22nd Apr 2008 07:01
Gaming VC Holdings S.A.22 April 2008 Press Release 22 April 2008 Gaming VC Holdings S.A. ("Gaming VC" or "the Group") Preliminary Results Gaming VC Holdings S.A., a leading European online gaming company, todayannounces its preliminary results for the year ended 31 December 2007. Highlights• Gross profit increased 9.5% to €32.2 million (2006: €29.4 million);• Operating profit up* 28.1% to €17.3 million (2006: €13.5 million);• Net revenues were up 5.2% to €42.7 million (2006: €40.6 million);• Maltese gaming licences acquired, reducing regulatory risk in the European Union;• Successful diversification, having acquired a sports betting licence;• Recommended final dividend of €0.20 (c£0.16) (2006:€0.19 (£0.13)). *before exceptional items and share option charge Commenting on the results, Kenneth Alexander, Chief Executive of Gaming VC,said: "I am delighted with the performance of the Group during 2007 with recordprofitability delivered during the year. It has been a year of transformationand change in strategic direction. Acquiring our European licences anddiversifying into new products and markets leaves the Group in a much strongerposition moving forward. I am confident that Gaming VC is now well placed tocontinue its successful growth story." - Ends - For further information: Gaming VC Holdings S.A. Tel: +44 (0) 20 7398 7700 Kenneth Alexander, Chief Executive [email protected] www.gamingvc.com Arbuthnot Securities Limited Tel: +44 (0) 20 7012 2000James Steel / Paul Vanstone, Corporate Finance www.arbuthnotsecurities.co.uk Media enquiries:AbchurchStephanie Cuthbert / Nick Probert Tel: +44 (0) 20 7398 [email protected] www.abchurch-group.com Chairman's Statement I am pleased to present the 2007 full year results for Gaming VC whichdemonstrate strong growth and are in line with expectations. Over the last year, the Group has successfully implemented the importantstrategic and operational objectives as set out in Gaming VC's 2006 results bythe then newly appointed Chief Executive, Kenneth Alexander, including: • Reducing the risk from potential German legislative issues;• Improving the profitability of the German business;• Diversifying into other territories and into other products; and• Strengthening the level of expertise within the business. The outcome of carefully following these strategies is record profitability forthe Group. The financial results for the year ended 31 December 2007 show anoperating profit before exceptional items and share option charges of €17.3million (2006: €13.5 million), an increase of 28 per cent. I believe 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 cash flow to shareholders as appropriate. The Boardis recommending a final dividend of €0.20 (c£0.16) giving a total distributionof €0.40 (c£0.29) for the current financial year (2006: €0.384 and £0.26). Thisfinal dividend will be paid on 30 May 2008 to all shareholders of record at theclose of business on 9 May 2008. To reduce risk from potential legislative issues in Europe the majority of ourbusiness, including all of our German operations, now operates under our Malteselicences. We look forward to a resolution of the regulatory debate within theEU. We are pleased with the results for the first quarter of 2008 and are confidentthat we will continue to build on the strong momentum created in 2007. Adrian Smith, Chairman22 April 2008 Chief Executive's Statement The successful implementation of our strategy has produced record results forthe 2007 financial year. The Group has taken a number of steps to improve the profitability of its coreGerman business, including tighter control of overheads and expenditure. Thedistribution of all direct mail to recruit customers was stopped in May 2007 andmarketing efforts were concentrated on affiliate marketing and search engineoptimisation with customer recruitment remaining at historic levels. In June 2007, the Group renegotiated its casino/poker operating contract withBoss Media on more favourable commercial terms. In order to remain competitive,Gaming VC believes it is important to utilise other software providers. Newbrands utilising flash casino and live dealer casino products will be launchedduring 2008 and a new poker brand www.pokerkings.com was launched in December2007. In September 2007, Gaming VC launched a sportsbook licenced in Malta(www.betaland.com) and in the first quarter of 2008, has secured an Italiansportsbook licence (www.betpro.it). The Maltese sportsbook launch has exceededour expectations and represents a significant step for Gaming VC in developingbusiness outside of Germany. The new business has continued to grow during 