11th Apr 2006 07:01
Gaming VC Holdings S.A.11 April 2006 Press Release 11 April 2006 Gaming VC Holdings S.A. ("Gaming VC" or "the Group") Preliminary Results Gaming VC Holdings S.A., a leading European online casino provider, todayannounces its unaudited Preliminary Results for the year ended 31 December 2005. Financial Highlights The Casino business was acquired by Gaming VC on 21 December 2004 so thecomparative 2004 figures only reflect 11 days trading. • Recommended final dividend of 21p per share to be paid on 22 May 2006. Total dividend for year of 42p per share represents yield of 9.7% on last night's closing price.• Turnover of €40.4 million (2004: €0.7 million)• Gross margin 76% (2004: 79%)• Operating profit of €13.4 million (2004: €0.4 million)• Profit before tax of €12.8 million (2004: €0.3 million)• Basic earnings per share of €0.41• Average daily revenue €113k for 1Q 2006 Business Highlights • Average 2% per month revenue growth since October 2005 achieved• New registrations continue to increase: 14,700 Q1 06 (11,200 Q4 05; 8,450 Q3 05)• New depositing player numbers tracking registrations• German speaking markets show continued strong growth• New technology has enabled greater customer differentiation and targeting• Gaming VC does not accept wagers from residents of the USA• Relative value of players acquired over last two quarters is on par with players acquired in previous years (€60 revenue per month per player) Commenting on these results, Steve Barlow, Chief Executive of Gaming VC, said:"These results demonstrate Gaming VC's ability to deliver strong increases inrevenues as seen by the achievement of at least 2% per month revenue growthsince October 2005. Our cost base remains broadly fixed with incrementalrevenues contributing directly to profits. "The Group's focus on non-US markets has led to improved awareness of Gaming VCamongst our peer group and shareholders. The Board anticipates that thisfinancial year will deliver another strong set of results, with the creation ofshareholder value a key objective for the Group." - Ends - For further information:Gaming VC Holdings S.A.Steve Barlow, Chief Executive Tel: +44 (0) 20 7398 [email protected] www.gamingvc.com Media enquiries:AbchurchChris Lane / Katherine Murphy Tel: +44 (0) 20 7398 [email protected] www.abchurch-group.com Chairman's statement I am pleased to present Gaming VC's maiden set of preliminary results since ouradmission to AIM in December 2004. These results are in line with marketexpectations and I am pleased to say that we are delivering our target of 2%average revenue growth per month. The results for the year ended 31 December 2005 show an operating profit of€13.4 million (2004: €0.4 million) and a net profit of €12.8 million (2004: €0.3million). The Board has recommended a final dividend of 21p (gross) per share,giving a total distribution of 42p for the year. Earnings per share on profitafter tax were €0.41 (2004: €0.02). The dividend will be paid on 22 May 2006 toholders on the share register at 21 April 2006. Gaming VC provides a proven business model and is a leading online gamingoperator in German speaking countries. Importantly, we do not accept wagers fromUS customers and as such are not affected by current or potential prohibitivelegislation in that market. The Board is confident that this lack of exposure tothe United States significantly enhances the value of the Group relative to ourpeer group. Our aim is to continue growing in our core German markets, where newmarketing initiatives have proven to be successful and we are continuing toexpand market share. We are also selectively looking at opportunities toreplicate this model in other geographic areas. A key factor in Gaming VC's growth is its committed and experienced managementteam. In January 2006, we welcomed Gerard Cassels to Gaming VC's managementcommitee as Finance Director. Gerard brings a wealth of experience to the Group,having held the position of Finance Director within several successful listedcompanies in Europe. Furthermore, the Board proposes that Adrian J R Smith is appointed as aNon-Executive Director. Adrian is the CEO of the Woolton Group, and hassignificant public company and corporate governance experience, having been theNon-Executive Chairman of the Carter and Carter Group from 2002 through to itsflotation in 2005. In addition to his continued non-executive director positionat Carter and Carter plc, he serves on the board of Tutogen Medical Inc. in theUSA, and the Harbor Branch Oceanographic Institution. His management experienceincludes Deloitte Touche Tohmatsu, Grant Thornton LLP and Arthur Andersen LLP,as well as Procter and Gamble. It is expected that Adrian will be Chairman ofthe Remuneration committee and will also sit on the other core governancecommittees of Audit and Nomination. Shareholders will be asked to confirm Gerard Cassels' and Adrian Smith'sappointments at the