RNS Number:4856A
Leisure & Gaming plc
28 March 2006
28 March 2006
Leisure & Gaming plc
Preliminary Results for the period ended 31 December 2005
Leisure & Gaming plc ("L&G" or "the Group") the online betting and gaming group,
today announces its maiden preliminary results for the financial period ended 31
December 2005. The audited figures cover the 16 months and 22 days from 10
August 2004 to 31 December 2005, including the post-acquisition results of the
businesses acquired in this period. In addition, unaudited pro forma figures for
the 12 months ended 31 December 2005 have been prepared to provide the
performance of the Group as if all acquisitions had been made at 1 January 2005.
Business Highlights
* Successful acquisition of foundation VIP business followed by the
acquisitions of Stanley Entertainment, Nine.com and English Harbour,
building a strong multi-brand betting and gaming group.
* Two successful placings at 88p and 125p raising a total of #27.1m (net
of costs) to fund the acquisitions.
* Continued strong growth in 2005 in net win (up 32% on 2004) and new
customer sign-ups (up 21% on 2004).
* Strong customer retention and loyalty leading to an average player
lifetime of 18 months in the VIP business, significantly higher than
the industry average.
* Consolidation and integration strategy proceeding to plan.
Financial Highlights
* The combined L&G and VIP business for 2005, together with the post
acquisition results of Nine.com and English Harbour, delivered a
pretax profit (excluding share option charges) of $7.1m, in line with
our pre-close statement.
Full year pro forma results for 2005 for the L&G Group:
* Total net win of $80.9m
* Sportsbook (including racebook) net win of $34.9m at a net margin of
6.2%
* Casino net win of $44.9m
* Gross profit of $44.6m
* Earnings before interest, tax, depreciation, amortisation and share
option charges of $14.0m.
* Profit before tax and share option charges of $13.2m.
* Basic earnings per share, excluding share option charges, of 21.2
cents.
* Cash balance at the year-end of $24.8m (including $9.9m held in
escrow).
Philip Parker, Chairman of Leisure & Gaming plc, said:
"With the acquisition of VIP, L&G has established an excellent foundation for
its buy and build strategy, and with the subsequent acquisitions of Stanley
Entertainment, Nine.com and English Harbour, L&G has developed a strong base
from which to drive earnings and further consolidate the online leisure and
gaming industry.
Early trading in 2006 shows group net win ahead of last year by 28%, with active
customers up by 16% and new customer sign-ups are up by 7%. We are pleased with
the progress on our key integration and business consolidation objectives -
further supporting our confidence in the outlook for the Group.
We continue to review acquisition targets in our sector, focusing on
opportunities that enhance earnings per share and enable us to develop new
products, enter new geographic markets and add scale to our existing operations.
We remain committed to pursuing our consolidation strategy and would like to
thank shareholders for their support over the past year."
For further information, please contact:
Alistair Assheton, Chief Executive, Leisure & Gaming plc
Tel: 020 7248 6343
Jonathon Brill/Billy Clegg, Financial Dynamics
Tel: 020 7831 3113
CHAIRMAN'S STATEMENT
It is with great pleasure that we are announcing Leisure & Gaming plc's first
preliminary results as a listed company. L&G was admitted to trading on AIM on 3
September 2004 with a strategy focused on identifying and acquiring businesses
in the online gaming sector.
Between June 2005 and December 2005, we successfully acquired four businesses
and completed two share placings, at 88p and 125p raising #27.1m (net of costs)
from a strong group of institutional investors.
Alistair Assheton, previously CEO of VIP, joined the Board to become CEO of L&G
in June 2005 and has since led the Group through further acquisitions and the
development of group operations, while establishing a strong group executive
team. Giles Willits joined the Board as a Non-Executive Director in June and
Benjamin Shaw continues as the Board member responsible for Corporate
Development. Peter Blacker, Finance Director, is leaving the Company from 31
March 2006 to pursue other business interests and the Board would like to thank
Peter for his contribution and wishes him well for the future. The process of
finding a successor is well underway and we will update the market in due
course. In the meantime, we have engaged Martin Clifford-King (formerly Chief
Financial Officer of MFI Furniture plc) as a consultant to support and oversee
the transition.
