RNS Number:4748T
Leisure & Gaming plc
22 March 2007
22 March 2007
Leisure & Gaming plc
Preliminary Results for the year ended 31 December 2006
Leisure & Gaming plc ("L&G" or "the Company"), the online betting and gaming
group, today announces its preliminary results for the year ended 31 December
2006.
On 13 October 2006, ahead of the signing into US law of the Unlawful Internet
Gambling Enforcement Act, L&G sold all of its US facing subsidiaries
("Discontinued Operations") for the nominal sum of $1. Following the sale, the
Company's main operating subsidiary is Betshop Group (Europe) Limited
("Betshop"), a European betting and gaming business acquired in June 2006.
The Company's preliminary results and accounts comprise 12 months for group
central costs and for Grouse Entertainment NV ("Grouse"), a small online casino
business, plus 6 months and 8 days to 31 December 2006 for Betshop (together the
"Continuing Operations") and 9 months and 12 days to 13 October 2006 for the
Discontinued Operations.
As the Company's primary market is Europe, L&G also announces that it will
report all results from 1 January 2007 onwards in Euros.
2006 Results
* Significant growth from 2005 to 2006 in the Company's main operating
subsidiary, Betshop:
- 247% growth in turnover to $116.7m on a like-for-like basis
- 187% growth in net win to $27.4m on a like-for-like basis
- 200% growth in active customers to 44,750 customers on a like-for-like
basis
* Continuing Operations' turnover of $74.2m, mainly comprising Betshop's six
month contribution, and pre-tax loss of $12.8m after charging a full year
of corporate overheads, exceptional restructuring and goodwill impairment
charges
* Successful restructuring of the Company with significant cost reductions,
including a 75% reduction in group central costs
* Group retained loss of $104.5m following the sale of the Discontinued
Operations
Trading Update and recent developments
* Strong trading start in 2007 to 12 March ahead of management expectations:
- Turnover of $31.6m, a pro forma increase of 101% on the equivalent
period in 2006
- Net win of $10.2m, a pro forma increase of 98% on the equivalent period
in 2006
* The award of 58 new licences to Betshop Italia (21 sports betting, 37 horse
betting), allowing the Company to broaden its product range
* The Betshop Italia franchise network now comprises over 1100 retail outlets
including approximately 710 dedicated betting shops and 390 additional
retail points of sale
* Successful new product launches, including scratch cards across the Betshop
Italia network and poker on the Betshop.com platform
* Entry into the licensed Romanian market with the launch of a franchise
network and revenue contribution expected in Q3 2007
Henry Birch, Chief Executive of Leisure & Gaming plc, said:
"2006 was a challenging year for L&G and the online gaming sector. Disposing of
our US-facing assets dramatically impacted our business, but having successfully
restructured our operations we are now well-positioned to capitalise on growth
opportunities throughout Europe, particularly Betshop Italia's leading position
in the Italian sports betting market.
"Comparative trading for 2006 over the previous year shows triple digit growth
and we are delighted that trading this year is already ahead of management
expectations. Our business model, combining online operations with a land-based
franchise network, allows us to enter new markets and grow rapidly with minimal
capital outlay. The recent ECJ judgment in the Placanica case is encouraging
for L&G, as it implies that further European betting markets will be forced to
open up and liberalise."
- Ends -
For further information, please contact:
Henry Birch, Chief Executive, Leisure & Gaming plc
Tel: 020 7248 6343
Jonathon Brill/Billy Clegg, Financial Dynamics
Tel: 020 7831 3113
David Seal/Rhodri Cruwys, Corporate Synergy Plc
Tel: 020 7448 4400
BUSINESS REVIEW
Leisure & Gaming plc is an online betting and gaming group focused on regulated,
emerging markets.
Background to and reasons for the sale of the US-facing operations
On 30 September 2006 the United States Congress passed the SAFE Port Act of 2006
which included, as a rider, the Unlawful Internet Gambling Enforcement Act. The
Unlawful Internet Gambling Enforcement Act prohibits the processing and
acceptance of financial transactions in connection with certain types of
internet gambling, making it illegal for anyone in the business of betting or
wagering to accept monies in association with unlawful internet gambling in the
US. The Unlawful Internet Gambling Enforcement Act is the first piece of federal
legislation directly aimed at internet gambling and it makes clear that the US
government is intent on stopping the flow of monies from Americans to online
gaming operators through criminal sanction.
