Interim Results

 32Red Plc

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

Interim results for the six months ended 30 June 2013

32Red, the award-winning online gaming operator, today reports interim results for the six months ended 30 June 2013.

Key Financials:

Headlines:

· Record revenues and underlying EBITDA in the six month period

· Strength in Mobile: now generates 17% of total casino revenue (2012: 8%)

· Steady growth in Italy and 2 year partnership announced with Italian Serie A club Bologna FC

· 32Red rated top in online casino industry customer service audit

· Recovery of c. £1.25m in damages and costs following successful litigation

· Declared a special dividend of 2.50p per share, paid on 2 August 2013

· Current trading strong, with underlying revenues up 27%

· Confident of meeting full year expectations

Key performance indicators

· Active casino players in first 6 months up 34% to 42,455 (H1 2012: 31,722)

· Casino player yield £398 (H1 2012: £457)

· New Casino players recruited: 17,459 (H1 2012: 18,724) 

· Casino cost per acquisition: £159 (H1 2012: £166)

Current trading

The second half of the year has started strongly with underlying revenues for the first 10 weeks up 27% on the corresponding period in 2012 and the Board continues its strategy of growing investment in marketing and aiming to provide an unrivalled customer experience. 

Ed Ware, CEO commented:

"We are pleased to report another strong performance both in terms of revenue growth and in underlying profitability, which has continued into the second half of the year. Our strategy remains to invest in marketing to regulated markets with a constant focus on maintaining the best user experience enjoyed by new and existing players alike.

While early trading in the Italian market has been slower than expected, there continues to be month on month improvement and with our new Bologna partnership, we remain confident that Italy will develop into an important and lucrative market for 32Red.'' 

12 September 2013

Enquiries:

32Red plc

Performance Summary

As reported in our trading update on 18 July 2013, 32Red is pleased to announce another record first half, with revenues for the six months ended 30 June 2013 increasing 15% to £19.0m (H1 2012: £16.5m). Top line growth has resulted in a 39% increase in underlying EBITDA to £2.5m (H1 2012: £1.8m). Profit before taxation after start-up losses in Italy of £0.6m (H1 2012: £0.1m) totalled £1.3m (H1 2012: £1.2m) and earnings per share totalled 1.77p (H1 2012: 1.60p).

The Company today declares an interim dividend of 0.8p per share (H1 2012: 0.6p) to be paid on 11 October 2013 to all shareholders on the Company's share register on 20 September 2013. This is in addition to the special dividend of 2.5p per share declared on 4 July 2013 and paid on the 2 August 2013.

Casino Revenues

The 32Red casino remains the core of the business, generating 91% of Group underlying revenue in the first half of the year (H1 2012: 88%). The strong growth in active players, up 34% in the half, was reflective of an increased focus on CRM and of our on-going commitment to delivering a 'second to none' customer service proposition. 

The focus on improving player retention and reactivation techniques has resulted in an improvement in returning players, which inevitably puts short-term pressure on player yields. We saw a much higher level of activity at the casino, assisted by the steady recruitment of new players at competitive cost per acquisition levels.

With improved CRM tools in place, the Company intends to increase investment in marketing to recruit more new players during the second half of the year. The early termination compensation payment received from Swansea will be recognised in its entirety as 'other operating income' in the second half of 2013, and will be matched against the increased expenditure on alternative offline marketing initiatives.

The 32Red mobile casino continues to flourish with revenues up 157% on H1 2012, representing 17% of total casino revenues (H1 2012: 8%) and attracting approximately one third of all new players. While some of this growth can be attributed to the migration of existing online customers, the launch of the HTML5 online casino, which provides a more responsive and stable platform across a wider range of devices and networks, has undoubtedly improved the user experience and has also proven to be an effective way to recruit new players.

Other Revenues

Revenues from 32Red Poker remain flat in the first half of the year, while revenues from 32Red Bingo and 32Redbet are down on the previous year. The Company intends to invest further funds to market the 32Red Bingo product which should not only improve its performance but also drive additional customers to our 32Red casino. The Company continues to explore its options with regard to a fit-for-purpose sports betting product, however the 32Red casino remains the Company's priority. 

32Red.it

The 32Red casino was launched in Italy on 29 November 2012, with slots permitted from 3 December. While initial trading has been softer than anticipated, revenues have grown consistently month on month, with further progress expected from the launch of a mobile casino, along with other services in due course. Growth will be further augmented as additional products are approved by the Italian regulator, AAMS.

On 27 August 2013, the Company announced an exclusive partnership with Italian Serie A football team, Bologna FC. The deal will see the 32Red brand become the official casino partner of the Italian club for the 2013-14 and 2014-15 seasons and will boost the profile of the 32Red brand in Italy. The sponsorship deal includes both on and off-line co-branding activities, stadium branding and the launch of an affiliate programme to market the 32Red casino to Bologna fans via the Club's website. Historically, the associations with Swansea City and Aston Villa have helped to establish 32Red as a trusted and leading casino brand in the UK and we see Bologna as an ideal partner to help promote the 32Red brand in Italy.