forthcoming AGM. We are well positioned to maintain our growth in 2006 and are confident that ourefforts to build Gaming VC's presence in the online casino market will continueto deliver positive results. Trading in 2006 to date has been comfortably inline with management's expectations. Nigel Blythe-TinkerChairman Chief Executive's Statement Over the past financial year we have established a robust operational frameworkwhich will allow Gaming VC to move to the next stage of growth as we leverageour position as a leading online Casino in German speaking markets. The strongincrease in revenues is a testament to the durability of our Casino business andthe strengths of our marketing strategy which both indicate future growthopportunities. The German gaming market remains considerably buoyant and we areconsistently adding to our customer base. The strategy going forward is to continue to build on the strongly cashgenerative core business in German speaking markets, whilst looking selectivelyat opportunities to enter other national markets with a Casino offering that iscustom tailored to each targeted country. Casino Gaming VC is now in a position where we have a reliable customer base thatprovides the Group with good forward visibility of earnings. To further sustaingrowth, we have developed a monthly direct mail campaign for customeracquisition, in addition to the quarterly publication of our Casino Clubmagazine. These new campaigns follow two high volume test direct mail campaignsthat we ran in July and August 2005. The combination of these two marketinginitiatives has resulted in strong customer acquisition and retention levelsthat are among the highest in the industry with our average customer playing for22 months. This anchor marketing campaign has now been operating for 6 months and hassignificantly improved the performance of the core business as shown below: Q3 2005 Q4 2005 Q1 2006New registrations 8,458 11,187 14,777New depositing customers 4,663 5,245 7,428Daily average revenue • 98,500 • 106,350 • 112,800 In addition, we have begun to add e-mail, banner and affiliate programmes to ouroverall marketing strategy in support of our direct mail efforts, and we arealso working on the launch of new casino games, such as a football biased slotgame for the World Cup in June 2006. New territories One of our growth strategies is to examine opportunities to replicate our provenbusiness model in new geographical markets. In Spain, additional marketing spend has been allocated to drive the customernumbers needed to achieve critical mass. Spain was selected as the first testmarket for a new casino as it was identified as a market that had no contentiouslegislation for internet gaming, an appropriate level of internet infrastructureand no current dominant market leader in the online gaming sector. An initialbroad media campaign to heighten customer awareness of the Casino Club brand waslaunched in September 2005. Encouragingly, visits to the Spanish site in September and October 2005 wereover 9,000 per day, with online channels showing good leads to the site.However, the conversion of leads to paid play was significantly slower thanexpected. Subsequent analysis identified areas of web navigation and Spanishsupport services as contributing factors. These issues have now been addressedwith both site and customer support improvements. Phase two of the Spanishmarketing campaign, which entails a low additional cost, went live in March2006. Since February 2006, we have soft launched a second new casino in Russia inconjunction with experienced local business people who have significant internetand marketing experience. The new site (www.casino-club.ru) offers the usualsuite of casino games in both Euros and Roubles. Gaming VC's initial financialinvestment in this new casino represents only a small part of our overallmarketing budget for 2006. With both Spain and Russia, it is still too early to have statisticallymeaningful operating data. Following a detailed operational review in 2005, wenow have sophisticated reactive feedback controls in place which are integral toboth trials. These give us instant and detailed market data which will ensurethat additional resources will only be committed where we have a strong degreeof confidence about the potential for significant upside. Poker Casino Club's online poker room completed a soft-launch in August 2005, andunderwent beta-level testing during the European summer holidays. A marketingprogramme to promote this new product began in September 2005, includingpromotion in Casino Club magazine to the existing German customer base, a directmarketing campaign to new prospects and inclusion in the rollout of the Spanishmarketing campaign. Poker is now accounting for about 4% of our daily revenues. With this offering, members of the Casino have the ability to play poker on ourwebsite although we expect that growth in 2006 will come