Interim Results

32Red Plc

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

Interim results for the six months ended 30 June 2010

32Red Plc, the award-winning online gaming operator, today reports interim results for the half year ended 30 June 2010. 

As reported in its trading update on 15 July 2010, 32Red is delighted to confirm an encouraging first half's trading in 2010, building further on the strong trading experienced in the second half of 2009. Record revenues for a six month period in the first half of 2010 of £7.8m, up 33% on 2009, have resulted in a 38% increase in PBT before exceptional items. The result is underpinned by excellent trading at the Company's flagship operation, the 32Red Casino, which continues to grow in all key areas in 2010.

Key Financials:

*exceptional costs of £162,000 (H1 09: nil) relate to costs in respect of ongoing legal case being brought against William Hill

Key Casino Performance Indicators (excluding acquisitions):

·; Casino Gross Win of £6.8m, up 29% on H1 2009

·; Active casino players in the first 6 months: 19,497, up 35% on H1 2009

·; New casino players in the first 6 months: 12,289, up 26% on H1 2009

·; New casino players recruited at cost per acquisition of £86 each (H1 2009: £89)

·; Casino player yield in the first 6 months: £346 (H1 2009: £360)

Other Highlights

·; Successful integration of acquired casinos contributing £0.5m Gross Win in the first half

·; The Group has no bank debt and has cash resources of £1.5m (30 June 2009: £1.1m)

·; Strong current trading with daily average casino revenue for July and August up 19% on the corresponding period in 2009 and up 6% on first half of the year.

Ed Ware, CEO commented:

 "We are pleased to announce another strong performance by 32Red. The first half of 2010 represents a record performance and follows a previous set of records achieved in the second half of 2009. This is in contrast to the negative growth experienced in H1 2009 and supports both our ongoing marketing investment in 32Red and our resolve to protect our brand and intellectual property rights. Our long term strategy has been centred on the United Kingdom's online casino market and while we will continue to increase investment in this area, we remain convinced that other 32Red products and services, along with expansion into new territories, remain part of our future growth.

Our case against William Hill for trade mark infringement (due to the operation of a casino called 32Vegas which was renamed in August 2009) continues with trial set for the second week of October 2010.

The underlying strength in the business has continued into July and August with revenues up 19% on the corresponding period in 2009. We benefit from a full portfolio of gaming and betting services and our business is based on a sound operational and financial platform which we believe will enable us to fulfil growth plans for casino and other products in and out of the United Kingdom'.  

2 September 2010

Enquiries:

32Red plc

Performance Summary

On 15 July 2010, the Company reported a 33% increase in revenues for the first half of the year and this marked step up in trading levels has resulted in a 38% increase in Profit before taxation and exceptional items.

The performance is particularly pleasing given the continued challenging economic conditions faced by UK and European players during the first half of the year and given the added distraction of the World Cup in June 2010. The results are primarily due to excellent trading at the Company's flagship operation, the 32Red Casino, which represented 87% of total group revenues in the first half of the year (H1 09: 89%).

Casino (excluding acquisitions)

Player yields remained virtually constant and the 29% increase in revenues is attributed to a record level of active casino players for a six month period (up 35% on H1 09). The high level of traffic to the 32Red Casino is a combined result of a record number of new players recruited in the period (up 26% on H1 09) and improved retention performance following the software investment made during the second half of 2009.

Increased investment in targeted marketing activities has enabled a record 12,289 new casino players to be recruited during the first half of the year (9,733 in H1 2009). These players were recruited at a reduced Cost Per Acquisition of £86 (H1 09: £89). This reflects the renewed effectiveness of our marketing and follows the withdrawal of the 32Vegas casino by William Hill in August 2009. The Board believes that these results support the action taken to protect the Company's trade marks and provides an update on litigation proceedings below.

Casino player yields remained suppressed, an inevitable result of the continued heavy recruitment of new players, but also reflecting reduced high-roller activity over the last 18 months. The Board will continue to reinvest profits into marketing the business while attractive opportunities exist. The expansive growth of the player database leaves the business well positioned for future years, a factor that will be further underlined should player yields revert back to higher levels.

32Red was delighted to receive the award of 'Casino of the Decade' from independent watchdog and player advocate, Casinomeister earlier in 2010. This significant award recognises the level of care and attention the 32Red team have consistently delivered over a number of years. This level of excellence continues to be a strong focus for the management team as 32Red develops more scale and depth.

Casino Acquisitions

On 15 February 2010, the Company announced the acquisition of the assets of two European-focused online casinos, Nedplay (www.nedplay.com) and Golden Lounge (www.goldenlounge.com), both purchased for nominal consideration. Both casinos have been fully integrated and have generated £0.5m revenues from the period since acquisition up to 30 June 2010. Players of both Nedplay and Golden Lounge have responded well to our direct marketing and we are assessing the marketability of both brands going forwards.

Other products

32Red Poker operations have generated revenues of £0.4m in the first half of the year (H1 2009: £0.5m). As reported by other operators, the poker market remains tough but the Board hopes that moves to attempt to restrict those operators still accepting bets from the US may lead to a more level playing field.

