27th Apr 2006 07:02
World Gaming PLC27 April 2006 FOR IMMEDIATE RELEASE 27 APRIL 2006 WORLD GAMING PLC (TIDM:WGP) RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2006 The Board of World Gaming plc ("World Gaming"), whose subsidiary companies (the"Group) operates internet gaming sites and licenses software offering acomprehensive suite of internet gaming products and services to operators, ispleased to announce the Group's first quarter results for the three months ended31 March 2006. HIGHLIGHTS - THREE MONTHS ENDED 31 MARCH 2006 • Operating profit before goodwill amortisation for the quarter of $6.1m compared to $0.8m for the first quarter of 2005. • Growth in proforma gross profit of 40.1% to $10.5m. • 19,360 new customers added in the quarter representing a 29% increase in new customers compared to the first quarter of 2005*. • Two new licensees signed in the quarter. • Pre-tax profit before goodwill amortisation for the quarter of $5.4m compared to $0.8m for the first quarter of 2005. • Strong cross-sell with 32.7% of sports bettors expanding their play to casino gaming and poker products in the quarter. World Gaming plc CEO, Daniel Moran said: "The first quarter of 2006 hasdemonstrated the value of our recently acquired SPORTSBETTING.COM brand,through both strength in key performance indicators and the significantearnings enhancement that this acquisition has delivered for shareholders. TheGroup, while continuing its integration of SPORTSBETTING.COM, continues to seekfurther acquisition opportunities both strategic in terms of geography orproduct and scalable as complementary to its existing strong operatingbusiness." * Assuming that the SPORTSBETTING.COM business had been owned throughout 2005 for comparative purposes. --ENDS-- Enquiries: WORLD GAMING PLC Tel: +1 888 883 0833Daniel Moran, Chief ExecutiveDavid Naismith, Chief Financial Officer BISHOPSGATE COMMUNICATIONS LIMITED Tel: 020 7430 1600Maxine BarnesScott Robertson DANIEL STEWART & COMPANY PLC Tel: 020 7374 6789Ruari McGirr The Company's Ordinary Shares have not been and will not be registered under theU.S. Securities Act of 1933 (the "Securities Act") and may not be offered orsold in the United States or to a U.S. person (as such term is defined inRegulations S under the Securities Act) absent registration or an applicableexemption from registration under the Securities Act. FULL STATEMENT ATTACHED CHIEF EXECUTIVE'S STATEMENT Introduction The first quarter of 2006 has demonstrated the strength of the SPORTSBETTING.COMbrand through robust growth and strong margins in the Group's first full quarterof control. Underpinning the strong growth in gross margin in the quarter was a continuationof robust key performance indicators across the customer database. In addition,sports margins exceeded management's expectations throughout the first quarterof 2006. In March 2006, the Group agreed with and paid the final consideration in respectof the acquisition of the SPORTSBETTING.COM business and there remain no furtherpayments due to the vendors in respect of this transaction. As at the end of the first quarter, the Group had paid down $6.0m of its $40mBarclays loan facility and continued to maintain an unutilised $5m revolvingfacility. During the quarter, the Group signed two new licensees that are expected tolaunch in the second quarter of 2006. The Group enters the second quarter of 2006 well placed to strengthen itsorganic revenue growth in both its newly acquired Operating division and itscontinuing licensing offerings. Currency amounts set forth in this Statement are in U.S. dollars. Financial Results Three months ending 31 March 2006 Turnover for the quarter ended 31 March increased by $74.7m to $77.3m comparedto $2.6m for the same period last year. The increase in turnover is whollyattributable to the Sportsbetting Transaction effective 1 October 2005 at whichtime the Group acquired all of the business and assets of its then largestlicensee whose leading brand is SPORTSBETTING.COM (hereinafter referred to the"Operating division"). The Group's two key revenue streams are: 1. Royalties and fees which includes royalties charged to the Group's continuing licensees plus hosting fees charged to Sportingbet plc ("Sportingbet") for hosting services provided