Responsible gaming is an area that we take seriously, and the Group is proud to
be associated with various initiatives in this area - including the development
of regulation in the Netherlands Antilles (the Group's principal operating
jurisdiction) to meet the requirements of the UK Gambling Act 2005. We have also
undertaken trials of the GamAid and GamStop tools and have implemented the URU
age verification tool to further protect against under age gaming.
The Board is actively reviewing a number of acquisition opportunities as it
seeks to consolidate further complementary and synergistic businesses in the
sector and, in so doing, continues to enhance shareholder value.
Philip Parker
Chairman
Leisure & Gaming plc
CHIEF EXECUTIVE'S REVIEW
Financial Summary
We are reporting results for L&G for the 16 months and 22 days since
incorporation. However, as L&G completed the acquisition of VIP on 28 June 2005,
Stanley Entertainment on 14 October 2005 and Nine.com and English Harbour on 6
December 2005, the audited results include only 6 months of VIP earnings and
less than a month of Nine.com and English Harbour.
Profit before tax and share option charges for the original combined L&G and VIP
business for 2005, also including the post acquisition contribution from
Nine.com and English Harbour was $7.1m in line with our pre-close statement.
In order to provide a meaningful basis for understanding future performance, we
have focused on providing unaudited pro forma results for the full 2005 year as
if all acquisitions had taken place at 1 January 2005.
The pro forma net win for the Group in 2005 was $80.9m, up 32% on 2004. This net
win is comprised of $34.9m from sports and race book activity, $44.9m from
casino gaming and the balance from our fledgling poker operations. With other
income of $1.6m the total pro forma income for the Group in 2005 was $82.5m. Pro
forma group gross profit for 2005 was $44.6m after charging costs of bonuses,
rebates, affiliate charges, banking and processing costs.
Pro forma administration costs excluding share option charges for 2005 of $31.6m
represented 39% of net win. Costs included marketing of $8.7m, employee costs of
$11.2m, system and IT costs of $4.5m, depreciation and amortisation of $1.0m and
other administration costs of $6.2m, including the costs of running our European
operation. Having conducted a review of this business, we have concluded that
the enlarged Group will be best served by closing the small operational office
in Bristol and consolidating our UK based operations with the corporate team.
Pro forma earnings before interest, depreciation and amortisation and share
option charges were $14.0m. Pro forma profit before tax and share option charges
for 2005 was $13.2m which represents 16% of net win. Given the high percentage
of favourites that won during the NFL season late in 2005, a well publicised
phenomenon, this result is pleasing. We fully expect sports results to show
volatility in the short term, and our focus on retaining customers over the long
term ensures this effect is minimised over the longer run. Share option charges
for 2005 were $1.2m using the Black Scholes valuation methodology. Pro forma
profit before tax after share option charges was $12.0m.
Pro forma basic earnings per share excluding share option charges for 2005 were
21.2 cents per share and 20.8 cents per share on a diluted basis. Pro forma
basic earnings per share after share option charges were 19.2 cents per share
and 18.8 cents per share on a diluted basis.
At year end, the Group had total cash balances of $24.8m including $9.9m held in
escrow for deferred and contingent consideration. These funds will be drawn upon
to pay deferred consideration and to pay contingent consideration if Nine and
English Harbour achieve certain EBIT targets in 2006. Included in creditors are
player deposits of $7.8m.
The reporting timetable for 2006 provides a regular flow of opportunities to
update on current trading. Following today's announcement we will provide a
further update at the AGM on 22 June, a third update at the Interim Results in
September and a pre-close statement in January 2007.
Operational Review
Sports and Race Book
In 2005, the sports and race book pro forma net win was $34.9m (up 23% on 2004)
with a net win percentage of 6.2%. Customers placed 8.9 million sports bets in
the year (up 11% on 2004), with an average bet size of $63 per bet which is
consistent with our recreational customer base and focus.