32Red Bingo operations generated £0.1m of revenue in the first half of the year (H1 09: £0.1m). Initial reaction to the re-launched website has been very positive and the Company will increase Bingo marketing activities in the second half of 2010, spearheaded by more television advertising along with a focus on search engine optimisation.

32Red Rummy offers 32Red players the chance to play one of the world's best-known and compelling card games and provides the Company with the opportunity to reach a new audience. The integration into the 32Red central wallet has now been completed and fully tested and allows the product to be marketed in a more effective manner.

32Redbet enables the Company to operate a sportsbook on a no-risk basis with the ability to fully or partially hedge through the Betdaq betting exchange. The Board believes that the sportsbetting service is a valuable addition to the 32Red suite of products and provides a degree of protection against existing 32Red players spending time with rival sportsbetting operators (who may also offer casino games). The product has been fully tested and integrated into the 32Red wallet and will be marketed in advance of notable betting opportunities, including the resumption of the English Premier League, the Ryder Cup and the Ashes. Importantly, where opportunities arise, 32Red has the ability to manage the risk, and to offer specialised markets designed to attract new customers to 32Red in a different way.

Litigation

In 2009, 32Red initiated legal proceedings against three William Hill companies ("William Hill") in respect of the online casino, 32Vegas. The directors believe that the name 32Vegas infringes various 32Red registered trade marks and other intellectual property rights. 32Red served a claim in the High Court of Justice on 3 July 2009 and William Hill changed the 32Vegas website name on 4 August 2009.

In respect of the claim, William Hill filed a defence and counterclaim on 11 August 2009 challenging the validity of the 32Red trade marks. 32Red has always registered and protected its valuable trade marks and is fully prepared to defend their validity in the courts if necessary. Following various disclosures from both parties, witness statements have been exchanged and the trial is scheduled to be heard in the High Court during the second week of October 2010. The Board will update shareholders further once the result of the hearing has been determined.

Strategy

Along with action being taken to protect the intellectual property, brand and identity of 32Red, the Board is committed to increasing significantly the marketing investment in 32Red during 2010. This investment will be primarily in its core product, the 32Red casino in its core marketplace, the UK. However, the Board continues to monitor regulatory developments in Europe and beyond and believes that the PLC status of the Company may become a significant factor if and when 32Red decides to make applications to licensing authorities for additional gaming licences.

Current Trading and Outlook

The second half of the year has started encouragingly with revenues for July and August up 19% on the corresponding period in 2009 and with average daily revenues up 6% on H1 10. The Company will continue to reinvest profits into targeted marketing campaigns while remaining watchful of economic indicators and confirms that trading remains in line with expectations.

32Red Plc

Consolidated Income Statement

for the six months ended 30 June 2010

Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2010

32Red Plc

Consolidated Statement of Changes in Equity

for the six months ended 30 June 2010

On 26 February 2010, the Company received approval from the Supreme Court of Gibraltar to effect a special resolution passed by shareholders at the Extraordinary General Meeting held on 15 April 2009. This resolution allows the Company to reduce its share premium account by £14,171,025 and offset the amount by which the Company's share premium account is reduced against retained losses. 

32Red Plc

Consolidated Balance Sheet

as at 30th June 2010

32Red Plc

Consolidated Statement of Cash Flows

for the six months ended 30 June 2010

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 2009, available on www.32redplc.com.

2. Exceptional item

During 2009, 32Red initiated legal proceedings against three William Hill companies (''William Hill'') in respect of the online casino, 32Vegas. The directors believe that the name 32Vegas infringes various 32Red registered trade marks and other intellectual property rights. 32Red issued a claim in the High Court of Justice on 4 March 2009 and this claim was served on 3 July 2009. Subsequent to service of the claim, William Hill has changed the 32Vegas website name, a move that was welcomed by 32Red. Exceptional items relate to legal and other expenses incurred in the accounting period in relation to the ongoing litigation dispute with William Hill.

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 69,555,829 shares (2009: 69,375,000).

To calculate the diluted earnings per share figure, the weighted average of employee share options 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 2010, the weighted average number of share options expected to vest was 4,319,275 (2009: 3,953,000).

4. Taxation

The Company has been granted tax exempt status under the Companies (Taxation and Concessions) Act. Under the terms of such status an annual charge of £450 is payable to the Government of Gibraltar. Provided the Company complies with the necessary criteria, payment of such charges will satisfy the Company's tax obligation in Gibraltar in relation to the period.

5. Intangible assets

On 21 January 2010 the Group acquired the trade and assets of Nedplay casino from Floryntia Play Group NV. On 12 February 2010 the Group acquired the trade and assets of Golden Lounge casino from Golden Lounge Limited. The business assets acquired in both cases comprise of the player database, software agreements, the domain names and other intellectual property that were purchased for a nominal consideration. The sole liabilities assumed by the Group are in respect of player balances and certain outstanding payments to affiliates and total £223,383.

6. Property, plant and equipment