2008and Italy will be a key strategic market for the Group in the financial yearahead. Further sportsbook sites will be launched under the 'Betaland' brand in2008 to assist with diversification. To further extend the Group's product range, Gaming VC launched a bingo site,www.winzingo.es, in the first quarter of 2008, using the proven software fromParlay. This site will initially be focused on the Spanish female market androlled out across other European territories in due course. Consistent with the change in marketing strategy, the Group replaced directmarketers with experienced executives from the online gaming industry includingaffiliate marketing. In addition, an experienced Customer RelationshipManagement (CRM) team allows us to concentrate on the retention of existingcasino customers. The CRM expertise that was recruited in 2007, together withfurther recruits, will be employed to set up a new CRM centre during the secondquarter of 2008 to handle all aspects of customer service, currently provided byBoss Media. By bringing all areas of customer contact in-house Gaming VC willhave complete control over all areas of the customer interface. This shouldsignificantly enhance retention and maximise the lifetime value of customers. Group Financial Performance All • Net Revenue Gross Profit '000 2007 2006 2007 2006 Casino 38,164 38,365 28,685 28,377 Poker 3,420 2,208 2,409 1,038 Sports Betting 1,123 - 1,075 - Total 42,707 40,573 32,169 29,415 In 2007, the total gross wagers placed were €1.8 billion (2006: €1.6 billion)and net revenues were €42.7 million (2006: €40.6 million). A significantpropotion of the revenue growth is attributable to the commencement of sportsbetting during the year, which accounted for €1.1 million of the increase. Thegross profit for the financial year ended 31 December 2007 was €32.2 million(2006: €29.4 million). €1.1 million of the increased gross profit was generatedfrom the sportsbook activity started in 2007. Casino operating activities in2007 remained at a similar level and margin to 2006 and poker net revenuesincreased by 55% year-on-year. In both 2007 and the prior year less than 1% ofthe gross margin was earned from customers residing outside the European Unionand Gaming VC has never transacted any wagering activity by customers in the US. In the 2007 financial year there were no significant one-off jackpot winners onthe Group's slot machine games with associated "progressive" jackpots. Thetotal of the available jackpots at the end of December 2007 was €3.2 million(2006: €2.2million) with the largest available individual jackpot being €1.6million (2006: €1.3 million). The Group operating profit before exceptional items and share option charges forthe financial year ended 31 December 2007 increased by 28% to €17.3 million(2006: €13.5 million) after the deduction of distribution and administrativeexpenses. The Group incurred no exceptional charges in the year (2006: €41.5million) and generated an operating profit before financing of €16.5 million(2006: loss of €28.9 million). Distribution costs of €5.8 million (2006: €7.1 million) reflect the savingsgenerated due to the change in customer recruitment from direct mail toaffiliate marketing which has been partly offset by the additional costs of €1.0million for the 2007 sportsbook launch. The major items within the administrative expenses incurred (excludingamortisation) during the financial year are detailed below 2007 2006 •'000 •'000 Employment costs 2,886 3,434Travel 548 886Legal, accounting and tax 2,432 1,682All other costs 990 775 Total administrative expenses 6,856 6,777 Employment costs are analysed in note 2 to the financial results. Within the legal, accounting and tax costs for 2007 are expenses related to theacquisition of the Maltese operating licences in the year. The amortization of intangible assets is detailed in note 6 to the financialresults. This is a non-cash charge primarily to reflect the reduction ineconomic value over the useful lives of these assets. Net financing income for the financial year of €0.1 million (2006: net financingincome €0.1 million) are analysed in note 3 to the financial results. Themajority of Group revenues are in Euros, as are the majority of both the cost ofdistribution and administration. Due to the increased levels of business in both Malta and Italy projected in2008 compared to 2007, it is estimated that Gaming VC will increase its taxcharge from a current base level of 2% of operating profits to closer to 5% in2008. The final charge will depend on both the markets where growth is achievedand future developments on taxation in the domiciles Gaming VC operates