Casino
The successful launch of the Real Time Gaming casino product at VIP sites in the
second half of 2005 led to a strong uplift in revenues, which we expect to
continue in 2006. We are already using the casino expertise in English Harbour
to develop cross marketing opportunities in Nine.com and VIP.
For 2005, the pro forma casino net win was $44.9m (up 37% on 2004) with a net
margin percentage of 3.1%.
Poker
Across the Group our current revenue run rate on poker is $200k per month and
growing rapidly, albeit from a low base. Following the acquisitions, we are
implementing further poker initiatives and partnerships in the early part of
2006 to drive higher growth going forwards. The Board recognises that poker
represents a significant opportunity for the now enlarged L&G group, given the
propensity of sports bettors to cross into playing poker online.
Customers
In 2005, new customer sign-ups increased by 21% on 2004 on a pro forma basis.
The total number of active customers in the year was up 13% on 2004. Cost of
acquisition per new customer for 2005 was $203 and pro forma net win per
customer in 2005 was $974. Our customer base is substantially based in North
America although we now have active customers from 93 countries around the
world. Increasingly, we are diversifying our customer base to mirror the global
demographics - while historically our players have been disproportionately male
and under 35, the growth in our casino business is attracting a higher number of
females in the 30 - 50 age bracket. We expect this trend to continue as we
develop our customer base and continue expanding the product offering we provide
for our players.
We are pleased to note the continued success of our differentiating focus on
customer loyalty and retention. In 2005 we have seen an average customer
lifetime of 18 months in our VIP business. We expect to see an increase in
player lifetime, and average player value as we implement the proprietary VIP
Rewards programme across the Group. This is significantly higher than the
industry average.
Cross Marketing
There are further significant opportunities to cross-sell between the different
portfolio of products, with particular opportunities to move sportbook players
into poker and casino. Taking our sports and race categories as one, currently
around one quarter of our customers in VIP play in more than one product
category. We are focused on increasing the number of our players who try other
products within our portfolio, and we are exploring various initiatives
including the incentives available through our player loyalty system - VIP
Rewards - to encourage players to use multiple products. Given the common wallet
tools we have had in place since 1999 in our foundation business, we are
confident that our product crossover can, as a minimum, be consistent with our
peers' experience in the sector. Indeed, the fact that our common wallet
technology has been proven and improved over several years provides us with the
experience to have an advantage over some of our peers in this regard.
Brands
Following the various acquisitions, we are focused on our primary brands - and
channelling promotional and marketing investment in the Groups' core brands,
each with a common wallet and integrated to the group-wide proprietary reward
programme, VIP Rewards.
Systems
We acquired the premium domain name, VIP.com, in 2005 and expect to relaunch
this site in June 2006, bringing a "one stop shop" for our customers for the
first time and providing us with the opportunity to further leverage our
distinct brands under one umbrella.
A new version of our operating software and betting platform is being introduced
at VIP in 2006. Key benefits will include enhanced operating margins, player
revenues through profile, player conversion and rewards programme management. It
is our strategic objective to take ownership of our trading and core software
systems to ensure we control and retain our market leading position in this
area. In 2005, $1.9m was spent on this software and a further $4m is expected to
be incurred over the next two years in capital expenditure to complete the
initial development of this system.
Acquisitions and Integration
The key businesses acquired over the year; VIP, Nine.com and English Harbour
were substantially earnings enhancing ahead of any integration and business
consolidation. Following completion of the Nine.com and English Harbour
transactions in early December we established a schedule of specific integration
activities which are now being implemented and we are pleased to report this is
proceeding as anticipated. The three key integration areas we have worked on
are:
Ecommerce: Ensuring optimal margins and management of this core business area by consolidating under Virtual
Exchange, the specialist e-payments business acquired as part of English Harbour.
Wagering: Centralising sports trading and risk management operations across the companies to ensure best
practice, reduced headcount and enhanced net win margins.
Retention: Deployment of the proprietary VIP Rewards programme across all the Group brands to further drive
customer retention success and increase player yield
Meanwhile, we continue to actively review a number of potential acquisition
opportunities in line with our stated strategy of acquiring businesses in the
online gaming sector, specifically focusing on the following categories; US
facing sportsbooks and casinos, new geographic development opportunities, or
increased product categories to offer to our player base.