from its wholly-owned hosting infrastructure; and 2. Operations, representing revenue derived from its wholly-owned internet gaming sites. Turnover from operations, representing gross sports and horse racing wagers andnet casino and poker win was $76.0m before netting of customer bonuses of $0.5mfor the quarter ended 31 March 2006, compared to $nil for the same period in2005. For comparative purposes, the proforma growth in turnover in the Operatingdivision was 34.3% or $19.4m from $56.6m before netting of customer bonuses of$0.4m for the quarter ended 31 March 2005. Turnover from new and continuing licensees on a like-for-like basis grew by$0.4m to $1.1m representing a 57.1% growth in licensing revenue. Overallturnover from royalties and fee income decreased by 30.7% or $0.8m to $1.8m forthe quarter ended 31 March 2006, compared to $2.6m for the same period lastyear. The reduction is attributable to no longer receiving software royaltiesfrom the SPORTSBETTING.COM business as a result of the acquisition. Gross profit increased $9.5m to $11.4m for the quarter ended 31 March 2006compared to $1.9m for the same quarter last year. On a proforma basis gross profit from the Operating division grew 40.1% to$10.5m after deducting $0.6m of customer bonuses and jackpot transfers in thequarter. For comparative purposes, the proforma gross profit contribution fromthe Operating division for the quarter ended 31 March 2005 was $7.5m afterdeducting $0.5m in customer bonuses and jackpot transfers. The total gross margin percentage for the quarter ended 31 March 2006 was 14.8%compared to 71.1% for the same period last year. The decrease resulted from thesignificant change in revenue mix as a result of the acquisition ofSPORTSBETTING.COM. On a proforma basis the gross margin percentage for the Operating division forthe quarter ended 31 March 2006 was 13.6% compared to 12.9% for the quarterended 31 March 2005. The increase is attributable to strong win margins onsports throughout the quarter and the contribution of net poker rake in 2006 of$1.0m (2005: $nil). Operating expenses before goodwill amortisation increased by $4.2m to $5.3mduring the quarter ended 31 March 2006 compared to $1.1m for the same periodlast year. The increase is wholly attributable to Operating division costs notincluded in the comparative period. Costs associated with operations, primarilyconsisting of transaction processing, customer service and marketing,contributed $4.0m to total operating expenses in the first quarter of 2006. Operating profit before goodwill amortisation and exceptional items for thequarter ended 31 March 2006 increased by $5.3m to $6.1m compared to $0.8m forthe comparative period in 2005. The increase is attributable to the contributionfrom the Operating division as well as increase in like-for-like royalty and feerevenue. Goodwill amortisation for the quarter ended 31 March 2006 was $0.9m compared to$nil for the comparative period in 2005. Finance costs, representing netinterest and loan cost amortisation, was $0.7m for the quarter ended 31 March2006 compared to $nil for the comparative period in 2005. Profit after tax for the quarter ended 31 March 2006 increased $3.7m to $4.5mfrom $0.8m for the quarter ended 31 March 2005. Basic earnings per share before goodwill amortisation per participating ordinaryshare for the quarter ended 31 March 2006 was 10.2 cents (8.6 cents aftergoodwill amortisation) compared to 3.0 cents (3.0 cents after goodwillamortisation and exceptional items) for the same quarter in 2005. Participatingordinary shares include those shares that have voting and economic rights andexclude those shares held by Sportingbet in accordance with the transactioneffective 1 October 2004. On a fully diluted basis earnings per share before goodwill amortisation perparticipating ordinary share for the quarter ended 31 March 2006 was 9.1 cents(7.6 cents after goodwill amortisation) compared to 2.0 cents (2.0 cents aftergoodwill amortisation) for the same quarter in 2005. At the end of the first quarter of 2006, the Group paid down $6.0m of its $40.0mloan facilities. The Group's $5m revolving credit facility remains unutilised. Afurther $13m is scheduled to be repaid throughout 2006. Review of Operations Operating Division (SPORTSBETTING.COM) The