisure & Gaming plc ("L&G" or "the Company") is a holding company focused on
the interactive betting and gaming sector. L&G listed on AIM on 3rd September
2004 and made its first acquisition of VIP Management Services N.V. and Bon Bini
Investments N.V. (together "VIP") on 28th June 2005.
Through its VIP subsidiary, the company operates a number of online sports
betting and casino gaming brands including VIPsports, VIPpoker, VIPhorses,
BetGameDay and FairDeal.
Highlights
Leisure & Gaming plc
* Successful acquisition of VIP for an initial consideration of #18.7m
representing a 6.3x multiple on 2004 audited net profit of #2.9m (US$5.54m)
* Successful raising of #7.0m to fund the acquisition of VIP
* First half proforma EBITDA of US$2.87m
VIP First Half Results
* Net win of US$15.6m - up 25.3% (2004: US$12.5m)
* Net win margin of 10.6% - up from 8.3% in 2004
* Sportsbook - net win of US$9.7m - up 35% (2004: US$7.2m)
* Horses - net win of US$1.36m - up 36% (2004: US$1.0m)
* Casino - net win of US$4.4m - up 1.3% (2004: US$4.3m)
* 10,453 new registrations - up 49% (2004: 7,011)
* 22,789 active customers - up 27% (2004: 17,982)
Philip Parker, Chairman of Leisure & Gaming plc, said:
"We are pleased that through the acquisition of VIP, L&G has a solid platform to
provide further growth and consolidation in the online gaming market. The VIP
business is differentiated by its focus on customer service, loyalty and
retention and we remain optimistic about its prospects.
We are encouraged by the key performance indicators being shown by VIP as we now
enter the peak trading season and also by the progress we are making with
potential acquisition targets."
For further information, please contact:
Alistair Assheton, Chief Executive Tel: 020 7248 6343
Leisure & Gaming plc
Jonathon Brill/Caroline Stewart Tel: 020 7831 3113
Financial Dynamics
Chairman's Statement
I am pleased to be writing this as Leisure & Gaming plc's ("L&G") first interim
report as a public limited company. L&G was admitted to trading on AIM on 3rd
September 2004 with a strategy focussed on identifying and acquiring businesses
or interests in the leisure and gaming sector. To this effect, on 28th June
2005, L&G completed the acquisition of VIP for an initial consideration of
#18.7m representing a 6.3x multiple on 2004 audited net profit of #2.9m
(US$5.6). This included a successful raising of #7.0m to fund the acquisition.
In the course of this acquisition, Alistair Assheton and Peter Blacker,
respectively the CEO and CFO of VIP, joined the Board to become CEO and CFO of L
&G. At the time of the acquisition, we were also pleased to appoint Giles
Willits, director of group finance at Woolworths Group plc as a Non-executive
Director of the Board. Following these appointments, I am confident that we now
have a strong management team in place to not only further the growth of the VIP
business but also to deliver L&G's stated strategy of making further
acquisitions in the sector.
As L&G completed the acquisition of VIP on 28 June 2005, we are reporting
results for L&G along with pro-forma accounts for the consolidated L&G and VIP
business as if they had been one company for the entire period under review.
The proforma first half EBITDA was US$2.87m.
As a first acquisition, VIP represents a solid, well-priced acquisition capable
of delivering significant growth and provides the group with a strong operating
and brand platform differentiated by superior customer loyalty and retention.
The Board is actively progressing a number of acquisition opportunities as it
seeks to find further complementary and synergistic businesses in the sector
and, in so doing, create further shareholder value.
Philip Parker
Chairman, 19 September 2005
Chief Executive's Review
I am delighted to be announcing our first interim results as L&G's chief
executive following the successful acquisition of VIP.
Financial Summary
In VIP the net win for the first six months of 2005 increased to US$15.6m from
US$12.5m in 2004, an increase of 25.3%, growth that was in part driven by
enhancing the net win margin from 8.3% to 10.6%. The benefits of the Company's
marketing strategy are starting to be seen with 10,453 customer sign-ups, an
increase of 49% on the same period in 2004.
EBITDA for the VIP business for the six months ended 30 June was US$2.93m. This
included a charge of US$1.22m for our initial revenue investment in the European
market. On a consolidated basis, the enlarged group delivered proforma EBITDA
of US$2.87m and a pro-forma pre-tax profit of US$2.64m.
Operational Review
Net Win
In the six months ended 30 June 2005, the Company delivered strong results,
particularly in its sportsbook and racebook offerings. The Company's core North
American facing sportsbook delivered US$9.6m in net win in the period, an
increase of 35% compared to 2004 whilst the racebook delivered US$1.3m of net
win, an increase of 29% on 2004.
