Half-year Report

JPJ Group plc

(formerly Jackpotjoy plc)

Results for the six months ended 30 June 2018

Total gaming revenue up 10% year-on-year, performance in line with expectations

Shares transferred to a Premium Listing on LSE

LONDON, 14 August 2018 - JPJ Group plc (LSE: JPJ) (the 'Group'), a leading global online bingo-led operator, today announces results for the six months ended 30 June 2018.

Financial summary

Financial highlights for first six months

· Good financial performance 

o Total gaming revenue rose 10% year-on-year (12% excluding social)

o Adjusted EBITDA1 decreased 4% year-on-year, reflecting the planned increase in marketing costs and the application of point of consumption tax to gross gaming revenue ('POC2') in the UK from Q4 2017

o Adjusted net income1 increased 7% year-on-year, principally due to a 37% decrease in interest expense

· Strong ongoing cash generation

o Operating cash flow of £49.0 million, an increase of 7% year-on-year, and 65p of operating cash flow per share2

o Adjusted EBITDA1 to cash conversion of 86%; free cash flow[3] of £47.8 million

o Adjusted net debt[4] of £362.9 million (31 December 2017: £387.3 million) and adjusted net leverage ratio[5] of 3.41x (31 December 2017: 3.57x)

· Final Botemania earn-out payment of £58.5 million and a £5.0 million milestone payment made in June 2018 out of existing cash resources

· Signed a share purchase agreement for the sale of the social business for cash consideration of £18.1 million. Post completion, the Group will be exclusively focussed on its core activity of real money gaming and the disposal will represent another positive step in reducing net leverage

· Performance in line with expectations; outlook for the Group remains positive for the full year

Operational highlights

· Continued improvement in core KPIs[6] year-on-year:

o Average Active Customers per Month6 grew to 259,861 in the twelve months to 30 June 2018, an increase of 7% year-on-year

o Average Real Money Gaming Revenue per Month6 grew to £25.0 million, an increase of 15% year-on-year

o Monthly Real Money Gaming Revenue per Average Active Customer6 of £96, an increase of 8% year-on-year

Business segments highlights for H1 2018

· Jackpotjoy[7] (72% of Group revenue) - Total gaming revenue growth of 2% year-on-year, reflecting strong growth in Botemania and Starspins (25% of segment revenues) and the impact of a reduction in social gaming revenue; Adjusted EBITDA1 decreased 9% due to the impact of higher distribution costs from the UK TV advertising campaign and the introduction of POC2 on gross gaming revenue in the UK in Q4 2017

· Vera&John (28% of Group revenue) - Total gaming revenue growth of 37% year-on-year, 34% on a constant currency basis; Adjusted EBITDA1 increased 31% due to strong organic revenue growth[8] partially offset by higher marketing spend and increased gaming tax

Neil Goulden, Executive Chairman, commented:

"The first half of the year has seen a continuation of the strong momentum that JPJ Group plc has reported since listing in the UK in January 2017. Group revenue grew 10% with Average Active Customers per Month6 also increasing 7%, driven by good growth across our global footprint, in particular in Spain and a number of relatively new markets. As expected, Adjusted EBITDA1 was down 4% year-on-year, but is expected to return to growth in the second half of the year following the conclusion of the TV advertising campaigns and as we pass the anniversary of the introduction of the POC2 on gross gaming revenue in the UK."

"There were also several significant milestones for the Group during the period. In June, we announced the intention to move to a Premium Listing on the London Stock Exchange ('LSE') which was effective from 26 July 2018. We believe this provides us with an appropriate platform for continued growth, as well as exposure to a wider investor base and enhanced liquidity in our shares. In addition, also in June, we made the final earn-out payment to Gamesys in relation to Botemania, which was comfortably met from existing cash balances, and today we announced that we have signed a share purchase agreement for the sale of the social business enabling us to focus solely on our core activity of real money gaming. Looking ahead, I am confident that the Group's strong cash flow generation provides us with the opportunity to create additional value for shareholders as we continue to deleverage."

Outlook

Profitability in the first six months of the financial year has been as expected and we are comfortable with market expectations for FY 2018. The Group's ongoing strong free cash flow generation is enabling us to rapidly deleverage, with net debt reduction to below 2.5x net debt/EBITDA remaining a key strategic target and the point at which we can consider options to return cash to shareholders. Significant growth opportunities continue to exist in global online gaming markets and we are confident that we are well-placed to take advantage of this backdrop.

