Final Results

9 March 2017

32Red Plc("32Red" or the ''Group" or the ''Company")

'A record year for revenue and profit'

Final results for the year ended 31 December 2016

32Red, the award-winning online gaming operator, today announces its final results for the year ended 31 December 2016

Key highlights:

· Record revenue performance with total net gaming revenues up 28% to £62.3m (2015: £48.7m)

· EBITDA* increased 102% to £10.6m (2015: £5.2m)

· PBT increased 511% to £6.5m (2015: £1.1m)

· 77% of net gaming revenues derived from regulated and taxed markets (2015: 80%)

· 32Red moves to profitability in Italian market

· Successful launch of new responsive, multi-platform website in April 2016

· Extended contract with improved and more flexible terms signed with Microgaming

· Mobile revenues represent 57% of total casino revenues (2015: 44%)

· Exclusive licence to promote casino games for ITV flagship brands featuring Ant and Dec

· British Horse Racing sponsorship agreements with racecourses and brand ambassadors

· Strong start to 2017 with net gaming revenues for the first nine weeks of the year up 20% on the same period in 2016

· Post Period end, 32Red announced the recommended cash offer from Kindred Group plc for the entire issued and to be issued share capital of 32Red at 196p per share

Key Financials:

Commenting on the results, Ed Ware, Chief Executive Officer, said:

"It is once again a pleasure to announce another record annual performance from 32Red. In 2016 the Group delivered continued strategic progress across the business with outstanding growth on mobile, further successful product enhancements and highly successful marketing investment, all the while maintaining one of the highest levels of regulated revenue amongst our peers. This outstanding operational progress has resulted in another hugely successful financial outcome with EBITDA* more than doubling and revenues rising by an impressive 28% to exceed prior records.

Momentum into 2017 has remained strong with NGR up 20% year on year. Underpinned by the strength of the brand, 32Red has an exceptional platform to drive continued growth across the business and increase market share both in the UK and Italy.

The recommended offer for the business by Kindred Group plc post the Period end reflects the strength of the 32Red brand as well as its significant growth opportunities as a casino focused operator. We are confident that Kindred would provide the right fit both operationally and culturally to continue the Group's growth.

The Group's outstanding performance in 2016 is, above all, testament to the efforts of our outstanding team. Their passion, skill and dedication continues to drive the business forward. 2017 is set to be another landmark year for 32Red and I would like to thank all of my colleagues for their continued dedication and hard work."

Enquiries:

*Underlying EBITDA is Earnings before Interest, Tax, Depreciation and Amortisation derived from the 32Red & Roxy Palace businesses i.e. excluding results from its Italian operations and is stated before share option costs and exceptional items. 

CHAIRMAN'S STATEMENT

Another year of outstanding growth

I am pleased to report another record breaking year for 32Red. The Group's outstanding performance in 2016 was again testament to the strength of the 32Red brand, the quality of our product offering, the effectiveness of our targeted, returns-driven marketing and the efforts of our outstanding people.

Financial Review

32Red's strong operational momentum continued throughout 2016 resulting in the Group delivering total net gaming revenues (''NGR'') up 28% to a record £62.3m (2015: £48.7m). This very strong performance was driven by continued growth across our core 32Red business (+19% on 2015) as well as a healthy full year contribution from the Roxy Palace business that was acquired in July 2015.

In this report (and going forward) the Group is reporting and intends to report its NGR as split between Total Casino NGR and Other Products NGR. With 32Red Casino in Italy now profitable and Roxy Palace successfully integrated into the Group, the Board believes this disclosure better reflects the business and its growth opportunities as a predominantly remote casino operator.

Total Casino NGR increased 26% to £58.5m in 2016 (2015: £46.3m) and represented 94% of total NGR (2015: 95%). This very strong growth reflected increased and effective marketing investment in 32Red Casino, a full year's contribution from Roxy Palace Casino, and good growth from 32Red Casino in Italy.

Revenue from 32Red Other Products continued to grow strongly, primarily driven by 32RedSport which is continuing to develop as an increasingly important customer acquisition and retention channel.

This record revenue performance resulted in an increase in EBITDA of 102% to a record £10.6m (2015: £5.2m). Profit before taxation of £6.5m in 2016 (2015: £1.1m) generates a basic earnings per share of 7.46p (2015: 1.23p).

The Group had a net cash balance of £10.1m as at 31 December 2016 (2015: £10.3m) and had no borrowings.