After extensive discussions with the Company's various advisers, the board of
Directors ("Board") concluded that, following the signing into law of the
Unlawful Internet Gambling Enforcement Act, it would no longer be appropriate
for the Company to serve US-based customers and that the Company should focus
solely on its existing European businesses. Had the Company continued to
operate any US businesses when the Unlawful Internet Gambling Enforcement Act
came into law, it would have had to immediately close down the businesses
incurring an estimated $6 million of costs. The Board strongly believes that
such a course of action would not have been in the best interests of
shareholders of the Company.
On 13 October 2006, ahead of the signing into US law of the Unlawful Internet
Gambling Enforcement Act, L&G sold all of the shares of its wholly-owned
subsidiaries, Bon Bini, ECom ServCorp, English Harbour, Nine.com and VIP
(collectively "Discontinued Operations") for the nominal sum of $1. The sale
represented the divestiture of all US-facing operating assets of the Group and
had a significant negative impact on the business resulting in a retained loss
for the year of $104.5m.
Continuing Operations
L&G's main operating subsidiary is Betshop, which was acquired in June 2006 and
is a European betting and gaming business comprising three main business units:
(a) BetShop Italia, an online sports betting service supported by a franchised
chain of over 1000 Betshop-branded shops and retail outlets offering sports
betting via terminals across Italy;
(b) BetShop.com, a pan-European online sports betting and casino gaming
operating in eight languages; and
(c) GoalsLive.com, a soccer information and results portal service for internet
and mobile phone users.
In addition, L&G operates an online casino, Grouse, trading under the Acropolis
Casinos brand and was acquired from Stanley Leisure in October 2005. It is
focused on Europe and Asia and operates using Playtech software.
From the sale of its US-facing companies, L&G has also retained:
* a range of proprietary software, including sports and horse betting
software, casino and poker software and affiliate and loyalty programme
software;
* a copy of the database of all non-US players; and
* rights to approximately 200 betting-related domain names.
As part of the restructuring associated with the sale of its US-facing
operations, L&G has successfully implemented a 75% reduction in group central
costs.
2006 Financial Review
The 2006 results for L&G consist of 12 months accounts for group central costs
and for Grouse, 6 months and 8 days to 31 December 2006 for Betshop and 9 months
and 12 days to 13 October 2006 for its US-facing subsidiaries (together the
"Group").
Total Group turnover totalled $604.4m (2005: $261.1m) and produced a gross
profit of $41.8m (2005: $13.4m). There was a retained loss of $104.5m for 2006.
This comprises a loss of $91.4m from the Discontinued Operations and $13.1m from
the Continuing Operations, which includes restructuring costs and goodwill
impairment. The Discontinued Operations' loss was after charging a $106.2m loss
on the disposal of the US facing subsidiaries.
With a 6 month and 8 day contribution from Betshop, the Continuing Operations
recorded turnover of $74.2m for 2006 and a net win of $18.1m. Net win
contribution from sports betting was $14.6m with margins of 21.7%. Horse
betting generated net win of $1.2m and casino net win generated $2.3m.
On a 12 month pro-forma basis, Betshop generated turnover of $116.8m (an
increase of 247% on 2005) and net win of $27.4m (an increase of 187% on 2005).
In the course of 2006 Betshop had 44,750 active customers (a 200% increase on
2005).
Grouse stopped taking bets from US clients in 2006 contributing to its
underperformance. In 2006 it generated $1.6m of net win, a 50% reduction on
2005. The Directors have considered it appropriate to fully impair the goodwill
attributable to the business ($3.6m).
In June 2006 L&G drew down $18m from a debt facility provided by Barclays Bank
to complete the acquisition of Betshop. As part of the restructuring of the
Company in October 2006, L&G repaid in full the outstanding $15.7m payable and
secured a new loan facility of $3m, securitised against the assets of the
Continuing Group. The Company also arranged a $1m overdraft facility with
Barclays Bank. At the end of the year L&G had cash of $6.5m and debt of $3m
and loan notes payable of $0.7m.