Conference call

A conference call for analysts and investors will be held today at 1.00pm BST / 8.00am ET. To participate, interested parties are asked to dial +44 (0) 20 3003 2666 or +1 800 608-0547, or for US shareholders +1 866 966-5335, 10 minutes prior to the scheduled start of the call using the reference "JPJ" when prompted. A replay of the conference call will be available for 30 days by dialling +44 (0) 20 8196 1998 or +1 866 583-1035 and using reference 9762655#. A transcript will also be made available on JPJ Group plc's website at http://www.jpjgroup.com/investors

EXECUTIVE CHAIRMAN'S REVIEW

Overview and summary of results

JPJ Group plc has had a solid first half in the current financial year, continuing the strong momentum the company has demonstrated since listing on the London Stock Exchange in 2017. During the six-month period, we increased Group total gaming revenue by 10% and grew our customer base by 7%, to 259,861 Average Active Customers per Month6. Operating cash flow also remained strong, increasing by 7% year-on-year, and representing an Adjusted EBITDA1 cash conversion rate of 86%.

The good performance across the Group was driven by strong growth in Botemania in Spain and Starspins in the UK. Vera&John also performed strongly, increasing total gaming revenue by 37%. Total gaming revenue growth in our Jackpotjoy7 segment did slow in Q2 and partly reflects the impact of lower revenues in social gaming where high CPAs (cost per acquisition) shifted the focus to profitability. The introduction of a range of responsible gambling initiatives in the UK was also a feature of H1 and meant that good growth in actives was to a degree offset by lower UK average revenue per customer[9]. 

As previously highlighted and expected, Adjusted EBITDA1 was negatively impacted in the first half of the year by higher distribution costs from the UK and Spanish TV advertising campaigns and the introduction of POC2 on gross gaming revenue in the UK in Q4 2017, resulting in a 4% year-on-year decline.

Significant milestones achieved during the period

There were several significant milestones for the Group during the period. In June we announced the intention to transfer to a Premium Listing on the LSE, providing us with an appropriate platform for continued growth, as well as exposure to a wider investor base and enhanced liquidity in our shares.

Also in June, we paid our final earn-out payment of £58.5 million to the Gamesys group in relation to Botemania, comfortably met from existing cash balances, which now stand at £29.5 million at 30 June 2018. The Group will make two further milestone payments of no more than £10.0 million in aggregate should the Jackpotjoy7 brands attain certain EBIT targets in the years to March 2019 and March 2020.

Additionally, we were pleased to announce the appointment of Andria Vidler as a non-executive director to the Board at our AGM in June. She will also join the Group's Remuneration Committee. As the chief executive of Centaur Media, a leading business information group, Andria brings a wealth of experience in developing businesses and has a strong track record of creating digital solutions to engage with consumers and drive loyalty.

Outlook for the second half

Looking ahead to the second half of the year, we expect an improvement in Adjusted EBITDA1 growth year-on-year following the conclusion of the successful TV advertising campaigns and as we pass the anniversary of the introduction of the UK POC2 gross gaming revenue tax. The Group will continue to focus on generating strong cash flow and will use this to deleverage towards and below 2.5x net debt/EBITDA. At this level, our strong cash flow provides us with opportunities to return cash to shareholders.

Conclusion and strategy update

Having delivered consistently strong results since our listing and given continued deleverage of the Group's balance sheet, we intend to announce an update at our 2018 Full Year Results next March that will outline our plans to return cash to shareholders.

As an organisation, we remain committed to delivering a best-in-class customer experience across all verticals that is underpinned by a robust approach to responsible gaming. Additionally, I believe securing a Premium Listing for JPJ Group plc is further proof that we are now a business that operates to the highest standards of corporate governance, and one that is set to continue delivering a fun and safe environment for our customers while generating value for our shareholders.

Neil Goulden

Executive Chairman

Note Regarding Non-IFRS financial measures

The following non-IFRS definitions are used in this release because management believes that they provide additional useful information regarding ongoing operating and financial performance. Readers are cautioned that the definitions are not recognised measures under IFRS, do not have standardised meanings prescribed by IFRS, and should not be considered in isolation or construed to be alternatives to revenues and net income/(loss) and comprehensive income/(loss) for the period determined in accordance with IFRS or as indicators of performance, liquidity or cash flows. Our method of calculating these measures may differ from the method used by other entities. Accordingly, our measures may not be comparable to similarly titled measures used by other entities or in other jurisdictions.