Finally, we have agreed a new bank facility of $20m with Barclays and we would
expect that we will use this debt for further acquisitions to improve our
balance sheet efficiency and enhance the impact on earnings per share.
Outlook
To date, trading in 2006 so far has been very encouraging, with total net win to
20 March 2006 up by 28% compared to last year. Net win across each of the
product areas is shown below:
Net Win % increase vs 2005
Sports and Race book 25%
Casino 26%
Poker 517%
Total Net Win 28%
Since the start of the new financial year, active customers up by 16% and new
customer sign-ups are up by 7%, in line with management expectations.
We have achieved a great deal in the nine months since the foundation VIP
acquisition and it is a great credit to our management team and employees who
have shown exceptional willingness to progress the business and to seek out and
implement the synergistic benefits that will further underpin our growth in
2006. I would like to thank them for their co-operation and dedication in what
has been a fast changing, challenging environment.
With the high calibre management team and the focus and commitment in place, I
am confident that 2006 will be another highly successful year for our Group.
Alistair Assheton
Chief Executive
Leisure & Gaming plc
28 March 2006
Unaudited Pro forma Consolidated Income Statement for the year ended 31 December
2005
Notes $m
Revenue 2 607.2
Net win 2 80.9
Other income 2 1.6
2 82.5
Cost of sales (37.9)
Gross profit 44.6
Administrative expenses:
- Other costs (31.6)
- Share option charge (1.2)
Operating profit 11.8
Net interest and similar income 0.2
Profit before tax 12.0
Tax 4 (0.5)
Profit for the period attributable to equity holders of the parent 11.5
Earnings per share (cents)
Earnings per share - basic 5 19.2c
Earnings per share - diluted 5 18.8c
Earnings per share - basic (excluding share option charge) 5 21.2c
Earnings per share - diluted (excluding share option charge) 5 20.8c
All activities were acquired in the year and are continuing.
Basis of preparation
The above statement includes the results of all subsidiaries as though they were
acquired on 1 January 2005.
Audited Consolidated Income Statement for the 16 months and 22 days ended 31
December 2005
Notes $m
Revenue 2 261.1
Net win 2 23.3
Other income 2 0.3
2 23.6
Cost of sales (10.2)
Gross profit 13.4
Administrative expenses
- Other costs (10.8)
- Share option charge (1.2)
Operating profit 1.4
Net interest and similar income 0.3
Profit before tax 1.7
Tax 4 (0.4)
Profit for the period attributable to equity holders of the parent 1.3
Earnings per share (cents)
Earnings per share - basic 5 9.9c
Earnings per share - diluted 5 9.6c
Earnings per share - basic (excluding share option charge) 5 18.8c
Earnings per share - diluted (excluding share option charge) 5 18.2c
All activities were acquired in the period and are continuing.
Audited Consolidated and Company Balance Sheets at 31 December 2005
Notes Group Company
$m $m
ASSETS
Non-current assets
Property, plant and equipment 1.4 -
Goodwill 6 106.7 -
Intra-group loan - 4.0
Investment in subsidiaries - 109.7
Other intangibles 4.2 -
112.3 113.7
Current assets
Trade and other receivables 12.3 0.7
Intra-group loan - 2.1
Cash and cash equivalents 7 24.8 15.0
37.1 17.8
Total assets 149.4 131.5
LIABILITIES
Current liabilities
Trade and other payables 8 (15.7) (1.4)
Current tax liabilities (0.5) -
(16.2) (1.4)
Non-current liabilities
Deferred and contingent consideration (17.4) (17.4)
Total liabilities (33.6) (18.8)
Net assets 115.8 112.7
EQUITY
Share capital 9 26.4 26.4
Share premium 82.6 82.6
Other reserves 4.6 4.6
Retained earnings 2.2 (0.9)
Equity attributable to equity holders of the parent 115.8 112.7
Audited Consolidated Cashflow Statement for the 16 month and 22 days ended 31
December 2005
$m
Operating profit 1.4
Adjustments for:
Increase in trade and other receivables (1.5)
Increase in trade and other payables 2.7
Unrealised foreign exchange differences (0.2)
Depreciation and amortisation 0.2
Share option charge 1.2
Net cash from operating activities 3.8
Investing activities
Purchase of subsidiary undertakings (net of cash acquired) (31.9)
Purchase of intangible assets (1.5)
Purchase of property, plant and equipment (0.1)
Net cash used in investing activities (33.5)
Financing activities
Proceeds from issue of ordinary shares 54.4
Interest received 0.1
Net cash from financing activities 54.5
Cash and cash equivalents at end of period 24.8
The Group has no debt.
