LNG Leisure&Gaming

 

TIDMLNG 
 
RNS Number : 5621Q 
Leisure & Gaming plc 
15 April 2009 
 

15 April 2009 
 
 
Leisure & Gaming plc 
 
 
Unaudited results for the first quarter ended 31 March 2009 
 
 
Leisure & Gaming plc ("L&G" or "the Group"), the online betting and gaming 
group, today announces its unaudited first quarter results to 31 March 2009. 
 
 
Financial highlights for Quarter 1 
  *  Amounts wagered up 36% to EUR42.1m (2008: EUR30.9m). 
  *  Net win up 38% to EUR8.7m (2008: EUR6.3m). 
  *  Net win margin steady at 20.6% (2008: 20.3%). 
  *  Gross profit up 33% to EUR2.8m (2008: EUR2.1m). 
  *  Overheads static at EUR1.0m (2008: EUR1.1m). 
  *  Net profit before interest and tax up to EUR1.8m (2008: EUR1.0m). 
  *  Cash balances stand at EUR3.0m. 
 
 
 
Key business performance indicators for Quarter 1 
  *  Italian and Cypriot partner networks remained constant. 
  *  Continued success of poker in Italy. 
  *  Continued growth in Greek online business. 
  *  Sponsorship deal with Serie A team Palermo announced. 
 
 
 
L&G is also announcing a proposed reduction of its share premium account which 
will allow it in due course to be able to pay dividends to shareholders or buy 
back the Company's shares in the future. 
 
 
It was originally intended to announce audited preliminary results for the year 
ended 31 December 2008 today, however, this has not proved possible and the 
results will be announced within the next week. 
 
 
Richard Creed, CEO of Leisure & Gaming plc said: 
 
 
"This has been an excellent quarter with favourable results in sports events 
giving a net win margin of 31.4% and growth in all performance indicators. The 
partner networks in Italy and Cyprus have remained constant as partners tend not 
to move as they usually benefit from deals covering the football season, 
however, there has been steady growth in the online activities in Greece. 
 
 
Poker has continued to produce stable revenues with modest growth in numbers of 
players. 
In the quarter, this activity generated EUR1.7m in gross rake and EUR0.4m in net 
rake. 
 
 
The diversification in terms of geography and products is progressing 
satisfactorily. As at 31 March 2009, the Group held cash balances of EUR3.0m, 
excluding cash held in escrow covering Italian Government gaming guarantees of 
EUR2.4m." 
  FINANCIAL RESULTS 
 
 
First quarter ended 31 March 2009 
 
 
In total, the amounts wagered on all our products for the three months to 
31 March 2009 were EUR42.1m (2008: EUR30.9m), earning net win of EUR8.7m (2008: EUR6.3m) 
at a net win margin of 20.6% (2008: 20.3%). 
 
 
Amounts wagered on sports betting were EUR20.4m (2008: EUR21.3m) generating a net 
win of EUR6.4m (2008: EUR5.8m) at a net win percentage of 31.4% (2008: 27.2%). In 
the quarter, the Italian retail outlets contributed 68% of amounts wagered as 
compared to 84% in 2008, reflecting the growth of our businesses in Cyprus and 
Greece and Italian customers playing poker. The exceptional net win margin 
reflects the failure of favourites to win when predicted, as well as the 
competitiveness of both leagues and cups. However, this should not be seen as an 
indicator of the outcome of future results. 
 
Amounts played on casino products were EUR10.2m in plays (2008: EUR8.9m) generating 
net win of EUR0.4m (2008: EUR0.3m). The launch of casino products for the online 
Greek market has enhanced this business and countered the closure of the 
Acropolis online casino. 
 
 
Amounts played on lotto and skill games were EUR0.6m (2008: EUR0.7m) generating net 
win of EUR0.2m (2008: EUR0.2m). 
 
 
Real-money online tournament poker was launched in November 2008 and continues 
to show steady incomes and modest growth. In the quarter, the tournament fees 
generated EUR10.9m with gross rake earned of EUR1.7m. After betting duty, provider 
and commission charges, the net rake was EUR0.4m. The Group has plans to promote 
poker through the traditionally quiet summer months after the football season 
has ended. 
 
 
Outlook 
 
 
During the second quarter, the Group is mounting advertising campaigns based on 
the Palermo sponsorship deal which are aimed at recruiting further partners and 
customers as well enhancing the Italian poker offering to encourage players to 
continue playing through the summer. 
 
 
The Group will continue to seek to grow the Cypriot estate. 
 