Adjusted EBITDA, as defined by the Group, is income before interest expense including accelerated debt costs and other accretion (net of interest income), income taxes, amortisation and depreciation, share-based compensation, severance costs, realised loss on cross currency swap, fair value adjustments on contingent consideration, transaction related costs, foreign exchange (gain)/loss, and gain on sale of intangible assets. Management believes that Adjusted EBITDA is an important indicator of the issuer's ability to generate liquidity to service outstanding debt and fund acquisition milestone payments and uses this metric for such purpose. The exclusion of share-based compensation eliminates non-cash items and the exclusion of realised loss on cross currency swap, fair value adjustments on contingent consideration, severance costs, transaction related costs, foreign exchange (gain)/loss, and gain on sale of intangible assets eliminates items which management believes are either non-operational and/or non-routine.

Adjusted Net Income, as defined by the Group, means net income plus or minus items of note that management may reasonably quantify and believes will provide the reader with a better understanding of the Group's underlying business performance. Adjusted Net Income is calculated by adjusting net income for accretion on financial liabilities, amortisation of acquisition related purchase price intangibles (including non-compete clauses), share-based compensation, severance costs, realised loss on cross currency swap, fair value adjustments on contingent consideration, transaction related costs, foreign exchange (gain)/loss and gain on sale of intangible assets. The exclusion of accretion on financial liabilities and share-based compensation eliminates the non-cash items and the exclusion of amortisation of acquisition related purchase price intangibles (including non-compete clauses), realised loss on cross currency swap, fair value adjustments on contingent consideration, severance costs, transaction related costs, foreign exchange (gain)/loss, and gain on sale of intangible assets eliminates items which management believes are non-operational and/or non-routine. Adjusted Net Income is considered by some investors and analysts for the purpose of assisting in valuing a company.

Diluted Adjusted Net Income per share, as defined by the Group, means Adjusted Net Income divided by the diluted weighted average number of shares outstanding, calculated using the IFRS treasury method, for the applicable period. Management believes that Diluted Adjusted Net Income per share assists with the Group's ability to analyse Adjusted Net Income on a diluted weighted average per share basis. 

Cautionary Note Regarding Forward-Looking Information

This release contains certain information and statements that may constitute 'forward-looking information' (including future-oriented financial information and financial outlooks) within the meaning of applicable laws, including Canadian securities laws. Often, but not always, forward-looking information can be identified by the use of words such as 'plans', 'expects', 'estimates', 'projects', 'predicts', 'targets', 'seeks', 'intends', 'anticipates', 'believes', or 'is confident of' or the negative of such words or other variations of or synonyms for such words, or state that certain actions, events or results 'may', 'could', 'would', 'should', 'might' or 'will' be taken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause actual results, performance, achievements or developments to be materially different from those anticipated by the Group and expressed or implied by the forward-looking statements. Forward-looking information contained in this release includes, but is not limited to, statements with respect to the Group's future financial performance, the future prospects of the Group's business and operations, the Group's growth opportunities and the execution of its growth strategies, the Group's milestone payment obligations, the future performance of the Jackpotjoy segment, the possibility of the Group drawing on the Revolving Facility, and the statements made under the heading 'Outlook' of this release. Certain of these statements may constitute a financial outlook within the meaning of Canadian securities laws. These statements reflect the Group's current expectations related to future events or its future results, performance, achievements or developments, and future trends affecting the Group. All such statements, other than statements of historical fact, are forward-looking information. Such forward-looking information is based on a number of assumptions which may prove to be incorrect, including, but not limited to, the ability of the Group to secure, maintain and comply with all required licences, permits and certifications to carry out business in the jurisdictions in which it currently operates or intends to operate; governmental and regulatory actions, including the introduction of new laws or changes in laws (or the interpretation thereof) related to online gaming; general business, economic and market conditions (including market growth rates and the withdrawal of the UK from the European Union); the Group operating in foreign jurisdictions; the competitive environment; the expected growth of the online gaming market and potential new market opportunities; anticipated and unanticipated costs; the protection of the Group's intellectual property rights; the Group's ability to successfully integrate and realise the benefits of its completed acquisitions, the amount of expected milestone payments required to be made; the Group's continued relationship with the Gamesys group and other third parties; the ability of the Group to service its debt obligations; and the ability of the Group to obtain additional financing, if, as and when required. Such statements could also be materially affected by risks relating to the lack of available and qualified personnel or management; stock market volatility; taxation policies; competition; foreign operations; the Group's limited operating history and the Group's ability to access sufficient capital from internal or external sources. However, whether actual results and developments will conform with the expectations and predictions contained in the forward-looking information is subject to a number of risks and uncertainties, many of which are beyond the Group's control, and the effects of which can be difficult to predict, including that the assumptions outlined above may not be accurate. For a description of additional risk factors, see Schedule 'A' attached to JPJ Group plc's most recently filed annual information form. Although the Group has attempted to identify important factors that could cause actual results, performance, achievements or developments to differ materially from those described in forward-looking statements, there may be other factors that cause actual results, performance, achievements or developments not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results, performance, achievement or developments are likely to differ, and may differ materially, from those expressed in or implied by the forward-looking information contained in this release. Accordingly, readers should not place undue reliance on forward-looking information. While subsequent events and developments may cause the Group's expectations, estimates and views to change, the Group does not undertake or assume any obligation to update or revise any forward-looking information, except as required by applicable securities laws. The forward-looking information contained in this release should not be relied upon as representing the Group's expectations, estimates and views as of any date subsequent to the date of this release. The forward-looking information contained in this release is expressly qualified by this cautionary statement. Investors should not place undue reliance on forward-looking statements as the plans, intentions or expectations upon which they are based might not occur.

