4th Quarter Results
January 28 2010 - 2:00AM
UK Regulatory
TIDMLNG
RNS Number : 2570G
Leisure & Gaming plc
28 January 2010
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28 January 2010
Leisure & Gaming plc
Unaudited results for the fourth quarter ended 31 December 2009
Leisure & Gaming plc ("L&G" or "the Group"), the AIM listed European betting and
gaming group, today announces its unaudited results for the quarter ended 31
December 2009.
Financial Highlights for the quarter
* Amounts wagered EUR34.4m (2008: EUR25.6m) (see note below *)
* Net win EUR6.6m (2008: EUR5.9m)
* Sports betting net win margin 22.2% (2008: 21.9%)
* Overall net win margin 16.8% (2008: 14.5%)
* Gross profit of EUR1.8m (2008: EUR1.9m)
Operating highlights for the quarter
* Poker activity growing to a weekly average of EUR1.1m
* Stable partner network of 580 in Italy and 49 in Cyprus.
* New online marketing terms agreed for Greece.
Richard Creed, CEO of Leisure & Gaming plc said:
"Poker activity in Italy has increased and now contributes 30% of net win
with weekly tournament fees
of EUR1.1m.
The adverse weather in
late December resulted in a disruption in the matches played which led to a
smaller
fixture list causing reduced volumes and margins."
For further information, please contact:
Richard Creed, Leisure & Gaming plc
Tel 020 8545 2190
Charles Cunningham/Rose Herbert, FinnCap
Tel 020 7600 1658
*Accounting convention defines amounts wagered as sports betting volume, casino
and skill games net win and poker rake. The figure of amounts wagered in the
table above includes poker tournament fees of EUR14.7m (2008 EUR2.7m) instead of
poker rake of EUR2.0m (2008 EUR0.5m), as the Directors believe this more clearly
shows the level of business generated by the Group.
FINANCIAL RESULTS
Fourth quarter ended 31 December 2009
Amounts wagered on sports betting, including horses were EUR19.4m (2008: EUR22.4m)
generating a net win of EUR4.3m (2008: EUR4.9m) at a net win percentage of 22.2%
(2008: 21.9%). Sports betting volumes and margins were adversly affected by the
weather in the last two weeks of December.
Amounts played on casino products were EUR4.5m (2008: EUR14.7m) generating net win
of EUR0.2m (2008: EUR0.3m). The drop in volume reflects the closure of Acropolis and
the move by customers to poker games as well as a change of casino provider in
Greece.
Amounts played on lotto and skill games were EUR0.7m (2008: EUR1.0m) generating net
win of EUR0.1m (2008: EUR0.2m). The benefits of offering the Superannolotto game
will be gained in 2010.
Tournament fees for poker amounted to EUR14.7m (2008: EUR2.7m) earning a rake of
EUR2.0m (2008: EUR0.5m). The average weekly participation in tournament fees has
grown from EUR0.8m per week in the first quarter, to EUR0.9m per week in the second
quarter, dropping in the summer months when holidays occurred to EUR0.8m and
increasing in this quarter to EUR1.1m per week.
Other income from advertising amounted to EUR0.5m (2008: EUR0.6m)
The cost of sales amounted to EUR5.3m (2008: EUR4.6m) which included commissions
payable to our partner network, betting duties, IT software provider
commissions, bonuses given to customers, our customer poker losses to other
networks and the cost of processing payments to and from customers. The increase
based on a percentage of net win was due to a higher share of poker earnings
being attributable to partners and to increased customer retention bonuses.
Gross profit earned was EUR1.8m (2008: EUR1.9m).
The Group successfully negotiated the release of EUR0.6m from the guarantees which
support the Italian gaming licenses and has spent the following significants
amounts in the year:-
* Property in Reggio Calabria - EUR0.4m
* Software development - EUR0.6m
* Loan repayments - EUR0.6m
* Tax prepaid for 2009 - EUR0.5m (in addition to the payment of the 2008 liability).
The investment in premises and software are explained more fully in the review
of operations below, and is anticipated to result in greater income and lower
costs in future periods.
In the light of this expenditure and possible further guarantees being required
for casino games coupled with continued software development, the Group is
unlikely to declare a dividend for 2009.
The cash balance at the year end was EUR1.6m (2008: EUR1.5m)
REVIEW OF OPERATIONS
Italy
The volume of sports betting and poker tournament revenues generated by Italian
customers was EUR26.5m (2008: EUR18.1m) reflecting a significant growth in poker and
a small reduction in sports betting. Approximately, 40% of sports betting
customers now play poker and the Group has recruited over 1,500 pure poker
players.
The number of active partners remains stable at 580, with 90% of the high volume
partners having been with the Group for over 3 years.
The Group terminated the sponsorship agreement with Palermo Football Club in
September 2009, following breaches of material conditions by the football club
and has paid all costs up to termination, which were running at EUR0.1m per month.
The termination has been referred to the arbitration courts in Rome and the
process could take a number of years. Palermo is counter claiming for the
balance of the contract payments of EUR0.7m. The legal advisers to the Group do
not consider these costs will be payable.
The Group has acquired the freehold interest in the call centre and offices in
Reggio, Calabria for EUR0.4m as this provides security of tenure and takes
advantage of various concessions available in the region.
Cyprus
The partner network remains stable at 49 and the business has generated a volume
of EUR3.3m (2008: EUR2.7m) and achieved satisfactory margins.
Greece
The online offering in Greece, which was launched in April 2008, has shown
continued growth and generated EUR2.6m in sports betting (2008: EUR2.0m). In the
period when the business is being built, margins tend to be lower as new
business is gained and the net win was EUR0.1m (2008: EUR0.1m). The initial launch
phase has now been completed and terms have been agreed for a new marketing
agreement with our Greek partner in November 2009, which contains growth targets
of over 25% on volume of bets.
Software development
The Group is adapting its proprietary software to provide white label
opportunities and will be launching a series of initiatives in 2010 to capture
additional business which is projected to impact favourably on the group's
performance in 2011 and beyond.
US
The Group's voluntary discussions continue with the US Department of Justice to
seek clarification on the position of the US Authorities with respect to the
activities undertaken by subsidiary companies which were sold and completely
separated from the Group, prior to the passing of the UIGEA in October 2006. L&G
made no cash profit from the purchase, trading and sale of these businesses.
Separately, L&G has been named in legal proceedings in the US in connection with
a purported breach of patented web software used by the subsidiary companies
serving US customers which were sold in Octber 2006. L&G has never used this
software, which is not included in the current software used in Europe, and any
claims lie with the purchasers of these businesses.
Employee Benefit Trust investigation
This investigation is ongoing and a progress report will be made to shareholders
as soon as appropriate.
Directorate change
As announced at the 2009 Annual General Meeting, Philip Parker resigned as a non
Executive Director and Chairman on 31 December 2009.
OUTLOOK
Trading volumes have been in line with management's expectations for January,
though sports margins for the first two weeks were low with favourites
prevailing. Casino games are expected to be permitted in Italy from the summer
of 2010, which will increase the number of offerings to customers and open
avenues for revenue growth.
The Group intends to increase the size of the Cyprus business and the recent
marketing agreement in Greece is expected to push further growth.
The benefits of the investment in software development, if executed on time and
correctly, should result in a number of material white label agreements with the
associated income streams expecting to result in a significant growth in
turnover. The Directors are therefore excited about the medium term prospects
of the Group.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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