Recommended Cash Offer by Kindred for 32Red

On 23 February 2017, the Company announced that it had reached agreement with Kindred Group plc (''Kindred'') on the terms of a unanimously recommended cash offer under which Kindred would offer to acquire the entire issued and to be issued share capital of 32Red, such offer to be implemented by way of a takeover offer in accordance with the laws of Gibraltar (the "Offer").

Under the terms of the Offer, Kindred is offering to acquire the entire issued and to be issued share capital of 32Red for 196 pence in cash for each 32Red share. In addition, 32Red shareholders, as at the record date of 3 March 2017, will also be entitled to receive and retain a second interim dividend per 32Red share of 4 pence to be paid to 32Red shareholders on 23 March 2017. The Offer values the entire issued and to be issued share capital of 32Red on a fully diluted basis at approximately £175.6 million.

Since being admitted to trading on AIM in 2005, 32Red has successfully pursued its clear and focused strategy to exploit both organic and selective M&A opportunities and deliver sustainable long-term growth for all its stakeholders. This strategy has been focused, primarily, upon growing its brands in its core UK market and expansion in new regulated markets where 32Red could exploit its marketing strength. This strategy has delivered strong net gaming revenue growth and increased profitability for shareholders.

However, whilst the 32Red Directors continue to believe in its stated growth strategy and the strength of the 32Red brand, they also believe that 32Red would now be better placed as part of a larger group. Kindred represents a strong strategic and cultural fit for 32Red and the 32Red Directors believe a combination will build on 32Red's long-standing presence and well-established brand in the UK casino market.

In making its assessment of the merits of the Offer, the 32Red Board has taken into account:

· the level of the cash consideration payable under the Offer, being at a level above 32Red's all-time high closing share price and (including the Approved Dividend) at a premium of 39.5 per cent. to the volume weighted average closing price per 32Red Share of 143.4 pence in the three months prior to the start of the Offer Period;

· the Offer representing an attractive valuation when considered against 32Red's historic earnings and prospects;

· the relative lack of liquidity in 32Red Shares and the fact that the Offer provides 32Red Shareholders with a certain opportunity to realise their investment in 32Red wholly for cash; and

· the level of irrevocable undertakings to accept (or procure the acceptance of) the Offer, representing, in aggregate 71.1 per cent. of the 32Red Shares.

Following this assessment and for the reasons set out above, the 32Red Board is unanimously recommending that 32Red Shareholders accept the Offer.

Operational progress

Underpinning the Group's financial success has been continued strong progress against 32Red's strategic objectives. During 2016, we continued to innovate and develop our product offering with a notable highlight being the successful launch of our new 32Red Casino responsive multi-platform website in April. This has contributed to enhanced player retention, increased deposit levels and accelerated mobile casino growth, which now represents 57% of total casino revenues (2015: 44%).

In line with our continued focus on driving growth in sustainable regulated markets, revenue from regulated markets remained amongst the highest levels of our peers at 77% (2015: 80%).

During 2016, as mentioned above, as anticipated the Group turned to profitability in Italy and the Board continues to see exciting potential in this major online gaming market.

Effective from 1 November 2016, the Group was delighted to extend its contract with innovative commercial terms with digital gaming solutions partner, Microgaming. This important new arrangement is enabling 32Red to develop its strength in regulated markets whilst retaining its broad appeal across the target audience.

Edward Ware outlines the Group's progress in further detail in the CEO's Strategic Review.

People

Central to the growth and success of the 32Red business is our excellent team. Their talent and dedication means that we continue to achieve our goal of always exceeding customer expectations. I would like to take this opportunity to thank the entire 32Red team for their continued hard work and skill that remains critical to the Group's growth.

Current Trading and Outlook

32Red has excellent momentum with record growth in 2016 being driven by our core Casino products. We have continued to deliver progress against our strategy underpinned by effective ROI-driven marketing and an enhanced customer proposition.

32Red is firmly focused on driving growth in regulated markets which offer sustainable, long term prospects for the Group. The Group remains focused on delivering opportunities in our core UK market as well as in Italy where we are confident of successfully building on the platform we have established.

In August 2017 the online gaming market in the UK is anticipating changes in remote gaming duty in relation to customer bonuses. Whilst this will offer a headwind to the industry, the Board is confident that with 32Red's strong brand, marketing capabilities and operational momentum the Group is well positioned to minimalise the impact of these changes on the Group as well as capitalising on potential opportunities presented by any changes in market dynamics.

Trading during the current financial year has been strong across all areas of the business with like-for-like net gaming revenues for the first 9 weeks of the year up 20%% on the same period in 2016. Underpinned by this continued momentum, the Board remains confident that 32Red is well positioned for the future.