Any future-oriented financial information or financial outlooks in this release are based on certain assumptions regarding expected growth, results of operations, performance, and business prospects and opportunities. While the Group considers these assumptions to be reasonable, based on information currently available, they may prove to be incorrect. These risks, uncertainties and other factors include, but are not limited to: credit, market, currency, operational, liquidity and funding risks, including changes in economic conditions, and interest rates or tax rates. 

Financial Review

Total gaming revenue

The Group's total gaming revenue during the three months ended 30 June 2018 consisted of:

· £56.3 million in revenue earned from Jackpotjoy's7 operational activities. 

· £24.2 million in revenue earned from Vera&John's operational activities.

The Group's total gaming revenue during the three months ended 30 June 2017 consisted of:

· £57.8 million in revenue earned from Jackpotjoy's7 operational activities. 

· £17.4 million in revenue earned from Vera&John's operational activities.

The increase in total gaming revenue for the three months ended 30 June 2018 in comparison with the three months ended 30 June 2017 relates primarily to organic growth8 of the Vera&John segment, where total gaming revenue increased by 39%.

The Group's total gaming revenue during the six months ended 30 June 2018 consisted of:

· £115.8 million in revenue earned from Jackpotjoy's7 operational activities. 

· £45.4 million in revenue earned from Vera&John's operational activities.

The Group's total gaming revenue during the six months ended 30 June 2017 consisted of:

· £113.5 million in revenue earned from Jackpotjoy's7 operational activities. 

· £33.1 million in revenue earned from Vera&John's operational activities.

The increase in total gaming revenue for the six months ended 30 June 2018 in comparison with the six months ended 30 June 2017 relates primarily to organic growth8 of the Vera&John and Jackpotjoy7 segments, where total gaming revenue increased by 37% and 2%, respectively.

Costs and expenses

Distribution costs

Selling and marketing expenses consist of payments made to affiliates and general marketing expenses related to each brand. Licensing fees consist of the fees for the Jackpotjoy7 segment to operate on its platforms and game suppliers' fees paid by both, Vera&John and Jackpotjoy7 segments. Gaming taxes largely consist of point of consumption taxes ('POC'), payable in the regulated jurisdictions that the Group operates in. Variance in gaming taxes from prior periods relates to a 15% general betting duty on all free or discounted online bets ('POC2'), which came into effect in the UK in Q4 2017. Processing fees consist of costs associated with using payment providers and include payment service provider transaction and handling costs, as well as deposit and withdrawal fees. With the exception of selling and marketing expenses, distribution costs tend to be variable in relation to revenue.

The increase in distribution costs for the three and six months ended 30 June 2018 compared to the same periods in 2017 is mainly due to higher revenues achieved and increased selling and marketing spending in the Jackpotjoy7 and Vera&John segments.

Administrative costs

Compensation and benefits costs consist of salaries, wages, bonuses, directors' fees, benefits and share-based compensation expense. The increase in these expenses for the three and six months ended 30 June 2018 compared to the same periods in 2017 is due to additional staff hired in these periods as well as bonus accruals.

Professional fees consist mainly of legal, accounting and audit fees. These costs remained relatively flat in the three and six months ended 30 June 2018 compared to the same periods in 2017.