Audited Consolidated Statement of Changes in Equity for the 16 months and 22
days ended 31 December 2005
Share Share Retained Total
Capital Premium earnings
& other
reserves
$m $m $m $m
Profit for the period - - 1.3 1.3
Share option charge - - 1.2 1.2
Foreign exchange movements - - (0.3) (0.3)
Total recognised income and expense - - 2.2 2.2
Recognised directly in equity
Issue of ordinary shares 26.4 84.2 - 110.6
Future issue of ordinary shares - - 4.6 4.6
Costs attributable to share issue - (1.6) - (1.6)
Net change directly in equity 26.4 82.6 4.6 113.6
Equity at the end of the period 26.4 82.6 6.8 115.8
The above is wholly attributable to the equity holders' of the company.
Notes to the Consolidated Financial Information
Basis of preparation
The financial information presented above does not represent statutory financial
statements within the meaning of Section 240 of the Companies Act 1985. The
information has been derived from draft statutory financial statements, which
will be audited and filed at Companies House in due course.
The financial information was approved by the directors on 27 March 2006.
1. Accounting Policies
The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS").
The financial statements have been prepared on the historical cost basis. The
principal accounting policies adopted are set out below.
Basis of consolidation
The final results incorporate the financial statements of the Company and the
entities controlled by the Company. Control is achieved where the Company has
the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities.
Accounting for subsidiaries
The results of the subsidiaries acquired during the period are included in the
income statement from the effective date of acquisition. Where necessary,
adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with those of other members of the Group.
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. Contingent consideration is recognised to the extent that it is
probable that it will result in the issue of additional equity instruments or
the transfer of economic value.
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.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation
Foreign currency
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.
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 rates for the period. Exchange rate differences resulting from the
settlement of transactions denominated in foreign currency are included in the
income statement using the exchange rate ruling on that date.
At the balance sheet date, monetary assets and liabilities denominated in
foreign currencies are translated 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 income statement.
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 for the period; 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 sheet date to determine whether there is
objective evidence of impairment. If any such indication exists, an impairment
loss is recognised on the asset's estimated recoverable amount.
Property, plant and equipment
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 fixed assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the Group's share of the net identifiable assets of the acquired subsidiary
at the date of acquisition. Goodwill is tested annually for impairment and
carried at cost less accumulated impairment losses.
Domain names
Domain names are shown at historical cost. Domain names have a definite useful
life and are carried at cost less accumulated amortisation. Amortisation is
calculated using the straight-line method to allocate the cost of domain names
over their estimated useful lives (5 - 20 years).
Computer software
Acquired computer software is capitalised on the basis of the costs incurred to
acquire and bring to use the specific software. These costs are amortised on a
straight line basis over their estimated useful lives (5 years).
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.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received,
net of direct issue costs.
Cash and cash equivalents
Cash and cash equivalents, including amounts held in escrow are carried at cost.
For the purposes of the statement of cashflows, 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. Cash and cash equivalents also include bank deposits held on
escrow.
Loyalty Reward program
The Group maintains a client loyalty reward program. This program awards points
to clients based on the amounts bet. The Group 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 matured in the
period. Revenue recognisable from casino products is total amount taken. 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 of transactions are recognised in the period in which they are
realised. Expenses are allocated to the reporting period to which they relate.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
The Group has no finance leases. Rentals payable under operating leases are
charged to income on a straight-line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating
lease are also spread on a straight line basis over the lease term.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based Payments.