in. In the reporting period the Group generated €19 million (2006: €17.9 million) ofcash flows from operating activities. After payment of the dividends totalling€12.2 million during the year, the Group's closing cash balance as at 31December 2007 was €15.9 million (2006: €9.4 million). Capital expenditure inthe financial year across the Group was • 0.6 million (2006: €0.3 million) whichprimarily reflects new equipment and software related to the setting up of theMaltese operations. A similar level of capital expenditure is envisaged in 2008relating to the acquisition of the Italian licence and the establishment of anin-house customer service centre. Dividends The Board is recommending a final dividend of €0.20 (c£0.16) giving a totaldistribution of €0.40 (c£0.29) for the current financial year (2006: €0.38 and£0.26). This final dividend will be paid on 30 May 2008 to all shareholders ofrecord at the close of business on 9 May 2008. Outlook During the first three months of the 2008 financial year trading has beenslightly ahead of expectations due to both resilience in the German casinobusiness and better than expected sportsbook performance. The total revenuesare 12% ahead of the same period in the previous year and 6% more fundedaccounts have been recruited. Compared to the fourth quarter of 2007 revenue is23% higher and there have been 3% more funded accounts recruited. We will continue to focus on maintaining German casino volumes with the reducedcost base and aggressively growing revenue outside Germany through newinitiatives including the Italian operation, bingo and through affiliatemarketing. We move into 2008 with an experienced team now in place and a clear strategicdirection that will continue the transformation of the business from a Germancasino supported by direct mail into a significant European gaming businessusing efficient online marketing for recruitment and industry leading CRM. Kenneth Alexander, Chief Executive22 April 2008 Consolidated Income StatementFor the year ended 31 December 2007 Year ended 31 December 2006 Year ended Before Goodwill Total 31 December goodwill impairment 2007 impairment In thousands of euro Note Revenue 1 42,707 40,573 - 40,573Cost of Sales (10,538) (11,158) - (11,158)Gross profit 32,169 29,415 - 29,415 Net operating expenses ( including (15,665) (25,075) (33,274) (58,349)exceptional items and share optioncharges) Operating profit before exceptional items 17,319 13,505 - 13,505and share option chargeShare option charge (815) (893) - (893)Exceptional items 6 - (8,272) (33,274) (41,546) Operating profit/(loss) before financing 16,504 4,340 (33,274) (28,934) EBITDA 19,480 15,536 - 15,536Depreciation (57) (35) - (35)Amortisation (2,919) (11,161) (33,274) (44,435) Financial income 3 459 163 - 163Financial expense 3 (332) (68) - (68)Net financing income 127 95 - 95 Profit/Loss before Tax 16,631 4,435 (33,274) (28,839)Income tax income 4 11 - - -Profit/(Loss) for the year 16,642 4,435 (33,274) (28,839) Profit/(Loss) per ordinary share Basic earnings per share (euro) 7 0.534 (0.93)Diluted earnings per share (euro) 7 0.534 (0.93) Consolidated statement of recognised income and expenseFor the year ended 31 December 2007 Year ended Year ended 31 December 31 December 2007 2006In thousands of euro Profit/(Loss) and total recognised income and expense for the year 16,642 (28,839) Consolidated Balance SheetAs at 31 December 2007 31 December 31 December 2007 2006In thousands of euro Note AssetsProperty, plant and equipment 5 521 56Intangible assets 6 55,724 58,548Deferred tax asset 11 -Total non-current assets 56,256 58,604 Trade receivables 3,021 1,892Other receivables and prepayments 1,274 417Cash and cash equivalents 15,859 9,407Total current assets 20,154 11,716Total assets 76,410 70,320 EquityIssued share capital 38,608 38,608Share premium 51,977 57,926Retained earnings (18,623) (29,853)Total equity attributable to equity holders of the parent 71,962 66,681 LiabilitiesIncome tax payable 4 18 18Trade and other payables 1,538 1,317Accrued expenses 2,892 1,101Withholding tax on dividends - 1,203Total current liabilities 4,448 3,639Total liabilities 4,448 3,639Total equity and liabilities 76,410 70,320 Consolidated statement of cashflowsFor the year ended 31 December 2007 Year ended Year ended 31 December 31 December 2007 2006In thousands of euro Note Cash flows from operating activitiesCash receipts from customers 41,578 40,833Cash paid to suppliers and employees (22,545) (22,934)Net cash from operating activities 19,033 17,899 Cash flows from investing activitiesInterest received 459 154Disposal of equipment 40 -Acquisition of property, plant and equipment 