General and administrative expenses consist of items, such as rent and occupancy, travel and accommodation, insurance, listing fees, technology and development costs, and other office overhead charges. These costs also remained relatively flat in the three and six months ended 30 June 2018 compared to the same periods in 2017.

Amortisation and depreciation consists of amortisation of the Group's intangible assets and depreciation of the Group's tangible assets over their useful lives. The increase in amortisation and depreciation for the six months ended 30 June 2018 is due to the non-compete clauses for which amortisation started in Q2 2017.

Transaction related costs

Transaction related costs consist of legal, professional, due diligence, other direct costs/fees associated with transactions and acquisitions contemplated or completed, costs associated with the Group's Premium Listing, and the refinancing of the Group's external debt. Q1 2017 transaction related costs also included costs associated with the UK strategic review and implementation of UK-centred strategic initiatives, including the listing of the Group on the London Stock Exchange.

Severance costs

Severance costs during the six months ended 30 June 2018 relate to personnel redundancies resulting from internal restructuring.

Business unit results

Jackpotjoy7

Total gaming revenue for the Jackpotjoy7 segment for the three months ended 30 June 2018 was 3% lower than in the same period in 2017 due to declines in the Mandalay and social gaming brands. Collectively they accounted for 10% of this segment's revenue. These decreases were partially offset by increases in Starspins and Botemania brands, which accounted for 25% of this segment's revenue.

Total gaming revenue for the six months ended 30 June 2018 was 2% higher than in the same period in 2017 due to organic growth8 led by increases in the Starspins and Botemania brands. Collectively, they accounted for 25% of this segment's revenue.

The increase in distribution costs for the three and six months ended 30 June 2018 is driven by costs from the segment's TV marketing campaigns, as well as an incremental gaming tax expense, which relates to tax on bonuses through UK POC2 tax introduced in Q4 2017.

Vera&John

Total gaming revenue for the Vera&John segment for the three and six months ended 30 June 2018 increased by 39% and 37%, respectively, compared to the same periods in 2017 due to a combination of organic growth8 and period-over-period GBP to EUR exchange rate movement. On a constant currency basis, revenue increased by 36% and 34% in the three and six months ended 30 June 2018 compared to the same periods in 2017. Constant currency amounts are calculated by applying the same EUR to GBP average exchange rates to both current and prior year comparative periods.

Distribution costs increased by 42% and 54%, respectively, for the three and six months ended 30 June 2018 compared to the same periods in 2017 as a result of higher marketing spending in the current period. The increase was further driven by higher gaming tax due to increased revenue in regulated jurisdictions compared to the prior period.

The increase in administrative costs for the six months ended 30 June 2018 compared to the same period in 2017 was mainly driven by increases in personnel costs as the segment continues to grow.

Unallocated Corporate Costs

Adjusted EBITDA1 on Unallocated Corporate Costs increased from (£2.5) million to (£2.3) million in the three months ended 30 June 2018 as compared to the three months ended 30 June 2017. The variance mainly relates to a £0.1 million decrease in general and administrative overhead costs and a £0.1 million decrease in professional fees.

Adjusted EBITDA1 on Unallocated Corporate Costs was flat for the six months ended 30 June 2018 compared to the six months ended 30 June 2017.

Net loss on Unallocated Corporate costs decreased from £20.5 million to £9.3 million in the three months ended 30 June 2018 as compared to the three months ended 30 June 2017. This decrease is primarily related to lower interest expense incurred as a result of the debt refinance that took place in Q4 2017. The decrease in net loss can further be attributed to the fact that there were no fair value adjustments on contingent consideration in the current period as the earn-out period ended in Q1 2018.

Net loss on Unallocated Corporate Costs decreased from £55.2 million to £30.5 million in the six months ended 30 June 2018 as compared to the six months ended 30 June 2017. This decrease is primarily related to lower interest expense incurred as a result of the debt refinance that took place in Q4 2017. The decrease in net loss can further be attributed to the fact that there were no fair value adjustments on contingent consideration in Q2 2018 as the earn-out period ended in Q1 2018.

Costs included in net loss which are excluded from the Adjusted EBITDA1 measure are discussed on page 6 of this release.

Key performance indicators

Average Active Customers is a key performance indicator used by management to assess real money customer acquisition and real money customer retention efforts of each of the Group's brands. The Group defines Average Active Customers ('Average Active Customers') as being real money customers who have placed at least one bet in a given month. 'Average Active Customers per Month' is the Average Active Customers per month, averaged over a twelve-month period. While this measure is not recognised by IFRS, management believes that it is a meaningful indicator of the Group's ability to acquire and retain customers.