The Group issues equity-settled and cash-settled share-based payments to certain
employees, via an employee benefit trust. Equity-settled share-based payments
are measured at fair value at the date of grant. The fair value determined at
the grant date of equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group's estimate of
shares that will eventually vest. Fair value is measured by use of a Black
Scholes model.
Employee Share Ownership Plans
The company operates an employee benefit trust. Where the Group has de facto
control of the shares and options held by the trust and bears their benefits and
risks, the company records these assets as its own. Finance costs and
administrative expenses are charged as they accrue.
2. Segmental analysis
The Group analyses its business based on the 3 key products it operates:
By product
Revenue Net win Revenue Net win
16 months 16 months Unaudited Unaudited
& 22 days & 22 days Pro forma 2005 Pro forma 2005
$m $m $m $m
Sports and race book 250.4 12.9 559.6 34.9
Casino 9.6 9.6 44.9 44.9
Poker 0.8 0.8 1.1 1.1
260.8 23.3 605.6 80.9
Other income 0.3 0.3 1.6 1.6
261.1 23.6 607.2 82.5
No analysis of operating profit and net assets has been given by product as all
expenses, assets and liabilities relate jointly to these segments. Any
allocation of these items would be arbitrary.
3. Expenses
Profit on ordinary activities before taxation
Profit before tax is stated after charging
16 months Unaudited
& 22 days Pro forma
2005
$m $m
Amortisation of intangible assets (0.0) (0.2)
Depreciation of property, plant and equipment (0.1) (0.8)
Auditors - audit services (0.3) (0.3)
Auditors - non audit services (0.1) (0.1)
4. Taxation
16 months Unaudited
& 22 days Pro forma
2005
$m $m
Tax charge:
UK corporation tax (0.0) 0.0
Foreign tax (0.4) (0.5)
Charge for the period (0.4) (0.5)
Effective tax rate 22% 4%
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
The charge for the period can be reconciled to the profit per the income
statement as follows:
16 months Unaudited
& 22 days Pro forma
2005
$m % $m %
Profit before tax 1.7 12.0
Tax at the UK corporation tax rate of 30% (0.5) 30% (3.6) 30%
Tax effect of UK losses not relieved (0.2) 11% (0.2) 2%
Share option charge (0.4) 20% (0.4) 3%
Effect of different tax rates of subsidiaries operating in
other jurisdictions 0.7 -39% 3.7 -31%
Tax expense and effective tax rate for the period (0.4) 22% (0.5) 4%
5. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of ordinary shares
in issue during the period.
16 months Unaudited
& 22 days Pro forma
2005
$m $m
Profit attributable to equity holders of the Company 1.3 11.5
Profit attributable to equity holders (excluding share option charge) 2.5 12.7
Weighted average number of ordinary shares for the purposes of basic
earnings per share - the pro forma is based on the number of shares at year
end. 13,417,900 60,245,735
Basic earnings per share (cents) 9.9c 19.2c
Basic earnings per share (cents) - excluding share option charge 18.8c 21.2c
Diluted earnings per share is calculated adjusting the weighted average number
of ordinary shares outstanding to assume conversion of all dilutive potential
ordinary shares.
The only potentially dilutive ordinary shares the Company has are share options.
A calculation is undertaken to determine the number of shares that could have
been acquired at fair value (determined as the average market share price of the
Company's shares over the period) based on the monetary value of the
subscription rights attached to outstanding share options.
The number of shares calculated above is compared with the number of shares that
would have been issued assuming the exercise of the share options.