Operating division added 19,360 new customers in the first quarter of 2006compared to 14,978 new customers for the first quarter of 2005, a 29% increasein new customers than the comparative quarter of 2005. Of these new customers49% were converted to new active betting customers compared to 47% for the firstquarter of 2005. Active customer acquisition costs were $76 for the quarter compared to $79 in2005. The Group has successfully integrated the majority of the marketingfunction of the SPORTSBETTING.COM acquisition while maintaining highly efficientcustomer acquisition costs. The Board believes that the strength of theSPORTSBETTING.COM brand together with maintaining its established marketingrelationships will continue to drive its efficient customer acquisition costs. The average loss per active customer was $326 for the quarter compared to $333for the same quarter of 2005. The average life of a customer as at 31 March 2006was approximately 483 days or 16.1 months compared to 456 days or 15.2 months asat 31 March 2005. The average lifetime value of a customer at 31 March 2006 on arolling twelve month basis was approximately $1,394. Sports margins including horse racing in the first quarter of 2006 were 9.3%(2005: 9.1%) representing strong win margins on sports. Gaming margins in the first quarter of 2006 were 2.0% (2005: 2.2%). SPORTSBETTING.COM's poker product, launched only in the middle of 2005, yieldedrevenue before commissions of $1.5m (2005: $nil) for the quarter. Continuedgrowth in poker has been derived primarily from cross-selling the sports bettingproduct. The Operating division continued to deliver strong cross-sell from sportsbetting players with an average 32.7% (2005: 32.0%) in the quarter of playersplacing a sports wager going on to place a bet on a gaming product or poker.This yielded $2.8m (2005: $2.6m) of gaming revenue and $0.7m (2005: $nil) ofpoker revenue for the Group in the quarter. The cross-sell of products withinthe database is enhanced by the Group's single player account status across allproducts. In March 2006, the Group launched a 3-card poker product to further enhance itscasino offering. Licensing Division During the quarter, the Group added two new licensees. Both are expected to golive in the second quarter of 2006. Growth in the European white-label site launched in the fourth quarter of 2005has been encouraging. The Group continues to monitor further licensing andwhite-label opportunities. Consistent with the Board's strategy, the Group expects to continue to sign anaverage of one quality licensee per quarter, thus further leveraging its highlyscalable software and infrastructure resources. Regulatory Developments Over the past few years, authorities in certain jurisdictions, such as theUnited States, have taken indirect steps to restrict online gaming by seeking toprevent or deter banks, payment processors, media providers and other suppliersfrom transacting with and providing services to online gaming operators, eventhough many of these online gaming operators are legally licensed in thejurisdiction in which they operate. The application or enforcement (or threat ofenforcement) of restrictive laws or regulations, or a change in sentiment byregulatory authorities or the enactment of new legislation prohibiting orrestricting online gaming or services used by online gaming businesses or thetaking of certain indirect steps, may severely and adversely impact the businessand financial position of online gaming companies such as the Company's.Presently, there are two pieces of proposed legislation being considered in theUS House of Representatives (one introduced by Congressman Leach and the otherby Congressman Goodlatte), with the likelihood of a third being introduced inthe US Senate by US Senator Kyl, as an amendment to other proposed legislationpresently being considered or, in the future, as proposed stand-alonelegislation. Each of these bills will need, in the ordinary course, to bepassed by both Houses of Congress, probably before October 2006 when the 109thCongress is expected to adjourn, ahead of the mid-term 2006 elections. Inaddition, the proposed bills offer "carve-outs" to certain US domestic groupsthat undertake US domestic gaming activities and the insertion