Total Real Money Gaming Revenue and Average Real Money Gaming Revenue per Month are key performance indicators used by management to assess revenue earned from real money gaming operations of the business. The Group defines Total Real Money Gaming Revenue ('Total Real Money Gaming Revenue') as revenue less revenue earned from affiliate websites and social gaming. The Group defines Average Real Money Gaming Revenue per Month ('Average Real Money Gaming Revenue per Month') as Real Money Gaming Revenue per month, averaged over a twelve-month period. While these measures are not recognised by IFRS, management believes that they are meaningful indicators of the Group's real money gaming operational results.

Monthly Real Money Gaming Revenue per Average Active Customer is a key performance indicator used by management to assess the Group's ability to generate Real Money Gaming Revenue on a per customer basis. The Group defines Monthly Real Money Gaming Revenue per Average Active Customer ('Monthly Real Money Gaming Revenue per Average Active Customer') as being Average Real Money Gaming Revenue per Month divided by Average Active Customers per Month. While this measure is not recognised by IFRS, management believes that it is a meaningful indicator of the Group's ability to generate Total Real Money Gaming Revenue. 

(1)Total Real Money Gaming Revenue for the twelve months ended 30 June 2018 consists of total revenue less revenue earned from affiliate websites and social gaming revenue of £19.4 million (30 June 2017 - £24.2 million).

Monthly Real Money Gaming Revenue per Average Active Customer6 increased by 8% year-over-year which is in line with the Group's overall customer acquisition and retention strategy. 

Principal risks and uncertainties

Details of the Group's principal risks were set out on pages 20 to 25 of the Annual Report for the year ended 31 December 2017 (the '2017 Annual Report'). As at 30 June 2018, the directors have reviewed the Group's risk profile in the context of current market conditions and the outlook for the remaining six months of the financial year. In addition, they have reconsidered previous statements made on risk appetite, risk governance and internal controls and do not consider there to be any significant changes since the 2017 Annual Report.

Directors' responsibility statement in respect of the half yearly financial report

For the six months ended 30 June 2018

We confirm to the best of our knowledge that:

a) The condensed interim set of financial statements has been prepared in accordance with IAS 34 ̶ Interim Financial Reporting as adopted by the European Union;

b) The Interim Report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c) The Interim Report includes a fair review of the information required by DTR 4.2.8 R (disclosure of related parties' transactions and changes therein).

Signed by order of the Board of Directors

Neil Goulden

Executive Chairman

14 August 2018

Independent review report to JPJ Group plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the three and six months ended 30 June 2018 which comprises the Interim Condensed Consolidated Statement of Comprehensive Income, Interim Condensed Consolidated Balance Sheet, Interim Condensed Consolidated Statement of Changes in Equity, Interim Condensed Consolidated Statement of Cash Flows and the related notes.

We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim financial report for the three and six months ended 30 June 2018 is the responsibility of and has been approved by the directors. With regard to the six months ended 30 June 2018, the directors are responsible for preparing the interim financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as issued by the International Accounting Standards Board and International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement, and, with regard to the six months ended 30 June 2018, to assist the company in meeting its responsibilities in respect of interim financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'' as issued by the International Auditing and Assurance Standards Board and International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing or International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the three and six months ended 30 June 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as issued by the International Accounting Standards Board, International Accounting Standard 34, as adopted by the European Union, and, in respect of the six months ended 30 June 2018, the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

BDO LLP

Chartered Accountants

London

14 August 2018

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes

SUPPLEMENTARY NOTES FOR THREE AND SIX MONTHS ENDED 30 JUNE 2018

1. Corporate information

JPJ Group plc, formerly Jackpotjoy plc, is an online gaming holding company that was incorporated under the Companies Act 2006 (England and Wales) on 29 July 2016. On 27 June 2018, Jackpotjoy plc changed its name to JPJ Group plc. JPJ Group plc's registered office is located at 35 Great St. Helen's, London, United Kingdom. Unless the context requires otherwise, use of 'Group' in these accompanying notes means JPJ Group plc and its subsidiaries, as applicable.

The Group currently offers bingo, casino and other games to its customers using the Jackpotjoy, Starspins, Botemania, Vera&John, Costa Bingo, InterCasino, and other brands. The Jackpotjoy, Starspins, and Botemania brands operate off proprietary software owned by the Gamesys group, the Group's principal B2B software and support provider. The Vera&John and InterCasino brands operate off proprietary software owned by the Group. The Costa Bingo and related brands operate off the Dragonfish platform, a software service provided by the 888 group.