16 months Unaudited
& 22 days Pro forma
2005
$m $m
Profit attributable to equity holders of the Company 1.3 11.6
Profit attributable to equity holders (excluding share option charge) 2.5 12.8
Weighted average number of ordinary shares for the purposes of basic
earnings per share - the pro forma is based on the number of shares at
year end. 13,417,900 60,245,735
Adjustment for share options 488,721 1,162,424
Weighted average number of ordinary shares for diluted earnings per
share 13,906,621 61,408,159
Diluted earnings per share (cents) 9.6c 18.8c
Diluted earnings per share (cents) - excluding share option
charge 18.2c 20.8c
6. Business combination
VIP
On 28 June 2005 Leisure & Gaming Plc acquired 100% of the share capital of VIP
Management Services NV and Bon Bini Investments NV who both operate online
gaming businesses.
Stanley Entertainment
On 14 October 2005 Leisure & Gaming Plc acquired 100% of the share capital of
Stanley Entertainment NV which operates an online casino business.
English Harbour
On 6 December 2005 Leisure & Gaming Plc acquired 100% of the share capital of
Poker Software Development Inc and eCom ServCorp Inc (collectively "English
Harbour") who operate online gaming businesses.
Nine.com
On 6 December 2005 Leisure & Gaming Plc acquired 100% of the share capital of
Nine Holdings NV who operate online gaming businesses.
Details of net assets acquired and goodwill are as follows:
English
VIP Stanley Nine Harbour
$m $m $m $m
Purchase consideration:
Cash paid - 3.7 15.6 7.1
Fair value of shares issued 34.0 - 14.1 5.8
Direct costs relating to the acquisition 4.0 0.3 1.4 1.2
Deferred and contingent consideration 5.7 - 9.8 7.0
Total purchase consideration 43.7 4.0 40.9 21.1
Fair value of net (assets)/ liabilities (2.1) (0.4) 1.6 (2.1)
acquired
Goodwill (Total $106.7m) 41.6 3.6 42.5 19.0
The assets and liabilities arising from the acquisition are as follows:
VIP Stanley Nine English Harbour
Fair Acquiree's Fair Acquiree's Fair Acquiree's Fair Acquiree's
value carrying value carrying value carrying value carrying
amount amount amount amount
$m $m $m $m $m $m $m $m
Cash and cash - - 0.1 0.1 0.1 0.1 1.3 1.3
equivalents
Property, plant and 0.4 0.4 - - 0.4 0.4 1.1 1.1
equipment
Intangible assets 1.3 1.3 - - 0.2 0.2 - -
Receivables 5.1 5.1 0.3 0.3 2.1 2.1 2.2 2.2
Payables (4.7) (4.7) - - (4.4) (4.4) (2.5) (2.5)
Net assets / 2.1 2.1 0.4 0.4 (1.6) (1.6) 2.1 2.1
(liabilities) acquired
Purchase consideration settled in (4.0) (4.0) (17.0) (8.3)
cash
Cash and cash equivalents in - 0.1 0.1 1.3
subsidiary acquired
Cash outflow on (4.0) (3.9) (16.9) (7.0)
acquisition
The contingent consideration is based on VIP, Nine.com and English harbour
achieving certain earnings targets. If VIP, Nine.com and English Harbour were to
meet their maximum earnout targets, a further $13.8m cash would be paid and
$3.5m in shares would be issued.
7. Cash and cash equivalents
Group Company $m
$m
Cash at bank and in hand 14.9 5.1
Cash held in escrow 9.9 9.9
24.8 15.0
Cash is held in escrow for payment of deferred and contingent consideration some
of which is dependent on performance of the acquired businesses.
8. Trade Creditors and other payables
Group Company
$m $m
Trade payables (2.4) (0.2)
Client funds (7.8) -
Deferred and contingent consideration (1.0) (1.0)
Other payables and accrued expenses (4.5) (0.2)
(15.7) (1.4)
9. Share Capital
Authorised:
100 million ordinary shares of 25p each
No. $m
Alloted, issued and fully paid:
Issued in respect of share placing 28,454,545 12.5
Issued in respect of acquisitions 30,333,369 13.7
Issued in respect of acquired intangible assets 194,491 0.1
Issued in respect of exercised share options 50,000 0.0
Issued in respect of services provided 300,284 0.1
59,332,689 26.4
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAEDXASAKEAE_SN_RNS4856A_SU_RNSTEST_XX_070249.0004_RZ__RT_R.xRoute.001
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