CEO's Strategic Review

Delivering our focused growth strategy

32Red is a fast-growing, casino-focused online gaming operator with one of the highest levels of regulated income amongst its peer group. Underpinning the Group's continued success are its strong and trusted brands; unwavering customer focus; return on investment-driven marketing expertise; and a clear growth strategy.The strategy is aimed at successfully exploiting organic opportunities and therefore delivering sustainable long-term growth for all stakeholders. This strategy revolves around three core pillars:

Growing our brands in our core UK market

The Company is focused on growing its brands in our core UK market, where we continue to see significant growth potential for 32Red. We will do this through developing and implementing return on investment-driven marketing campaigns that deliver real value for the 32Red business and by continuing to enhance and improve our customer offer.

Expansion in regulated markets

The Company is focused on growing its presence in regulated online gaming markets where the Board feels that 32Red has commercially viable opportunities and can exploit its full marketing and operational strength.

Continue to do what's right for our customers

At the very core of everything we do is a focus on looking after our customers. 32Red has a heritage in pure online gaming and the Company has established a strong reputation by innovating for its customers' enjoyment as well as protecting them. This is not only the right thing to do but it strengthens our trusted brand in the marketplace, in turn driving more customers to our business and keeping them for longer.

32Red's progress against this strategy is underpinned by the Group's core expertise in marketing its products and brands. This allows the Group to recruit increased customer numbers to the business in the most cost efficient manner possible. Then, by offering a first class experience and service as well as relevant communications and offers, we are able to keep these customers playing with 32Red's products for longer.Return on investment-driven multi-channel marketingThe 32Red brand is one of the most recognised in the industry through its carefully positioned and efficient return on investment ('ROI') driven marketing. Since the Group's inception in 2002, the team at 32Red has developed and grown a distinct, leading brand that is recognised as a trusted online casino market leader.2016 saw an 26% increase in total marketing investment, reflecting the significant growth opportunities that we continue to see for the Group.

During the year, we increased 'above the line' investment in marketing the 32Red brand and, in August 2016, the Group aired its first TV advert promoting its sports book, reflecting the importance of the Group's multi-product strategy. During the year, the Company signed a twelve month deal to advertise around live sport on Sky, including a number of half-time adverts in live Premier League football matches. In May 2016, the Company announced a three year agreement to sponsor Leeds United Football Club, providing 32Red with shirt sponsorship, access to Leeds United's global fan base and extensive brand visibility throughout the club's iconic Elland Road stadium as well as across its digital and media platforms. This sponsorship complements our existing shirt sponsorship of Rangers Football Club who, in 2016, returned to top flight football in Scotland.32Red has been a major sponsor of horse racing for a number of years and in 2016 we added two significant events to our sponsorship roster: The King George Winter Festival on Boxing Day and Haydock Park's prestigious Group 1 Sprint Cup. 32Red also renewed its commitment to the sponsorship of the All Weather Championship for the next two seasons.Strategic partnershipsIn September 2016, 32Red was pleased to announce that it agreed a new and extended contract with innovative commercial terms with digital gaming solutions partner, Microgaming. Under the new agreement, which is effective from 1 November 2016, the relationship cements Microgaming as 32Red's central and major technical and content supplier. The new deal also gives 32Red the flexibility to utilise alternative providers in order to enable the Company to ensure it is able to attract and retain the full spectrum of casino players to the 32Red brand in both the UK and other regulated markets.The Group continues to partner with Kambi Sports Solutions who provide a fully managed sportsbook solution for the Group under the 32Red brand. In May 2016, the Company renewed its commercial agreement with Kambi which will support the Group's growth plans in this increasingly important and fast-growing product vertical.32Red Casino Products32Red is a casino focused operator with a rare heritage and reputation in this product vertical. In 2016, 94% of Group revenues were generated from Casino activities. Mobile remains a key growth driver behind the Casino Products performance and now represents 57% of total 32Red Casino revenues (2015: 44%).We continue to invest in and develop our Casino offer and, in April, 32Red was proud to launch a new responsive website that has enhanced the functionality and user experience across both desktop and mobile platforms. Our customers now enjoy a more personalised experienced based on their preferences and behaviour and, since launch, the Group has experienced a strong uplift in customer retention and deposit levels.We have continued to invest in our gaming content to ensure 32Red always offers the freshest and most engaging entertainment. In September the Group was pleased to announce a new three year partnership with ITV Commerce & Ventures which saw two of the broadcaster's biggest brands extend their exclusive game content with the Group. A new "I'm a Celebrity...Get Me Out Of Here!™" slot game, featuring well-known features from the show including Ant and Dec themselves and of course a Bushtucker Trial themed bonus game, enhances 32Red's existing game offering. In addition, 32Red's "Ant & Dec's Saturday Night Takeaway" slot game brings all the favourite parts of the award-winning entertainment show to life for our customers including clips and imagery from the show.