These Unaudited Interim Condensed Consolidated Financial Statements were authorised for issue by the Board of Directors of JPJ Group plc on 14 August 2018.

2. Basis of preparation

Basis of presentation

These Unaudited Interim Condensed Consolidated Financial Statements have been prepared by management on a going concern basis, are presented in compliance with International Accounting Standard ('IAS') 34 - Interim Financial Reporting, and have been prepared on a basis consistent with the accounting policies and methods used and disclosed in JPJ Group plc's consolidated financial statements for the year ended 31 December 2017 (the 'Annual Financial Statements'), except as described below. Certain information and disclosures normally included in the Annual Financial Statements prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, and in accordance with IFRS as issued by the International Accounting Standards Board, have been omitted or condensed. 

These Unaudited Interim Condensed Consolidated Financial Statements should be read in conjunction with the Annual Financial Statements. All defined terms used herein are consistent with those terms as defined in the Annual Financial Statements.

These Unaudited Interim Condensed Consolidated Financial Statements have been prepared under the historical cost convention, other than for the measurement at fair value of the Group's Interest Rate Swap (as defined in note 10), contingent consideration, certain hedged loan instruments, and loan receivable.

On 1 February 2017, having been approved in the High Court, the Group's share premium was cancelled. Accordingly, the balance has been reallocated within equity reserves to the Group's retained earnings account. This is now shown in the Unaudited Interim Condensed Consolidated Statements of Changes in Equity as an adjustment to the balances on the Group's equity reserves at 30 June 2017. There is no impact on the income statement, earnings per share or total equity. 

The comparative financial information for the year ended 31 December 2017 in these Unaudited Interim Condensed Consolidated Financial Statements does not constitute statutory accounts for that year. The auditors' report on the statutory accounts for the year ended 31 December 2017 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.

Basis of consolidation

JPJ Group plc's Unaudited Interim Condensed Consolidated Financial Statements consolidate the parent company and all of its subsidiaries. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All transactions and balances between companies are eliminated on consolidation.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which JPJ Group plc obtains control, and continue to be consolidated until the date that such control ceases.

Intercompany transactions, balances, income and expenses on transactions between JPJ Group plc's subsidiaries are eliminated. Profit and losses resulting from intercompany transactions that are recognised in assets are also eliminated.

3. Summary of significant accounting policies

For a description of the Group's significant accounting policies, critical accounting estimates and assumptions, and related information see note 3 to the Annual Financial Statements. Other than as described below, there have been no changes to the Group's significant accounting policies or critical accounting estimates and assumptions during the six months ended 30 June 2018.

Financial instruments

Effective from 1 January 2018, the Group adopted IFRS 9 - Financial Instruments: Recognition and Measurement ('IFRS 9') to account for the Gaming Realms Transaction (as defined in note 9). As a result, the Group no longer separates the embedded derivative from its host contract and the entire asset is measured at fair value through profit or loss. The adoption of IFRS 9 resulted in balances shown as other long-term receivables and other long-term assets at 31 December 2017 being combined into a single figure and shown as other long-term receivables at 30 June 2018.

Hedge accounting

The Group elected to use hedge accounting for the purposes of recognising realised and unrealised gains and losses associated with the Interest Rate Swap, in accordance with guidance provided in IFRS 9.

IFRS 9 permits hedge accounting under certain circumstances provided that the hedging relationship is:

· formally designated and documented, including the entity's risk management objective and strategy for undertaking the hedge, identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the entity will assess the hedging instrument's effectiveness;

· expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk as designated and documented, and effectiveness can be reliably measured; and

· assessed on an ongoing basis and determined to have been highly effective.

Based on the Group's analysis of the requirements outlined above, it was concluded that the Interest Rate Swap meets all the necessary criteria and qualifies for use of hedge accounting. The Interest Rate Swap was designated as a cash flow hedge.

Impairment policy

In accordance with IFRS 9, the Group reviewed its impairment policy and concluded that no impairment provision on its financial instruments, as discussed in note 15, is required. The Group uses the credit loss model to assess impairment.

Revenue recognition

Effective from 1 January 2018, the Group adopted IFRS 15 - Revenue from Contracts with Customers ('IFRS 15'), which replaces IAS 18 - Revenue.  Applying this standard did not impact the Group's financial information as the Group's policy was already in compliance with the key principles outlined in IFRS 15.