predominantly from theCasino operation. Group Financial Performance The Casino business was acquired on 21 December 2004 so the comparative 2004figures only reflect 11 days trading. The total gross wagers placed were €1.6 billion (2004: €58 million) and netrevenues were €40.4 million (2004: €0.7 million). The gross profit for thefinancial year ended 31 December 2005 was €30.8 million (2004: €0.5 million)with the primary operating cost element for the Group being the turnkey onlinecasino services provided by Boss Media SA and its subsidiaries. In the financial year there were no significant one-off jackpot winners in theGroup's slot machine games with associated "progressive" jackpots. The total ofthe available jackpots at the end of December 2005 was €1.7 million (2004: €0.9million) with the largest available individual jackpot being €0.8 million (2004:€0.4 million). Upon this jackpot becoming payable it will be a charge againstthe relevant period's gross profit. The last major jackpot win was for €0.5million in November 2004. The Group operating profit for the financial year ended 31 December 2005 was€13.4 million (2004: €0.4 million) after the deduction of distribution andadministrative expenses. Distribution costs of €7.4 million (2004: nil) reflect the third party marketingcosts incurred by the Group to recruit active members to the Casino. The marketing costs for 2005 include over €2 million that was related to theinitial launch of the Casino in Spain and nearly €3 million associated with thelaunch and promotion of poker. Neither of these one-off expenses is expected tobe repeated in the ongoing operation of the business. The core marketing of theCasino in 2006 is expected to account for circa €5 million out of a totalestimated marketing expenditure of €9 million. The balance will be spent testingalternative marketing channels to direct mail and marketing in new territoriesoutside Germany and Austria. The major items within the administrative expenses incurred during the financialyear are detailed below 2005 2004 •'000 •'000 Employment costs 2,378 26Travel 1,121 59Legal, accounting and tax 1,941 40Re-organisation costs 545 0Amortization of intangible assets 2,802 37All other costs 1,207 1 --------- ---------Total administrative expenses 9,994 161 --------- --------- Employment costs are analysed in note 2 to the financial results. The 2005 legal, accounting and tax costs included a one-off charge for a fullaudit after 6 months trading which cost €0.2 million. This was needed to giveinitial audited numbers as at the time of the IPO in December 2004, becauseaudited accounts for the business being acquired were not available. Inaddition, given the Group's complex physical and legal structures, ongoingprofessional advice costs are higher than for a business based in one domicile. The re-organisation costs include the costs related to closure of the Londonoffice, reductions in headcount and a €0.2 million settlement of contractualobligations to Dr Willis on his standing down as an executive director of theGroup. The amortization of intangible assets is detailed in note 5 to the financialresults. This is a non-cash charge primarily to reflect the reduction ineconomic value over their useful lives of the intangible assets acquired on thepurchase of the Casino business in December 2004. Net financing costs for the financial year ended 31 December 2005 of €0.6million (2004: €0.007 million) are analysed in note 3 to the financial results.The majority of Group revenues are in Euros, as are both the cost of sales andmarketing. Employment costs are primarily US Dollar denominated and most legal,tax and accounting services are incurred in Sterling. Dividend payments are alsoSterling denominated. The Group's operational structure, with the core business in Curacao, allows foran effective global tax charge of €0.01 million. The Group periodically reviewsall of the relevant and controlling tax regulations to optimise the availablebenefits. A Group effective tax charge of less than 2% of net profit isenvisaged to continue for the foreseeable future. In the reporting period the Group generated €17 million (2004: consumed €0.2million) from operating activities. After payment of the interim dividend of€9.6 million during the year, the Group's closing cash balance at 31 December2005 was €7.3 million (2004: €1.3 million). Due to the nature of the businessthere are no significant working capital pressures on the Group during periodsof revenue growth. The Group had no significant capital expenditure during theyear and does not envisage any in 2006. Dividends We consider that the current dividend policy remains appropriate for the Group.The core business is cash generative and not capital intensive and we willcontinue to return excess capital to shareholders, as appropriate. The Board recommends a final dividend of 21p (gross) (c €0.302) per share (2004:nil), making a