Casino net win was in line with 2004 results. The performance of our casino
business was affected by strong results in the sportsbook and racebook, as there
is typically an inverse correlation between the performance of a sportsbook and
its associated casino; which is symptomatic of the fact that some of VIP's
casino customers are also sportsbook customers. However, the introduction of a
new set of casino games and the development of a new downloadable product will
help to drive growth in our casino business in the future.
Customers
During the first six months of 2005, we registered 10,453 new customers, a 49%
increase over the 7,011 new customers attained during the same period in 2004.
The total number of active customers in the period was 22,879, up 27% on 2004
(17,982).
We are pleased to note the continued success and differentiation of our focus on
customer loyalty and retention. In the first half of the year we have seen an
average customer lifetime of 17 months. Our focus on loyalty has also resulted
in player betting frequency being sustained with our average sportsbook customer
placing 119 bets in the first half, compared to an average of 122 in the first
half of 2004.
Europe
Our initial investment in our European business contributed a loss of US$1.22m
at the EBITDA level in the first half of 2005. Despite this initial trading loss
in the European business, the European business should be of benefit to the
Company by not only providing support services to the Curacao operations, but
also enabling the company to gain a foothold in the key European market in
advance of next year's 2006 World Cup.
Outlook
We have been pleased with the performance of VIP since its acquisition. As we
now enter the peak trading period of the year our key performance indicators are
promising. For the period from 1 July to 19 September 2005, a key sign-up period
in the sports calendar, we have so far seen a 42% increase in new customers
compared to the same period last year and a net win of US$6.5m, 50% greater than
the same period last year.
In August 2005, we acquired the domain name VIP.com. We expect this domain, and
its associated branding opportunities, to deliver significant marketing
advantages in the future and lead to reduced costs per acquisition.
During the course of quarter 4, 2005 and quarter 1, 2006 we will introduce a new
version of our operating software as well as a new casino platform which we
anticipate will reduce some operational costs and further contribute to an
increase in player revenues, player conversion rates from registrations and
further drive customer loyalty and retention.
We continue to actively review a number of potential acquisition opportunities
in line with our stated strategy of acquiring further complementary businesses.
Our focus is principally on other combination sportsbook, casino and poker
businesses, similar to VIP, where we believe there are synergistic benefits. We
are also examining businesses which would provide the group with revenues from
new geographies and businesses that would provide the group with new products to
complement the existing portfolio.
Overall, we are encouraged by the progress that has been made by the Company in
the last six months and are optimistic about our outlook. We remain confident
in our ability to deliver shareholder value both organically and through
acquisition.
Alistair Assheton
Chief Executive
Leisure & Gaming plc
LEISURE & GAMING PLC
Unaudited Consolidated Income Statement for the
6 months Ending June 30, 2005
Notes US$
Expenses:
Communication 10,082
General 143,261
Total Expenses 153,343
Operational Result (153,343)
Interest Income 4,844
Result before corporation tax (148,499)
Corporation tax 0
Net Result (148,499)
Loss Per Share 13 (0.27p)
EPS (Diluted) 13 (0.24p)
LEISURE AND GAMING PLC
Unaudited Combined Proforma Income Statement for the
Six Months Ending June 30, 2005
Basis of preparation
As explained in note 12 below, the interim results for the six months ended 30
June 2005 include the full activities of Leisure & Gaming plc for the six month
and do not include the three days trading of VIP from acquisition as the
directors consider it impractical to create these records. However, the
directors consider that it is of assistance to shareholders to show pro forma
financial information of the combined entities for the full six months.
LEISURE & GAMING PLC
Unaudited Consolidated Balance Sheet
As at June 30, 2005
Notes US$
NON-CURRENT ASSETS
Intangible Assets:
Goodwill 4 36,858,594
Tangible Fixed Assets: 5
Furniture and Fittings 174,986
Computers and Telecom Equipment 220,671
Other Tangible Fixed Assets 133,336
37,387,587
CURRENT ASSETS
Trade and other receivables 6 4,852,740
Cash and Cash Equivalents 10,560,946
TOTAL ASSETS 52,801,273
EQUITY
Share Capital 7 13,851,179
Share premium 8 34,014,037
Retained earnings 8 (780,371)
Total equity 47,084,845
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 9 5,225,205
Taxes and social security premiums 491,223
Total liabilities 5,716,428
TOTAL EQUITY AND LIABILITIES 52,801,273
LEISURE AND GAMING PLC
Unaudited Consolidated Cash Flow Statement
For the Six Months Ending June 30, 2005
Notes US$
Net Cash Outflow from Operating Activities 10 (153,343)
Net cash from operating activities (153,343)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intangibles (3,160,218)
Interest received 4,844
Net cash used in investing activities (3,155,374)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuing share capital 13,200,594
Net cash used in financing activities 13,200,594
NET INCREASE IN CASH 9,891,877
CASH AT JANUARY 1, 2005 754,917
EXCHANGE LOSSES ON CASH (85,848)
CASH AT JUNE 30, 2005 10,560,946
Notes to the Consolidated Financial Statements
General information (note 1)
Leisure & Gaming plc (the Company) and its subsidiaries (together the Group)
operates a number of brands in the field of remote sports betting and horse race
betting, internet casinos and online poker games.