4. Segment information

In March 2018, the Group determined that its reportable operating segments had changed such that the Mandalay segment was aggregated with the Jackpotjoy segment with effect from 1 January 2018, as Mandalay no longer met the criteria for a reportable operating segment, set out in IFRS 8 - Operating Segments. Mandalay was therefore aggregated with the Jackpotjoy segment consistent with the Group's other third-party platform hosted operations and all 2017 comparative segment figures have been restated accordingly.

The following tables present selected financial results for each segment and the Unallocated Corporate Costs:

Three months ended 30 June 2018:

Six months ended 30 June 2018:

Three months ended 30 June 2017:

Six months ended 30 June 2017:

The following table presents net assets per segment and Unallocated Corporate Costs as at30 June 2018:

The following table presents net assets per segment and Unallocated Corporate Costs as at 31 December 2017:

During the six months ended 30 June 2018 and 2017, substantially all of the revenue earned by the Group was in Europe. Revenue was earned from customers located in the following locations: United Kingdom - 60% (six months ended 30 June 2017 - 64%), Sweden - 8% (six months ended 30 June 2017 - 10%), rest of Europe - 17% (six months ended 30 June 2017 - 13%), rest of world - 15% (six months ended 30 June 2017 - 13%).

Non-current assets by geographical location as at 30 June 2018 were as follows: Europe £85.1 million (31 December 2017 - £87.7 million) and Americas £481.9 million (31 December 2017 - £508.2 million).

5. Costs and expenses

6. Interest income/expense

7. Earnings per share

The following table presents the calculation of basic and diluted earnings per share:

1 In the case of a net loss, the effect of share options potentially exercisable on diluted loss per share will be anti-dilutive; therefore, basic and diluted net loss per share will be the same.

2 An assumed conversion of convertible debentures had an anti-dilutive effect on loss per share for the six months ended 30 June 2018 and the three and six months ended 30 June 2017.

3 Basic income/(loss) per share is calculated by dividing the net income/(loss) attributable to common shareholders by the weighted average number of shares outstanding during the period.

4 Diluted income per share is calculated by dividing the net income attributable to ordinary shareholders by the weighted average number of shares outstanding during the period and adjusted for the number of potentially dilutive share options and contingently issuable instruments.

8. Trade and other receivables

Trade and other receivables consist of the following items:

9. Other long-term receivables

On 29 November 2017, the Group entered into a secured convertible loan and services agreement with Gaming Realms plc ('Gaming Realms') (the 'Gaming Realms Transaction').

Key terms of the Gaming Realms Transaction include: (a) five-year secured convertible loan to Gaming Realms in the principal amount of £3.5 million with an interest rate of 3 month UK LIBOR plus 5.5% per annum; (b) conversion option that allows the Group to convert some or all of the loan (in tranches of £0.5 million) into ordinary shares of Gaming Realms after 12 months; (c) a ten-year services agreement ('Services Agreement') for the supply by Gaming Realms of some of its content to websites of the Group's choosing free-of-charge. The value of the free-of-charge services provided under this Services Agreement will be capped at £3.5 million over the first five years of the agreement, at which point the provision of free-of-charge services will cease.

In connection with this transaction, the Group recognised a long-term receivable of £3.5 million for the secured convertible loan, in accordance with IFRS 9, based on the calculation of fair value at 30 June 2018, as explained in note 15.

10. Interest rate swap

On 16 February 2018, JPJ Group plc entered into an interest rate swap agreement (the 'Interest Rate Swap') in order to minimise the Group's exposure to interest rate fluctuations. The Interest Rate Swap has an effective date of 15 March 2018 (the 'Effective Date') and an expiry date of 15 March 2023. Under this agreement, JPJ Group plc will pay a fixed 6.439% rate of interest in place of floating GBP interest payments of GBP LIBOR plus 5.25%. The fixed interest rate will be paid on 60% of the GBP Term Facility (£150.0 million - the 'Notional Amount') to start. The Notional Amount will decrease by £30.0 million every 12 months from the Effective Date. The Interest Rate Swap was designated as a cash flow hedge, as described in note 3. 

As at 30 June 2018, the fair value of the Interest Rate Swap was a £0.7 million payable (31 December 2017 - £nil). The Group has included £0.1 million of this payable in current liabilities, as shown in note 13 (31 December 2017 - £nil), with the value of the remaining balance, being £0.6 million (31 December 2017 - £nil), included in other long-term payables. 

11. Intangible assets

As at 30 June 2018