The Group's development in Italy has been pleasing and, in line with our expectations, 32Red.it turned to profitability during 2016. Net gaming revenues increased by 33% to £2.3m (2015: £1.7m). Italy remains a competitive but attractive market for 32Red and we continue to examine further ways to broaden our product offering and drive further growth.

32Red Other ProductsWhilst 32Red remains a dominantly Casino-led operator, revenue from 32Red Other Products continued to grow strongly, up 60% year-on-year. This growth was primarily driven by 32RedSport which benefitted from increased marketing investment and is developing as an increasingly important customer acquisition and retention product for the Group. The Group's Poker and Bingo operations continue to benefit from the investment in and visibility of the 32Red brand as well as from increased activity levels at 32Red Casino.

Looking ahead

32Red is well positioned as an established and fast-growing Casino focused operator with the vast majority of its revenue generated from regulated markets. Building on its strong platform we expect the brand to deliver a year of further progress in 2017.

Edward Ware,Chief Executive Officer, 32Red Plc

*As amended (see note 10)

Notes:

The financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union and issued by the International Accounting Standards Board ('IASB'). These accounting policies comply with each IFRS that is mandatory for accounting periods commencing on or after 1 January 2016. The financial statements have been prepared under the historical cost convention and on a going concern basis.

Business segment

For management purposes and for transacting with customers, the Group's operations can be segmented into the following reporting sections:

Non-current assets are used by all the business segments and a split has not been made by segment because management internally review the assets and liabilities in aggregate. Furthermore "social security and other taxes" relate to all business segments and cannot be split in a meaningful way.

During the year, legal costs of £57,963 (2015: £96,973) were expensed in respect of industry lobbying and legal advice received in connection with the UK Government's proposed Point of Consumption Tax and regulation. As a result of the acquisition and subsequent relocation of the Roxy Palace business during 2015, the Company incurred due diligence costs of £126,988 and restructuring costs of £363,541 in the prior year.

The following amounts have been included in the income statement for the reporting periods presented:

Basic earnings per share have been calculated by dividing the net results attributable to ordinary shareholders by the weighted average number of shares in issue during the relevant financial periods.

The weighted average number of shares used for basic earnings per share amounted to 84,484,016 shares (2015: 78,337,590).

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For share options, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to the 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.

In 2016, assessable income is taxed in Gibraltar at the mainstream corporate income tax rate of 10% (2015: 10%). The Group's wholly owned subsidiary, 32Red Limited, is liable to corporation tax in the UK at a rate of 20%

8 Intangible assets

9 Property, plant and equipment

10 Reclassification of comparatives for changes in presentation

Certain prior year amounts have been reclassified for consistency with current period presentation. These reclassifications had no effect on the reported results of operations. The reclassifications move certain items of marketing expenditure which were previously considered costs of sale to administrative expenses, better reflecting the fact that they represent variable expenditure and do not correlate directly with net gaming revenue.

11 Post Balance Sheet Event 

Recommended Cash Offer for 32Red Plc by Kindred Group plc 

On 23 February 2017, the Company announced that it had reached agreement with Kindred Group plc (''Kindred'') on the terms of a recommended cash offer pursuant to which Kindred will offer to acquire the entire issued and to be issued share capital of the Company (the ''Offer''). 

Under the terms of the Offer, 32Red Shareholders will be entitled to receive 196p for each 32Red share and will also be entitled to receive and retain a second interim dividend of 4 pence per share (as declared on 23 February 2017). The Offer values the entire issued and to be issued share capital of 32Red on a fully diluted basis at approximately £175.6 million.

12 Publication of Non-Statutory Accounts

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined under Gibraltar company law.

The summarised Consolidated Statement of Financial Position at 31 December 2016 and the summarised Consolidated Statement of Comprehensive Income, summarised Consolidated Statement of Changes in Equity, summarised Consolidated Statement of Cash Flows and associated notes for the year then ended have been extracted from the Group's 2016 statutory financial statements upon which the auditor's opinion is unqualified and unmodified. The full 2016 statutory financial statements are detailed on the Company's website www.32Redplc.com.

Those financial statements have not yet been delivered to the registrar of companies.