Current trading and developments
Trading in 2007 to 12 March has been strong and ahead of management
expectations. For the period 1 January to 12 March 2007 L&G generated:
* Turnover of $31.6m, a pro forma increase of 101% on the equivalent period
in 2006;
* Net win of $10.2m, a pro forma increase of 98% on the equivalent period in
2006; and
* Gross Profit of $3.1m, a pro forma increase of 108% on the equivalent
period in 2006
In line with its stated strategy, Betshop has started diversifying its product
offering with the launch of scratch cards across Betshop Italia and the launch
of poker on the Betshop.com platform.
Betshop is continuing with its geographic expansion plans and expects a revenue
contribution from its entry into the licensed Romanian market in Q3 2007, where
it will establish a retail franchise network similar to Betshop Italia.
Regulatory Developments
L&G is committed to operating in regulated markets. Gambling is a form of
entertainment which brings enjoyment to millions. However, we also recognise
that, if abused, it can have adverse social consequences, particularly in the
case of problem and under-age gambling. We have put in place safeguards to
prevent problem and under-age gambling, but we also believe that ultimately the
consumer is best served by a regulated environment. In this regard we support
any moves towards an open and regulated European gambling market. Accordingly,
we are encouraged by the fact that the European Commission's Internal Market and
Services Directorate General are moving ahead with proceedings against Member
States who they believe have contravened Article 48 of the Treaty of Rome
concerning the freedom of services - in this case gambling - within the EU.
Equally, the European Court of Justice's ruling on 6 March 2007 in the Placanica
case provides even greater and more immediate pressure on those countries
currently protecting their own national gambling monopolies and preventing
competition. While the timetable is uncertain, we see a regulated and open
European gambling market as inevitable and are encouraged by signs that the path
to its conclusion is gathering pace.
Outlook
L&G is well-positioned to grow rapidly in 2007. The growth in the size of
Betshop's franchise network and in its underlying customer database in 2006
will deliver increased betting volumes throughout 2007. In addition, L&G and
Betshop are focused on two key strategic initiatives in 2007: product
diversification and geographic diversification.
Product Diversification
In 2006 approximately 90% of Betshop's revenues were derived from sports
betting. Over the course of 2007, Betshop will be introducing a broader range
of products to its captive customer base and thereby raise its yield per
customer. This has started with the launch of scratch cards across the Betshop
Italia network and with poker on the Betshop.com platform in Q1 of 2007.
Betshop expects to launch other new products throughout the year.
Geographic Diversification
Betshop's hybrid business model, combining an online service backed by a
land-based franchise network, allows it to penetrate new markets very rapidly.
Many emerging gambling markets are characterised by low internet and low credit
card penetration, as well as often by difficult or fragmented marketing
channels. Even if they have credit cards, many customers in these markets still
prefer to bet using cash.
By using franchisees who bear the capital cost of opening a shop, Betshop can
grow a branded network in a new market with minimal capital. A traditional
land-based betting shop operator who enters a new market will need to find and
rent appropriate real estate, fit out their shops, hire staff, navigate local
and national regulations and market their services - all of which take
considerable time and expense. In contrast, Betshop Italia has built up an
estate of more than 1000 franchisees in less than 2 years with little capital
expenditure. Equally, if it is going to gain a foothold in a new market, a
purely online operator will need to commit a substantial marketing budget and
try to find the right channels to reach potential customers. Again, this
involves considerable capital, time and executional risk in terms of a return on
investment.
Betshop holds a Romanian betting licence and recently opened an office in
Bucharest. Romania is already a regulated market and, although it has a
population of 10 million, it is relatively under-supplied in terms of betting
and gaming services. Betshop is in the process of developing a franchise
network of Betshop-branded betting shops and expects a revenue contribution from
Romania in Q3 of 2007. Beyond Romania, Betshop is in discussions with a number
of local partners in different European territories and will look to enter new
markets where there is an opportunity to create value for the Company.