5 (562) (45)Acquisition of intellectual property 6 (95) (231)Net cash from investing activities (158) (122) Cash flows from financing activities Dividend paid (12,176) (15,612)Net cash from financing activities (12,176) (15,612) Net increase in cash and cash equivalents 6,699 2,165Cash and cash equivalents at beginning of the year 9,407 7,233Effect of exchange rate fluctuations on cash held (247) 9Cash and cash equivalents at end of the year 15,859 9,407 1 Segment reporting Segment information is presented in respect of the Group's business andgeographical segments. Business segments Based on risks and returns and transacting with customers, the managementconsiders that the Group's primary reporting format is by following threebusiness segments: • Casino;• Poker;• Sports Betting; Following the acquisition of new operating licences during the year, and theexpectation of additional licences being acquired in 2008 the managementreporting now places more emphasis on vertical product groups and majority ofdistribution costs being allocated on an activity basis to each businesssegment. The 2006 data has been restated on a consistent basis. Unallocated corporate expenses, assets and liabilities relate to the entity as awhole and cannot be allocated to individual segments. 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. Year ended 31 Casino Poker Sports Unallocated ConsolidatedDecember 2007 Betting Corporate• '000 Revenue 38,164 3,420 1,123 - 42,707 Gross Profit 28,685 2,409 1,075 - 32,169 Distribution costs 3,649 780 1,013 391 5,833Administrative expenses - - - 6,856 6,856 Profit Before Tax 24,927 1,629 62 (9,987) 16,631 Segmental assets 57,842 100 1,519 16,949 76,410Capital Expenditure 77 80 289 210 656 Year ended 31 Casino Poker Sports Unallocated ConsolidatedDecember 2006 Betting Corporate• '000 Revenue 38,365 2,208 - - 40,573 Gross Profit 28,377 1,038 - - 29,415 Distribution costs 5,841 385 - 911 7,137Administrative expenses - - - 6,777 6,777 Profit Before Tax 22,536 653 - (52,028) (28,839) Segmental assets 60,457 269 - 9,594 70,320Capital Expenditure 266 10 - - 276 Geographical analysis of net revenue Year ended 31 Dec 07 31 Dec 06 •'000 •'000 Germany 32,083 75.1% 30,330 74.8% Austria 6,297 14.7% 7,515 18.5% Italy 2,337 5.5% 130 0.3% Other 1,990 4.7% 2,598 6.4% Total Revenue 42,707 100% 40,573 100% Non current assets within Luxembourg total • nil (2006: • nil) and non-currentassets in other locations total • 56.2 million (2006: • 58.6 million). All segments are continuing operations. 2 Personnel expenses Year ended Year ended 31 December 31 December 2007 2006In thousands of euroWages and salaries 1,957 2,400 Compulsory social security contributions 65 154 Contributions to defined contribution plans 49 (13) Equity-settled transactions 815 893 2,886 3,434 3 Net financing costs Year ended Year ended 31 December 31 December 2007 2006In thousands of euroInterest income 459 154 Net foreign exchange gain through profit - 9 Financial income 459 163 Interest expenseInterest expenses and bank charges (85) (68)Net foreign exchange loss through profit (247) -Financial expenses (332) (68)Net financing income 127 95 4 Income tax expense Current tax Current tax for the current and prior periods is classified as a currentliability to the extent that it is unpaid. Amounts paid in excess of amountsowed are classified as a current asset. Year ended Year ended 31 December 31 December 2007 2006Recognised in the income statementIn thousands of euroCurrent tax expenseCurrent year - -Adjustments for prior period - - - -Deferred tax incomeOrigination and reversal of temporary differences (11) -Reduction in tax rate - -Benefits of tax losses recognises - - - -Total income tax (income)/expense in income statement (11) - Reconciliation of effective tax rate In thousands of euro Year ended Year ended 31 December 31 December 2007 2006 Profit/(loss) before tax 16,631 (28,839) Income tax using the domestic corporation tax rate 4,936 -Effect of tax rates in foreign jurisdictions (Rates decreased) (4,936) -Capital allowances for period in excess of depreciation (11) - (11) - A deferred tax asset was recognised as the Group considers that it more probablethan not that future taxable profits will be available against which the assetcould be utilised. 5 Property, plant and equipment Fixtures & Total Property Fittings Plant and EquipmentIn thousands of euro CostBalance at 1 January 2007 112 112Disposal (112) (112)Other acquisitions 562 562Balance at 31 December 2007 562 562 Depreciation and impairment lossesBalance at 1 January 2007 56 56Disposal (72) (72)Depreciation charge for the year 57 57Balance at 31 December 2007 41 41 Carrying amountsAt 31 December 2006 56 56At 31 December 2007 521 521 Capital expenditure related primarily to the setup of the Maltese office in theyear. 