of suchcarve-outs by special interests in the past undoubtedly had an impact on thefailure of such legislation in the past. Obviously, we will continue to monitordevelopments closely. In November 2004, the World Trade Organisation ("WTO") held that the US was inviolation of its commitments under international trade laws by not allowingoperators of Internet Gaming services licensed in Antigua and Barbuda to accessUS markets. The decision was appealed and the WTO ruled that the US had shownthat its laws prohibiting gambling are "necessary to protect public morals ormaintain public order" but had failed to demonstrate, in light of its laws inrespect of on-line gambling on horseracing, that such prohibitions are appliedequally to both foreign and domestic providers of on-line gambling services forhorseracing. Consequently, the WTO recommended that the US bring its laws intoconformity with its obligations under international trade rules. Pursuant tothe report of the arbitrator circulated in August 2005, the US was given until 3April 2006 to clarify its policies on Internet gambling and the purportedextraterritorial application of its laws. This date has now passed and the UShas not taken action to change the US domestic laws that the WTO panelidentified as in violation of the US's GATS commitments. It remains to be seenwhat effect, if any, will result from this inaction on Internet Gambling policyin the US. Trading Outlook The first three weeks of the second quarter of 2006 have continued todemonstrate growth in all key performance indicators broadly in-line with thefirst quarter. Margins, while remaining strong, have returned to levels withinmanagement's expectations after a very strong first quarter. In accordance with expectations and industry seasonality, trading volumesexperienced by the Group are generally lower in the second quarter. During thesecond quarter and the beginning of the third quarter, the Group willconcentrate efforts on planned hardware and infrastructure upgrades to securethe ability to handle expected growth in trading volumes through the second halfof 2006. The Company expects to report its results for the second quarter and first half ended 30 June 2006 on 25 July 2006. Daniel MoranChief Executive World Gaming plc Unaudited Consolidated Profit and Loss Account Three months ended 31 March 2006 and 2005 (Currency amounts in U.S. dollars) Note 3 months 3 months 31 March 31 March 2006 2005 $'000 $'000 TURNOVER 2 77,263 2,635 Cost of sales (65,851) (761) -------- -------- GROSS PROFIT 11,412 1,874------------------------ ------ -------- --------Goodwill amortisation (882) - Other administration expenses (5,346) (1,084)------------------------ ------ -------- -------- Total administration expenses (6,228) (1,084)------------------------ ------ -------- --------Operating profit before goodwill amortisation 6,066 790Goodwill amortisation (882) ------------------------- ------ -------- -------- Operating profit before finance costs andextraordinary items 5,184 790 Finance costs 5 (692) 46 -------- -------- Profit before tax 4,492 836 -------- -------- Taxation - - -------- --------Profit for the financial period 4,492 836 ======== ======== Earnings per ordinary share (cents) 3 Basic 8.6 3.0Diluted 7.6 2.0 Earnings per share adjusted (cents) 3 Basic 10.2 3.0Diluted 9.1 2.0 World Gaming plc Consolidated Balance Sheets As at 31 March 2006 and 31 December 2005 (Currency amounts in U.S. dollars) 31 March 31 December 2006 2005 Note (unaudited) $'000 $'000FIXED ASSETSIntangible assets - goodwill 84,927 85,662Tangible assets 1,279 1,231 ---------- --------- 86,206 86,893 CURRENT ASSETSDebtors 9,115 9,601Prepayments and accrued income 843 989Consideration recoverable - 3,481Cash at bank and in hand 6,305 7,605 ---------- --------- 16,263 21,676 CREDITORS: Amounts falling due within one yearBank loans 5 12,508 14,711Other creditors and accruals 8,695 9,659Deferred consideration - 3,600 ---------- --------- 21,203 27,970 ---------- ---------NET CURRENT (LIABILITIES)/ASSETS (4,940) (6,294) ---------- --------- TOTAL ASSETS LESS CURRENT LIABILITIES 81,266 80,599 CREDITORS: Amounts falling due after more thanone yearBank loans 5 20,484 24,396PROVISION FOR LIABILITIES AND CHARGES - - ---------- --------- NET ASSETS 60,782 