Unaudited Consolidated Income Statement
Continuing* Discontinued Year ended Continuing Discontinued 16 months and
operations operations operations operations 22 days ended
31 Dec 2006 31 Dec 2005
Total Total
Note $m $m $m $m $m $m
Turnover 74.2 530.2 604.4 0.7 260.4 261.1
Net win 18.1 74.3 92.4 0.7 22.6 23.3
Other income 0.1 2.2 2.3 - 0.3 0.3
18.2 76.4 94.6 0.7 22.9 23.6
Cost of sales (16.1) (36.7) (52.8) (0.4) (9.8) (10.2)
Gross profit 2.1 39.7 41.8 0.3 13.1 13.4
Share option (0.5) - (0.5) (1.2) - (1.2)
charge
Exceptional 2 (3.5) - (3.5) - - -
restructuring
costs
Loss on disposal 3 - (106.2) (106.2) - - -
of US facing
businesses
Impairment of (3.6) - (3.6) - - -
goodwill
Other (6.8) (24.5) (31.3) (0.9) (9.9) (10.8)
administrative
expenses
Operating (loss) / (12.3) (91.0) (103.3) (1.8) 3.2 1.4
profit
Net interest and (0.5) - (0.5) 0.2 0.1 0.3
similar income/
cost
(Loss) / Profit (12.8) (91.0) (103.8) (1.6) 3.3 1.7
before tax
Tax (0.3) (0.4) (0.7) - (0.4) (0.4)
(Loss) / Profit (13.1) (91.4) (104.5) (1.6) 2.9 1.3
for the period
attributable to
equity holders of
the parent
Earnings per share
(cents)
Earnings per share 4 (21.0c) (145.8c) (166.8c) (11.7c) 21.6c 9.9c
- basic
Earnings per share 4 (21.0c) (145.8c) (166.8c) (11.7c) 21.3c 9.6c
- diluted
* continuing operations in 2006 comprise 12 months for group central costs and
for Grouse plus 6 months and 8 days to December 31st 2006 for Betshop
Unaudited Consolidated Balance Sheet at 31 December
2006 2005
Notes $m $m
ASSETS
Non-current assets
Property, plant and equipment 0.1 1.4
Goodwill 5,6 41.3 106.7
Other intangibles 0.3 4.2
41.7 112.3
Current assets
Trade and other receivables 2.5 12.3
Cash and cash equivalents 7 6.5 24.8
9.0 37.1
Total assets 50.7 149.4
LIABILITIES
Current liabilities
Borrowings (2.4) -
Trade and other payables (6.8) (7.9)
Client funds (1.6) (7.8)
Current tax liabilities (0.4) (0.5)
(11.2) (16.2)
Non-current liabilities
Deferred and contingent consideration (14.3) (17.4)
Borrowings (0.6) -
Loan notes (0.7) -
(15.6) (17.4)
Total liabilities (26.8) (33.6)
Net Assets 23.9 115.8
EQUITY
Share capital 8 28.7 26.4
Share premium 93.0 82.6
Share option reserve 0.6 -
Shares to be issued 4.3 4.6
Retained earnings (102.7) 2.2
Equity attributable to equity holders of the parent 23.9 115.8
Unaudited Consolidated Statement of Changes in Equity
Share Share Share Option Shares to Retained Total
Capital Premium Reserve be issued earnings
$m $m $m $m $m $m
Balance as at 1 January 0.5 0.2 - - 0.1 0.8
2005
Profit for the period - - - - 1.2 1.2
Foreign exchange - - - - (0.3) (0.3)
movements
Total recognised income - - - - 0.9 0.9
and expense
Issue of ordinary shares 25.9 84.0 - - - 109.9
Share option charge - - - - 1.2 1.2
Future issue of ordinary - - - 4.6 - 4.6
shares
Costs attributable to - (1.6) - - - (1.6)
share issue
Net change directly in 25.9 82.4 - 4.6 1.2 114.1
equity
Balance as at 31 26.4 82.6 - 4.6 2.2 115.8
December 2005
Loss for the period - - - - (104.5) (104.5)
Foreign exchange - - - - 1.4 1.4
movements
Total recognised income - - - - (103.1) (103.1)
and expense
Issue of ordinary shares 2.3 10.4 - (1.8) - 10.9
Release from future - - - (2.8) - (2.8)
share issue commitments
Share option charge / - - 0.6 - (0.1) 0.5
release
Fair value adjustment to - - - - (1.7) (1.7)
management incentive
shares
Future issue of ordinary - - - 4.3 - 4.3
shares
Net change directly in 2.3 10.4 0.6 (0.3) (1.8) 11.2
equity
Balance as at 31 28.7 93.0 0.6 4.3 (102.7) 23.9
December 2006
Unaudited Consolidated Cashflow Statement
Year ended 16 months and
31 Dec 2006 22 days ended
31 Dec 2005
Note $m $m $m $m
Operating (loss) - continuing (12.3) (1.8)
Adjustments for:
Decrease / (increase) in trade and other receivables 9.2 (1.5)
(Decrease) / Increase in trade and other payables 1.6 5.9
Depreciation and amortisation 0.1 -
Impairment of goodwill 4 3.6 -
Management incentive shares 1.7 -
Other costs settled in shares 0.3 -
Share option charge 0.5 1.2
Net cash from operating activities 4.7 3.8