6 Intangible assets Goodwill Trade-marks Software Consulting Magazine Total licenceIn thousands of euroCostBalance at 1 January 2006 73,613 15,144 11,915 419 4,500 105,591Acquisitions - - 231 - - 231Balance at 31 December 2006 73,613 15,144 12,146 419 4,500 105,822 Balance at 1 January 2007 73,613 15,144 12,146 419 4,500 105,822 Acquisitions - - 95 - - 95At 31 December 2007 73,613 15,144 12,241 419 4,500 105,917 Amortisation and ImpairmentlossesBalance at 1 January 2006 - - 1,213 106 1,520 2,839Amortisation for the year - - 9,556 105 1,500 11,161Impairment loss for the year 33,274 - - - - 33,274Balance at 31 December 2006 33,274 - 10,769 211 3,020 47,274 Balance at 1 January 2007 33,274 - 10,769 211 3,020 47,274Amortisation for the year - - 1,335 104 1,480 2,919At 31 December 2007 33,274 - 12,104 315 4,500 50,193 Carrying amountsAt 31 December 2006 40,339 15,144 1,377 209 1,480 58,548At 31 December 2007 40,339 15,144 137 104 - 55,724 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 for the year and the accelerated amortisation on the softwarelicence in 2006 are recognised in the following line items in the incomestatement. Year ended Year ended 31 December 31 December 2006 2007In thousands of euroNet operating expenses 2,919 2,889Exceptional items - 8,272 Impairment tests for cash-generating units containing goodwill An Impairment Review was carried out at the year end of the Company's goodwillin the Casino operation. The carrying values of the assets were compared withthe recoverable amounts, these were determined with the assistance ofindependent valuers. It was viewed that the goodwill was not impaired. The following units have significant carrying amounts of goodwill: 31 December 31 December 2006 2007In thousands of euro Casino operation: GVC Corporation II B.V. 40,339 40,339 7 Earnings per share The calculation of basic earnings per share at 31 December 2007 was based on theprofit attributable to ordinary shareholders of €16,641,810 (2006: loss of€28,838,575) and a weighted average number of ordinary shares outstanding duringthe year ended 31 December 2007 of 31,135,762 (2006: 31,135,762), calculated asfollows: Profit attributable to ordinary shareholders Year ended Year ended 31 December 31 December 2006 2007In thousands of euroProfit/(Loss) attributable to ordinary shareholders 16,642 (28,839)Exceptional item - 41,546Profit before exceptional item 16,642 12,707 Weighted average number of ordinary shares Year ended Period ended 31 December 31 December 2006 2007 Issued ordinary shares beginning of the year 31,135,762 31,135,762 Weighted average number of ordinary shares at end of the year 31,135,762 31,135,762 Earnings per share Year ended Year ended 31 December 31 December 2006 2007 In euroBasic earnings per share 0.534 (0.926) Basic earnings per share before exceptional items 0.534 0.408 Diluted earnings per share The calculation of diluted earnings per share at 31 December 2007 was based onthe profit attributable to ordinary shareholders of €16,641,810 (2006: loss of€28,838,575) and a weighted average number of ordinary shares outstanding duringthe year ended 31 December 2007 of 31,135,762 (2006: 31,135,762), calculated asfollows: Profit attributable to ordinary shareholders (diluted) Year ended Year ended 31 December 31 December 2007 2006 In thousands of euro Profit/(Loss) attributable to ordinary shareholders (diluted) 16,642 (28,839)Exceptional item - 41,546Profit before exceptional item 16,642 12,707 Weighted average number of ordinary shares (diluted) Year ended Year ended 31 December 31 December 2006 2007 Weighted average number of ordinary shares at end of the year 31,135,762 31,135,762Effect of share options on issue - -Weighted average number of ordinary shares (diluted) at end of year 31,135,762 31,135,762 Diluted earnings per share Year ended Year ended 31 December 31 December 2006 2007 Diluted earnings per share 0.534 (0.926)Diluted earnings per share before exceptional items 0.534 0.408 Report and Accounts Copies of the annual report and accounts will be posted to shareholders shortlyand will be available at www.gamingvc.com Annual General Meeting The annual general meeting of the Company will be held at the registered office,73 Cote d'Eich, L-1450, Luxembourg on 20 May 2008 at 10:00 am. Notice of, andfurther details in relation to the annual general meeting of the Company will beposted out with the report and accounts as detailed above. -Ends- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
GVC.L