As we continue to augment and refine our product and marketing offering and learn more about our Italian customers we remain confident in the long term opportunity of this market.

Litigation update 

On 12 April 2013, following a six day damages enquiry a Judgment confirmed that 32Red Plc had been awarded damages in respect of its trade mark action against members of the William Hill Group. This was confirmed by a formal order sealed on 3 July 2013, which also included an award of costs in 32Red's favour. No appeal was filed and the award is therefore final. 32Red expects that the total liability of William Hill, for damages and costs in respect of all legal proceedings and appeals, will total approximately £1.25m of which £930,000 has been received by 30 June 2013. The balance (plus interest) will be due once the precise amount has been determined in a detailed assessment procedure. This marks the final step in four years of litigation that has resulted in all of 32Red's trade marks being validated and the removal of an infringing mark from the market.

Customer Service Award

On 28 May 2013 following an industry-wide Mystery Shopper survey, 32Red was ranked top of the inaugural etruvian Customer Service Quality Audit. The audit assessed each operator on seven key categories: Accessibility, Response Time, Product Knowledge, Presentation, Personalisation, Friendliness and going that Extra Mile. 32Red achieved an 8.8 out of ten overall score setting it apart from operators such as Bwin.party, Bet 365, Ladbrokes and William Hill who also featured in the Audit. In each of the categories 32Red achieved a top 4 ranking including top position in product knowledge, personal touch and going that extra mile. The building and maintenance of strong customer relationships is the bedrock of 32Red's business philosophy and the result of the etruvian audit underpins the effectiveness of its strategy. 32Red was also awarded the title of casino operator of the year by Casinomeister for an unprecedented tenth year running.

Strategy

The Board remains committed to its strategy to invest in licensed and regulated markets. The investment in marketing in the second half of the year will be focussed on the Group's primary markets, the UK and Italy. The Company welcomes regulatory developments in Europe and the US and looks forward to updating shareholders on plans to expand into newly regulated markets should they be commercially viable.

Current Trading and Outlook

The second half of the year has started strongly with underlying revenues for the first 10 weeks up 27% on the corresponding period in 2012 and the Company confirms that trading remains in line with management expectations.

32Red Plc

Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2013

32Red Plc

Consolidated Statement of Changes in Equity

for the six months ended 30 June 2013

32Red Plc

Consolidated Statement of Financial Position

as at 30 June 2013

32Red Plc

Consolidated Statement of Cash Flows

for the six months ended 30 June 2013

Notes:

1. Accounting policies

The consolidated interim financial results have been prepared in accordance with the measurement principles of applicable International Financial Reporting Standards (''IFRSs'') as adopted by the EU. The accounting policies have remained unchanged from the previous year, as set out in the Annual Report for the year ended 31 December 2012, available on www.32redplc.com, except for the application of the following standards, effective from 1 January 2013:

· IFRS 10: 'Consolidated Financial Statements'

· IFRS 11: 'Joint Arrangements'

· IFRS 13: 'Fair Value Measurements'

· The revised version of IAS 19: 'Employee Benefits'

· Annual Improvement 2009-2010

The effects of the applying these standards have been considered by management, who have concluded that no changes are required.

2. Exceptional item

During the period, 32Red incurred further legal and other expenses in respect of successful legal proceedings against three William Hill companies (together "William Hill") in respect of the online casino, 32Vegas. 

On 12 April 2013, following a six day damages enquiry, a Judgment confirmed that 32Red Plc had been awarded damages in respect of its trade mark action against members of the William Hill. This was confirmed by a formal order sealed on 3 July 2013, which also included an award of costs in 32Red's favour. No appeal was filed and the award is therefore final. 32Red expects that the total liability of William Hill, for damages and costs in respect of all legal proceedings and appeals, will total approximately £1.25m of which £930,000 has already been paid. A sum of £130,000 was received and recognised in the year ended 31 December 2012 and a further payment on account of £800,000 was received on 28 June 2013. The balance (plus interest) will be due and therefore recognised once the precise amount has been determined in a detailed assessment procedure.

3. Earnings per share

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 70,937,049 shares (2012: 70,361,860).

To calculate the diluted earnings per share figure, the weighted average of employee share options and awards made under the Long Term Incentive Plan expected to vest has been added. This number represents management's best estimate at the balance sheet date, which is also used for calculating employee payments relating to share based payment transactions. At 30 June 2013, the weighted average number of share options expected to vest was 4,913,633 (2012: 5,498,168).

4. Taxation

5. Intangible assets

6. Property, plant and equipment