Tax paid (0.4) -
Investing activities
Purchase of subsidiary undertakings (net of cash 5 (10.4) (31.9)
acquired)
Settlement of deferred consideration and further (4.9) -
acquisition costs
Sale of US facing businesses (net of cash disposed) (6.1) -
Purchases of intangible assets (3.6) (1.5)
Purchases of property, plant and equipment (0.3) (0.1)
Net cash used in investing activities (25.3) (33.5)
Financing activities
Proceeds from issue of ordinary shares - 54.4
Bank loan 21.2 -
Repayment of bank loan (18.2) -
Net interest (paid) / received (0.3) 0.1
Net cash from financing activities 2.7 54.5
Cash and cash equivalents at beginning of period 24.8 -
Cash and cash equivalents at end of period 6 6.5 24.8
Significant non-cash transactions related to acquisitions of subsidiary
undertakings; consideration of $25.3m ($76.4m in the period ended 31 Dec 2005)
was in the form of equity instruments and obligations to pay deferred and
contingent consideration.
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 21 March 2007.
Note 1
Summary of significant 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 in the 2005 Annual Report.
Going Concern
The Directors have considered the business projections for the coming 12 months.
In the context of significant growth of its main subsidiary in 2006, positive
current trading and the availability of external funding available to the group,
the Directors consider that the going concern basis of accounting is
appropriate.
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. The results of the
subsidiaries disposed of during the period are included in the income statement
up until the effective date of disposal. 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.
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.
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.
Turnover and profit recognition
Turnover represents the total amount placed by customers in respect to bets
placed on sports events, the net amount held by the house for casino products
and commission (rake) taken for poker.
Net win represents the net amount won (or lost) by the house in respect to bets
placed on sports events, the net amount held by the house for casino products
and commission (rake) taken for poker.
Cost of sales includes all direct costs attributable to generating net win such
as bonuses, commissions, betting duty and processing fees.
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.
Note 2
Exceptional restructuring costs
Year ended 31 Dec 2006
$m
Exceptional transaction costs (1.8)
Management incentive shares (1.7)
Exceptional restructuring costs (3.5)
The exceptional transaction costs relate to legal and professional fees
associated with the disposal of the US facing businesses and the subsequent
refinancing loan from Barclays.
Note 3
Loss on disposal
On 13 October 2006 Leisure & Gaming Plc disposed of its entire interest in its
US facing businesses for a nominal sum of $1; those businesses being Bon Bini,
EcomServcorp, VIP.com, Nine.com and English Harbour
$m
Cash proceeds -
Net Assets disposed of (2.5)
Goodwill (103.7)
Loss on disposal (106.2)
Note 4
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.
Year ended 16 months and 22
days ended 31 Dec
31 December 2006 2005
$m $m
(Loss) attributable to equity holders of the Company - (13.1) (1.6)
continuing operations
(Loss) / profit attributable to equity holders of the Company - (91.4) 2.9
discontinued operations
(Loss) / profit attributable to equity holders of the Company (104.5) 1.3
Weighted average number of ordinary shares for the purposes of 62,678,352 13,417,900
basic earnings per share
Basic earnings per share (cents) - continuing operations (21.0c) (11.7c)
Basic earnings per share (cents) - discontinued operations (145.8c) 21.6c
Basic earnings per share (cents) - total (166.8c) 9.9c
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 as above is compared with the number of shares
that would have been issued assuming the exercise of the share options.