56,203 ========== ========= CAPITAL AND RESERVESCalled up share capital 212 197Share premium account 36,313 27,793Shares to be issued - 8,440Deferred compensation reserve 567 567Merger reserve 23,528 23,528Profit and loss account 162 (4,322) ---------- --------- SHAREHOLDERS' FUNDS 60,782 56,203 ========== ========= World Gaming plc Unaudited Consolidated Cash Flow statement Three months to 31 March 2006 and 2005 (Currency amounts in U.S. dollars) 3 months ended 3 months ended 31 March 31 March 2006 2005 $'000 $'000 Net cash inflow from operating activities 6,124 1,413 Returns on investment and servicing offinance (569) 46 Acquisitions (685) - Capital expenditure (262) (95) Consideration received - Sportingbet - 3,000 --------- --------- CASH INFLOW/(OUTFLOW) BEFORE FINANCING 4,608 4,364 Financing (6,045) 82 Issue of shares 137 - --------- ---------Net (DECREASE)/INCREASE IN CASH IN THEPERIOD (1,300) 4,446 ========= ========= RECONCILIATION OF NET CASHFLOW TO MOVEMENT INNET FUNDS (Decrease)/Increase in cash in the period (1,300) 4,446 Cash (inflow)/outflow from(increase)/decrease in debt 6,045 14 --------- ---------MOVEMENT IN NET FUNDS RESULTING FROM CASHFLOWS IN PERIOD 4,745 4,460 --------- ---------Currency translation differences (8) (13)Non-cash movements - - --------- ---------Movement in net funds in period 4,737 4,447 --------- --------- --------- ---------Net funds/(debt) at start of period (31,502) 7,930 --------- --------- NET (DEBT)/ FUNDS AT END OF PERIOD (26,765) 12,377 ========= ========= 1. Consolidated statement of total recognised gains and losses 3 months 3 months 31 March 31 March 2006 2005 $'000 $'000 Profit for the financial period 4,492 836 Currency translation difference on foreign currency netinvestment (8) (13) -------- -------- Total recognised gains relating to the year 4,484 823 ======== ======== 2. Analysis of turnover 3 months 3 months 31 March 31 March 2006 2005 $'000 $'000Analysis of revenue by activity: Sports betting & racing 70,907 -Casino and gaming 3,556 -Poker rake 1,548 -Customer bonuses (459) -Royalty and fee income 1,711 2,635 -------- -------- 77,263 2,635 ======== ======== Turnover represents the amount staked in respect of bets placed on sporting andhorse racing events and net win in respect of bets placed on casino games andrake for poker games that have concluded in the period. Turnover from royaltyand fee income represents royalties charged to licensees of the Group's softwareand fees charged for usage of the Group's infrastructure. 3. Earnings per share The calculation of basic earnings per share for the quarter is based on theprofit after tax at 31 March 2006 of $4.5m (2005: $0.8m) and on the weightedaverage number of ordinary shares in issue of 52,469,189 (2005: 32,741,868). The calculation of diluted earnings per share for the quarter is based on theprofit after tax at 31 March 2006 of $4.5m (2005: $0.8m) and on the weightedaverage number of ordinary shares in issue adjusted to assume the exercise ofoptions over shares and the dilutive effect of shares to be issued in respect ofthe acquisition in the period of 59,084,434 (2005: 38,896,406). Adjusted basic and diluted earnings per share before goodwill and exceptionalitems for the quarter excludes amortisation of goodwill of $0.9m (2005: $nil). Earnings per share excludes shares with no voting or economic rights in respectof the 13,506,204 shares held by Sportingbet PLC and its affiliates that havebeen set aside as a result of the Transaction with Sportingbet PLC and may berepurchased by the Company for an aggregate $1 when the Company has retainedearnings to do so. 4. Basis of preparation There have been no material changes to the accounting policies of the Group asset out in 31 December 2004 consolidated financial statements. 5. Finance costs 3 months 3 months 31 March 31 March 2006 2005 $'000 $'000 Interest receivable 128 46Interest payable (697) -Amortisation of loan agreement fees (123) - -------- -------- (692) 46 ======== ======== Deferred finance costs of $963,983 as at 31 March 2006, netted against the loanbalances outstanding at 31 March 2006 are being amortised over the period of theloan agreement. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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