total distribution of 42p (c €0.604) for the year. This will bepaid on 22 May 2006 to shareholders on the register at the close of business on21 April 2006. While the total dividend for 2005 will be greater than the earnings per share inthe year, given the financial performance of the Group in 2005 and the strongstart to 2006, the Board considers the final dividend is merited. As at 31 March2006 our cash balances were more than sufficient to cover the final dividend. Outlook Gaming VC has started 2006 in a strong position. We are exploring opportunitiesto replicate our casino product in other markets on a selective basis, but wewill only commit meaningful resources after detailed feedback analysis and whenwe have confidence about the upside potential. In the meantime, our leadingposition in German speaking markets provides a very stable foundation,especially as we see significant potential for further growth in these coremarkets over the foreseeable future. We look forward to the remainder of thecurrent financial year with much confidence. Steve BarlowChief Executive Consolidated Income Statement Year ended 1 monthFor the year ended 31 December 2005 31 December Period ended 2005 31 December 2004(*)In thousands of euro Note Revenue 1 40,443 670Cost of Sales (9,677) (137)----------------------------- -------- --------Gross profit 30,766 533 Distribution expenses (7,410) -Administrative expense (9,994) (161)----------------------------- -------- --------Operating profit before financing costs 13,362 372 Financial income 3 46 7Financial expense 3 (601) ------------------------------ -------- --------Net financing costs (555) 7----------------------------- -------- -------- Profit before Tax 12,807 379Income tax expense 4 (13) (5)----------------------------- -------- --------Profit for the year/period 12,794 374----------------------------- -------- -------- Basic earnings per share (euro) 6 0.41 0.024----------------------------- -------- --------Diluted earnings per share (euro) 6 0.41 0.024----------------------------- -------- -------- Consolidated statement of recognised income and expense For the year ended 31 December 2005 Year ended 1 month 31 December Period ended 2005 31 December 2004(*)In thousands of euro ----------------------------- -------- -------- Profit and total recognised income andexpense for the year/period 12,794 374----------------------------- -------- -------- (*) Prior period since incorporation on 30 November 2004 Consolidated Balance Sheet 31 December 31 DecemberAs at 31 December 2005 2005 2004 In thousands of euro Note Assets Property, plant and equipment 46 -Intangible assets 5 102,752 105,479----------------------------- -------- --------Total non-current assets 102,798 105,479----------------------------- -------- --------Trade receivables 2,151 620Prepayments 531 132Cash and cash equivalents 7,233 1,270----------------------------- -------- --------Total current assets 9,915 2,022----------------------------- -------- --------Total assets 112,713 107,501----------------------------- -------- -------- EquityIssued share capital 38,608 38,608Share premium 67,522 67,522Retained earnings 4,109 383----------------------------- -------- --------Total equity attributable to equityholders of the parent 110,239 106,513----------------------------- -------- -------- LiabilitiesTrade and other payables 1,158 736Accrued expenses 1,316 252----------------------------- -------- --------Total current liabilities 2,474 988----------------------------- -------- --------Total liabilities 2,474 988----------------------------- -------- --------Total equity and liabilities 112,713 107,501----------------------------- -------- -------- Consolidated statement of cashflows For the year ended 31 December 2005 Year ended 1 month 31 December Period ended 2005 31 December 2004 (*)In thousands of euro Note Cash flows from operating activitiesCash receipts from customers 38,911 50Cash paid to suppliers and employees (21,966) (268)----------------------------- -------- --------Net cash from operating activities 16,945 (218)----------------------------- -------- --------Cash flows from investing activities Interest received 46 -Acquisition of business - (105,516)Acquisition of property, plant andequipment (67) -Acquisition of intellectual property 5 (75) ------------------------------ -------- --------Net cash from investing activities (96) (105,516)----------------------------- -------- -------- Cash flows from financing activitiesProceeds from the issue of share capital - 117,562Payment of transaction costs (867) (10,565)Dividend paid (9,559) ------------------------------ -------- --------Net cash from financing activities (10,426) 106,997----------------------------- -------- --------Net increase in cash and cash equivalents 6,423 1,263Cash and cash equivalents at beginning ofthe year/period 1,270 -Effect of exchange rate fluctuations oncash held 3 (460) 7----------------------------- -------- --------Cash and cash equivalents at end of theyear/period 7,233 1,270----------------------------- -------- --------(*) Prior period since incorporation on 30 November 2004 Notes to the consolidated financial statements 1 Segment reporting Segment information is presented in respect of the Group's business andgeographical segments. Business segments Based on risks and returns the management considers that the primary reportingformat is by business segment. The directors consider that there currently isonly one business segment being the casino operation of games of chance.Therefore the disclosures for the primary segment have already been given inthese financial statements. A second business segment of skill based games waslaunched in the last quarter of the year. It only achieved revenue of €327,000in the year which has been included in games of chance. It is expected to besufficiently material to be disclosed separately in the full year accounts for2006. Geographical segments Within the year the core business activity has been concentrated in the Germanlanguage countries. Development specifically tailored for other European language countries isongoing. Owing to current legislation in the US the company continues to blockaccess to its games to potential players located there. Segment capital expenditure is the total cost incurred during the year toacquire segment assets that are expected to be used for more than one year. In presenting information on the basis of geographical segments, segment revenueis based on the geographical location of customers. Segment assets are based onthe location of the assets themselves. Geographical segments Germany Austria Other Countries ConsolidatedInthousands 2005 2004 2005 2004 2005 2004 2005 2004of euro Revenuefromgames of 30,293 496 7,805 134 2,345 40 40,443 670chance ------ ------ ------ ------ ------- ------- ------- ------- -------Segment - - - - 112,713 107,501 112,713 107,501assets ------ ------ ------ ------ ------- ------- ------- ------- -------Capitalexpenditure - - - - 142 105,516 142 105,516 2 Personnel expenses Year ended 1 month 31 December Period ended 2005 31 December 2004In thousands of euroWages and salaries 1,713 15Compulsory social security contributions 135 -Contributions to defined contribution plans 39 1Equity-settled transactions 491 9--------------------------------- -------- -------- 2,378 25--------------------------------- -------- -------- 3 Net financing costs Year ended 1 month 31 December Period ended 2005 31 December 2004In thousands of euroInterest income 46 -Net foreign exchange gain through profit - 7--------------------------------- -------- --------Financial income 46 7--------------------------------- -------- -------- Interest expense -Interest expenses and bank charges (141) -Net foreign exchange loss through profit (460)--------------------------------- -------- --------Financial expenses (601) ---------------------------------- -------- --------Net financing costs (555) 7--------------------------------- -------- -------- 4 Income tax expense Year ended 1 month 31 December Period ended 2005 31 December 2004Recognised in the income statementIn thousands of euroCurrent tax expenseCurrent year 13 5Adjustments for prior period - ---------------------------------- -------- -------- 13 5--------------------------------- -------- -------- Deferred tax expenseOrigination and reversal of temporary differences - -Reduction in tax rate - -Benefits of tax losses recognises - ---------------------------------- -------- -------- - ---------------------------------- -------- --------Total income tax expense in income statement 13 5--------------------------------- -------- -------- Reconciliation of effective tax rateIn thousands of euro Year ended 1 month 31 December Period ended 2005 31 December 2004 Profit before tax 12,807 374--------------------------------- -------- -------- Income tax using the domestic corporationtax rate 2,818 82Effect of tax rates in foreign jurisdictions(Rates decreased) (2,805) (75)Tax exempt revenues - (2)--------------------------------- -------- -------- 13 5--------------------------------- -------- -------- 5 Intangible assets Goodwill Trade-marks Software Consulting Magazine Total licenceIn thousands of euroCost Balance at 30 - - - - - -November 2004Acquisitionsthroughbusinesscombinations 73,613 15,144 11,840 419 4,500 105,516-------------- ------- ------ ------- -------- ------- -------Balance at 31December 2004 73,613 15,144 11,840 419 4,500 105,516------------- ------- ------ ------- -------- ------- -------Balance at 1January 2005 73,613 15,144 11,840 419 4,500 105,516------------- ------- ------ ------- -------- ------- -------Otheracquisitions - - 75 - - 75------------- ------- ------ ------- -------- ------- -------At 31 December2005 73,613 15,144 11,915 419 4,500 105,591------------- ------- ------ ------- -------- ------- -------AmortisationBalance at 30 - - - - - -November 2004Amortisationfor the period - - 16 1 20 37------------- ------- ------ ------- -------- ------- -------Balance at 31December 2004 - - 16 1 20 37------------- ------- ------ ------- -------- ------- -------Balance at 1January 2005 - - 16 1 20 37Amortisationfor the year - - 1,197 105 1,500 2,802------------- ------- ------ ------- -------- ------- -------At 31 December2005 - - 1,213 106 1,520 2,839------------- ------- ------ ------- -------- ------- ------- Carrying amountsAt 31 December2004 73,613 15,144 11,824 418 4,480 105,479------------- ------- ------ ------- -------- ------- -------At 31 December2005 73,613 15,144 10,702 313 2,980 102,752------------- ------- ------ ------- -------- ------- ------- Valuation methodologies The valuation methodology of each type of identifiable intangible asset isdetailed below. Asset Valuation methodologyMagazine-related CostConsulting Income (cost saving)Software licence Income (incremental value plus loss of profits)Trade-marks Relief from royaltyGoodwill Residual balance The valuation conclusions, for the assets acquired through businesscombinations, were cross-checked relative to the overall consideration paid inthe transaction over net tangible assets, to ensure that the proportion of valueattributed to (i) each identifiable tangible asset: and (ii) to all of theidentified intangible assets combined in the total purchase price appearsreasonable. In addition, the implied weighted average return on assets was reconciled withthe cost of capital derived for the business as a whole to check for thereasonableness of values placed on intangible assets and the discount rates/returns used. Amortisation and impairment charge The amortisation is recognised in the following line items in the incomestatement: Year ended 1 month 31 December Period ended 2005 31 December 2004In thousands of euroAdministrative expenses 2,802 37------------------------------- -------- --------- Impairment tests for cash-generating units containing goodwill The following units have significant carrying amounts of goodwill: 31 December 31 December 2005 2004In thousands of euro Casino operation: GVC Corporation IIB.V. 73,613 73,613------------------------------- -------- --------- All the intangible assets acquired in 2004 were valued at the year end and theresultant goodwill was tested for reasonableness. 6 Earnings per share The calculation of basic earnings per share at 31 December 2005 was based on theprofit attributable to ordinary shareholders of €12,793,954 (2004: €373,040) anda weighted average number of ordinary shares outstanding during the year ended31 December 2005 of 31,135,762 (2004: 15,555,381), calculated as follows: Profit attributable to ordinary shareholders Year ended 1 month 31 December Period ended 2005 31 December 2004In thousands of euroProfit attributable to ordinary shareholders 12,794 374------------------------------- -------- ----------- Weighted average number of ordinary shares Year ended 1 month 31 December Period ended 2005 31 December 2004 Issued ordinary shares beginning of theyear/period 31,135,762 25,000Effect of shares issued in December 2004 - 15,555,381------------------------------- ---------- ----------Weighted average number of ordinary sharesat end of the year/period 31,135,762 15,580,381------------------------------- ---------- ---------- Earnings per share Year ended 1 month 31 December Period ended 2005 31 December 2004In euroBasic earnings per share 0.411 0.024------------------------------- ---------- ---------- Diluted earnings per share The calculation of diluted earnings per share at 31 December 2005 was based onthe profit attributable to ordinary shareholders of €12,793,954 (2004: €373,040)and a weighted average number of ordinary shares outstanding during the yearended 31 December 2005 of 31,135,762 (2004: 15,555,381), calculated as follows: Profit attributable to ordinary shareholders (diluted) Year ended 1 month 31 December Period ended 2005 31 December 2004In thousands of euro Profit attributable to ordinary shareholders(diluted) 12,794 374------------------------------- -------- --------- Weighted average number of ordinary shares (diluted) Year ended 1 month 31 December Period ended 2005 31 December 2004 Weighted average number of ordinary sharesat end of the year/period 31,135,762 15,580,381Effect of share options on issue - -------------------------------- ---------- ----------Weighted average number of ordinary shares(diluted) at end of year/period 31,135,762 15,580,381------------------------------- ---------- ---------- Diluted earnings per share Year ended 1 month 31 December Period ended 2005 31 December 2004 Diluted earnings per share 0.411 0.024------------------------------- -------- --------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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