Year ended 16 months and
31 December 2006 22 days ended
31 Dec 2005
$m $m
Weighted average number of ordinary shares for the purposes of 62,678,352 13,417,900
basic earnings per share
Adjustment for share options - 488,721
Weighted average number of ordinary shares for diluted earnings 62,678,352 13,906,621
per share
Diluted earnings per share (cents) - continuing operations (21.0c) (11.7c)
Diluted earnings per share (cents) - discontinued operations (145.8c) 21.3c
Diluted earnings per share (cents) - total (166.8c) 9.6c
Note 5
Goodwill
Goodwill
$m
At cost or valuation
Additions 106.7
At 31 December 2005 106.7
Additions 38.3
Further acquisition costs 0.6
Disposals (103.7)
Foreign exchange movements 3.0
At 31 December 2006 44.9
Impairment
$m
At 31 December 2005 -
Impairment in period (3.6)
At 31 December 2006 (3.6)
Net book value at 31 December 2005 106.7
Net book value at 31 December 2006 41.3
The investment in Grouse Entertainment NV was fully impaired in 2006 ($3.6m)
Note 6
Business Combination
Betshop
On 23 June 2006 Leisure & Gaming Plc acquired 100% of the share capital of
Betshop Group (Europe) Limited which operates online and land based gaming
businesses in Europe (mainly in Italy).
Details of net assets acquired and goodwill are as follows:
$m
Purchase consideration:
Cash paid 9.8
Fair value of shares issued (3,788,639 shares) 10.7
Direct costs relating to the acquisition 1.9
Deferred and contingent consideration 14.6
Total purchase consideration 37.0
Fair value of net liabilities acquired 1.3
Goodwill 38.3
The fair value of the shares issued is derived from the market price at the date
of issue. The goodwill represents the difference between the fair value of the
consideration paid and the fair value of the net liabilities acquired and
represents the opportunity cost of the potential to earn future profits. Any
attempt to split out the goodwill any further would be purely arbitrary.
The deferred and contingent consideration is to be settled as follows:
$m
Creditors - more than one year 13.4
Loan notes 0.3
Future issue of shares 0.9
14.6
The assets and liabilities arising from the acquisition are as follows:
Acquiree's carrying Fair Value
amount
$m $m
Cash and cash equivalents 1.3 1.3
Property, plant and equipment 0.1 0.1
Intangible assets 0.3 0.3
Receivables 1.4 1.4
Payables (4.4) (4.4)
Net (liabilities) acquired (1.3) (1.3)
Purchase consideration settled in cash 11.7
Cash and cash equivalents in subsidiary acquired (1.3)
Cash outflow on acquisition 10.4
The contingent consideration is based on BSG achieving certain earnings targets.
If BSG were to meet their maximum earnout targets, a further $22.2m cash would
be paid or shares issued.
Note 7
Cash and cash equivalents
31 Dec 2006 31 Dec 2005
$m $m
Cash at bank and in hand 4.9 14.9
Cash held in escrow 1.6 9.9
6.5 24.8
In 2005 cash was held in escrow for payment of deferred and contingent
consideration some of which was dependent on performance of the acquired
businesses. Part of these funds were used to repay outstanding debt in November
2006.
In addition cash is held on escrow with the Italian government to provide a
guarantee for payment of betting duty.
Note 8
Share Capital
Authorised: 100 million ordinary shares of 25p each
No. $m
Alloted, issued and fully paid:
As at 31 December 2005 59,332,689 26.4
Deferred consideration to vendors of English Harbour 798,950 0.3
Issued to vendors of BSG 3,788,639 1.7
Exercise of option 24,874 0.0
Issued to brokers 500,000 0.3
As at 31 December 2006 64,445,152 28.7
On 29 January 2007 Leisure and Gaming plc issued a further 7 million 25p
ordinary shares to the Employee Benefit Trust to incentivise management as
approved in the EGM held on 29 November 2006. The cost of shares to be issued
was expensed in 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EANDFAASXEFE
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