The consolidated financial statements are presented in United States Dollars
since the majority of the group's transactions are denominated in this currency.
Summary of Significant Accounting Policies (note 2)
Basis of Preparation
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS). The consolidated financial statements have
been prepared under the historical cost convention.
The principal operating currency of the group is US dollars, and accordingly the
financial statements have been prepared in US Dollars. The results for the six
months ended 30 June 2005 are unaudited, as is the combined proforma income
statement for the six months ended 30 June 2005.
Consolidation
Subsidiaries are all entities over which the Group has the power to govern the
financial and operating policies in all cases accompanying a shareholding of
more than one half of the voting shares.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition. The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded as goodwill.
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated.
Foreign Currency
a) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The consolidated financial
statements are presented in US Dollars, which is the Group's presentation
currency and foremost functional currency.
b) Transactions and balances
Transactions in currencies other than US dollars are recorded at the rates of
exchange prevailing on the dates of the transactions or translated at the
average exchange rates for the period. Exchange rate differences resulting from
the settlement of transactions denominated in foreign currency are included in
the profit and loss account using the exchange rate ruling on that date.
At the balance sheet date, monetary assets and liabilities that are denominated
in foreign currencies are retranslated at the rates prevailing on the balance
sheet date. Foreign currency gains and losses arising from the translation of
assets and liabilities are reflected in the profit and loss account.
c) Group companies
The results and financial position of all the group entities that have a
functional currency different from the presentational currency are translated
into the presentation currency as follows:
(i) assets and liabilities for each balance sheet presented are
translated at the closing rate at the balance sheet date
(ii) income and expenses for each income statement are translated at
average exchange rates ; and
(iii) all resulting exchange differences are recognised as a separate
component of equity
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
Impairment
Assets are reviewed at each balance date to determine whether there is objective
evidence of impairment. If any such indication exists, an impairment loss is
recognised based on the asset's estimated recoverable amount.
Provisions
A provision is recognised in the balance sheet when the Company has a legal or
constructive obligation as a result of a past event, and it is probable that an
outflow of economic benefits will be required to settle the obligation.
Tangible Fixed Assets
Fixed assets are carried at cost less accumulated depreciation. Depreciation is
calculated on a straight line basis over the estimated useful lives of the
assets, as follows:
Furniture & Fittings 3 years
Computer & Telecommunications Equipment - 3 years
Other equipment - 3 to 4 years
Intangible Assets
The intangible assets comprise goodwill and represent the excess of the cost
over the fair value of the net assets of the acquired subsidiary at the date of
acquisition.
Management determines goodwill based on its evaluation of the respective
companies at the time of acquisition, and periodically thereafter considering
factors such as potential growth and other factors inherent in the acquired
companies.
Financial Assets
Financial assets are carried at face value less a provision for
non-collectibility if applicable.
Receivables
Receivables are carried at face value less a provision for non-collectibility if
applicable
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost. For the purposes of the
statement of cash flows, cash and cash equivalents comprise balances less than
90 days to maturity from the date of acquisition and include cash on hand,
current account balances and amounts at call with banks and other unrestricted
short-term deposits with original maturities of three months or less.
Client Funds
Client funds are stated at face value. Debit balances are charged to the profit
and loss account as soon as they arise. Dormant accounts are released from the
profit and loss account according to the general terms and conditions as further
described in the VIP Group's websites.
Loyalty Reward program
The Company maintains a client loyalty reward program. This program awards
points to clients based on the amounts bet. The Company recognises the liability
of this program based on the actual points earned and the estimated pay out
ratio of these points.
Other assets and liabilities
Other assets and liabilities are valued at face value unless otherwise stated.
Revenue and profit recognition
Revenue represents amounts placed (being the gross risk taken by the customers)
in respect of bets on sports events and other events, which occurred in the
year. Revenue recognisable from casino products is total amount staked. Revenue
recognisable from poker products is commission taken (rake).
Cost of sales comprises house losses on sports, casino and horse race betting
activities plus direct costs associated with these activities.
The results on transactions are recognised in the year in which they are
realised. Expenses are allocated to the reporting year to which they relate.
Expenses
Expenses are recognised in the income statement on an accrual basis.