 
The Group awaits clarity on regulations that would permit Greek land based 
outlets and is poised to take advantage of the opportunity, when it arises. 
  REDUCTION OF SHARE PREMIUM ACCOUNT AND CANCELLATION OF DEFERRED SHARES 
 
 
The Company is proposing to reduce its share premium account ("the Reduction"), 
cancel its deferred shares ("the Cancellation"), and adopt new Articles of 
Association to take account of the Cancellation and bring them in line with the 
Companies Act 2006 (together "the Proposed Actions"). 
 
 
The Directors are proposing these measures as a means of enabling the Company to 
pay dividends to shareholders or buy back shares over the coming years. 
 
 
Under English Company law, a Company may only make distributions to shareholders 
out of distributable reserves. The Company sustained significant losses in the 
year to 31 December 2006 of EUR104.5m mainly as a result of the forced sale of US 
facing businesses in October 2006, prior to the signing of US law (the Unlawful 
Internet Gambling Enforcement Act) which effectively prohibited gaming 
activities in the US. Since that date, the Company has re-established itself as 
a European operator based on the Betshop business acquired in June 2006. 
 
 
As at 31 December 2008, the estimated deficiency on the Company's distributable 
reserves stood at EUR80.6m. 
 
 
The surplus on the share premium account was created predominantly in 2005 by 
the acquisition of the US facing companies, where shares were issued as part of 
the consideration. These shares were issued at a value greater than their 
nominal value by a sum of EUR77.6m. 
 
 
As a consequence of the sale of the US facing businesses, the share price 
declined and on 30 May 2007, by way of a special resolution, the Company 
re-designated its authorised share capital by converting its existing ordinary 
shares of 25p each into ordinary shares of 5p each and deferred shares of 20p 
each. 
 
 
The deferred shares are not entitled to receive any dividend or other 
distribution and on winding up, are entitled to receive a sum equal to the 
nominal capital paid up after the sum of GBP1m has been distributed to each 
ordinary share. In effect, this makes these shares worthless and the Directors 
therefore propose that they are cancelled which would have the effect of 
reducing the issued share capital of the Company by EUR14.3m. 
 
 
As a result of the above, the Directors consider that the Company's balance 
sheet is unrepresentative of the financial state of the Company and has 
adversely affected its ability to pay dividends to shareholders. The Directors 
have therefore taken the view that a capital re-alignment should take place 
through a reduction of capital to allow for the elimination of the deficiency on 
the retained earnings reserve, thereby giving the Company the ability to pay 
dividends to Shareholders or buy back shares. 
 
 
Distributions may not be made out of the share premium account under the 
Companies Act 1985 ("the Act"), however, the Act does allow for the account to 
be reduced and for such amount to be credited to the Company's distributable 
reserves. The Directors therefore propose the Reduction and Cancellation in 
order to create a reserve of distributable funds from which dividends can be 
paid. 
 
 
At 31 December 2008, the share premium account was EUR77.7m. The Board proposes to 
reduce the share premium account by EUR67.8m, being the amount of the share 
premium account attributable to US facing businesses acquired before 1 January 
2006 which have now been sold. The effect would be to create a distributable 
reserve from which, subject to the provisions relating to the protection of the 
Company's creditors, dividends can be paid to shareholders. 
 
 
The Cancellation should properly be reflected in changes to the Articles of 
Association. The Directors also proposes to take the opportunity to bring the 
Articles of Association into line with the changes brought about by the 
Companies Act 2006. 
 
 
The Directors will apply to the Court for the Reduction and Cancellation. This 
procedure requires the Company to obtain the approval of the shareholders to the 
Reduction and Cancellation by special resolution. Accordingly such special 
resolutions will be proposed at the AGM to be held on 1 June 2009 at which the 
Directors recommend shareholders approve the resolutions. 
 
 
Prior to approving the Reduction and Cancellation, the Court will need to be 
satisfied that the interests of the Company's creditors are not prejudiced. The 
terms upon which the Court is prepared to sanction the Reduction and 
Cancellation will be subject to consideration in due course by the Court and 
discussion between the Company and its advisers. 
 
 
It is anticipated that the Court will make an order confirming the Reduction and 
Cancellation within two months. The Reduction and Cancellation will take effect 
upon the registration of the Court Order with the Registrar of Companies. 
 
 
 
 
For further information, please contact: 
Richard Creed, Leisure & Gaming plc 
Tel: 020 8545 2190 
 
 
William Vandyk, Blue Oar Securities 
Tel: 020 7448 4400 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
 QRFEAKLLFLLNEFE 
 

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