Corporation Tax
The activities of the VIP Group are principally based in Curacao where the rate
of taxation is 34.5%. However, all companies engaged in the business of the
group have been granted "offshore" status by way of private letter rulings
issued by the Netherlands Antilles tax authorities. The contents of these
rulings are not equal for all companies. Some companies are subject to tax on 1
/3rd of the wagering income at a rate of 2.4-3%, resulting in an effective rate
of 0.8 -1%. Whereas other companies are subject to tax on 1/10th of the trading
income at a rate of 24 - 30%, resulting in an effective rate of 2.4-3%. Profit
tax is calculated based on the result before taxation taking the applicable tax
ruling into account.
Acquisition
Business Combinations (note 3)
On 28 June 2005 the group acquired 100% of the issued share capital of VIP
Management Services N.V. and Bon Bini Investments N.V., a group with a number
of online sports betting and casino gaming brands operating in the US and most
western European countries.
Details of the net assets acquired and goodwill are as follows:
Purchase Consideration $
- transaction costs 4,244,602
- fair value of shares issued 33,519,750
Total Purchase Consideration 37,764,352
Fair Value of Net assets acquired (905,758)
Goodwill (note 4) 36,858,594
The goodwill is attributable to the high profitability of the acquired business
and the increase in the profitability expected to arise after the Group's
acquisition of VIP.
The assets and liabilities at book value which the directors consider to be
their fair value, arising from the acquisition are as follows:
Book & Fair Value
$
Fixed assets 528,993
Receivables 5,151,185
Payables (4,744,420)
Net assets acquired 905,758
$
Purchase consideration settled in cash 0
Cash and cash equivalents acquired in subsidiary acquired 0
Cash inflow on acquisition 0
Fixed Assets
Intangible Assets (note 4)
Goodwill
$
Cost
As at January 1 2005 0
Additions 36,858,594
As at June 30, 2005 36,858,594
Goodwill relates to the acquisition of the net assets of the VIP Group of
Companies on June 28th, 2005.
Tangible fixed assets (note 5)
Furniture and Computer & telecom Other TOTAL
Fittings equipment tangible
fixed assets
$ $ $ $
Cost
As at January 1 2005 0 0 0 0
Acquired with subsidiaries 174,986 220,671 133,336 528,993
As at June 30 2005 174,986 220,671 133,336 528,993
Trade and Other Receivables (note 6)
30 June 2005
$
Receivables from Processors 2,107,719
Processor Reserves 1,031,855
Other Receivables 778,657
Prepayments 934,509
4,852,740
Share Capital (note 7)
# $
Authorised:
50,000,000 ordinary shares of #0.25 each 12,500,000 -
Allotted, issued and fully paid:
30,504,829 ordinary shares of #0.25 each 7,626,207 13,851,179
On 24 June 2005 the company increased its authorised share capital by
#11,500,000 and consolidated every 5 of the issued and unissued ordinary #0.05
shares into one ordinary share of #0.25.
On 28 June 2005, the company issued a further 29,504,829 ordinary shares of
#0.25 ($0.45) each at #0.88 ($1.60).
Reserves (note 8)
Retained Earnings Share Premium
$ $
1 January 2005 51,990 235,847
Issue of Shares 33,778,190
Foreign exchange movements (683,862) 0
Retained Loss (148,499)
30 June 2005 (780,371) 34,014,037
Trade and Other Payables (Note 9)
30 June 2005
$
Trade payables 614,294
Client funds 3,294,836
Other payables and accrued expenses 1,316,075
5,225,205
Cash Flow (Note 10)
Net Cash Outflow from operating activities 2005
$
Operating Loss (153,343)
Net cash outflow from operating activities (153,343)
Contingent Liability (Note 11)
The purchase agreement for VIP includes an earn out clause based on the results
of VIP for the years ended 31 December 2005 & 2006. The maximum amount payable
to the former VIP shareholders on the 2005 earn out is $3,325,000. The maximum
amount payable to former VIP shareholders on the 2006 earn out is $5,700,000.
It is envisaged that these earn outs would become payable in April of the year
following the respective year end.
The Net Present Value of the maximum 2005 and 2006 earn out amounts payable are
$3,217,316 and $5,277,894 respectively, based on a discount rate of 4.5%.
The directors are unable to make a reliable estimate of the amount that could be
payable in accordance with the earn out clause and therefore no provision has
been made in this respect.
Profit and Loss Account for the 3 Days to 30 June 2005 (Note 12)
In the 3 days from readmission to AIM to 30 June 2005, the group recorded
turnover of $1.6m. The directors consider it impractical to provide details of
overheads and the balance sheet for the 3 day period.
Earnings Per Share (Note 13)
EPS has been calculated on the outstanding shares as at 30 June 2005.
Outstanding shares have not been weighted over the period being reported.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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