14th Sep 2006 07:03
888 Holdings plc14 September 2006 888 Holdings Public Limited Company ("888" or the "Company") Interim Results for the six months ended 30 June 2006 888, one of the world's most popular online gaming entertainment companies,announces its interim results for the six months ended 30 June 2006. Financial Highlights • Profit before tax* up 88% to $48.0m (H1 2005: $25.6m) • Net Gaming Revenues ("NGR") up 32% to $163.5m (H1 2005: $123.7m) • Profit before tax* margin up to 29% (H1 2005: 21%) • Operating expenses % of NGR down to 25.6% (H1 2005: 28.0%) • Cost per acquisition** of US$165 (H1 2005: US$200) • Net cash generated from operating activities up 109% to $56.1m (H1 2005: $26.8m) • Basic EPS* up 89% to 13.8c (H1 2005: 7.3c) • Interim dividend of 4.5c per share • Special dividend of 4.0c per share * 2006 - excluding share benefit charges ** Excluding customers recruited on a revenue share basis. Operational Highlights • Geographical expansion outside US - 48% of NGR from non-US territories and 67% of new real money sign ups from non-US territories • Rapid growth in NGR in the UK up 61% and Continental Europe up 16% • Increased yields per member from Casino and Poker divisions • Continued technological innovation • Continued investment in the 888 brand through sports sponsorships including two new football sponsorships with Sevilla FC and Toulouse FC in addition to the World Snooker Championship and a third year with Middlesbrough FC Commenting, John Anderson, CEO of 888 said: "These are excellent results and represent a record performance of profitablegrowth. We have delivered on all our flotation goals. Trading during the first 10 weeks of Q3 is in line with management expectationsand we are on track to achieve a satisfactory outcome for the full year. As of 31 December 2006, I shall step down as CEO and take the role of non-executive Director. The current COO, Gigi Levy will succeed me as CEO. Gigi is an excellent, experienced individual who is more than capable of taking on this challenge. I am proud to have led 888, since 2000, through its formative years into the success it is today. Over the past six years, 888 has been a pioneer in the online gaming industry." An audio replay of the presentation to analysts will be available from theinvestor relations section of 888's website (http://www.888holdingsplc.com) fromlate afternoon today. Contacts and enquiries 888John Anderson Chief Executive Officer +350 49800Gigi Levy Chief Operating Officer +350 49800Aviad Kobrine Chief Financial Officer +350 49800 Bell Pottinger Corporate & FinancialNick Lambert +44 (0)20 7861 3232 Chief Executive's Review Overview I am pleased to report that 888's interim results represent another recordperformance of profitable growth. Profit before tax* was $48.0m, an increaseover half year 2005 of 88%. NGR was also up substantially at $163.5m, anincrease of 32%. Importantly our margins are increasing as well as our scale.Pre-tax margins* were 29% (H1 2005: 21%). This is due to increased marketingefficiency and focus on high-value customers. Basic earnings per share* were13.8 cents. Net cash generated from operating activities was $56.1m, an increase of 109% on2005. These are excellent results and in accordance with the policy set out at thetime of flotation we will be paying an interim dividend of 4.5 cents per share.In addition, given our excellent results and our record cash generation during2006, we have decided to pay a special dividend of 4.0 cents per share withoutcompromising our strategic goals. Since flotation last September 2005 our growth has been spread even more widelyacross geographic regions. This geographic spread is in line with our strategyof reducing our dependence on income from any one large market, withoutsacrificing volumes. NGR from non-US territories in H1 2006 was 48% compared to45% in H1 2005. We will continue to increase our business in non-US territoriesas we did successfully in the UK, where our revenues increased by 61%. * 2006 - excluding share benefit charges Product Casino Our major casino brand, Casino on Net, founded in 1997, has consistently beenranked as the leading online casino brand in the world. We continually innovateour casino offering and earlier in the year we launched an updated version. Thisincluded many new video slot machines which give a unique playing experience andhave proved hugely popular. We are now adding one new slot machine a month toour offering. NGR for the half year was up 12% at $89.6m. 888 focuses on high value customers,gives them the "perfect user experience" and this creates loyalty. As a resultwe continue to see not only an increase in customers, but also an increase inthe NGR per active player. Poker Poker volumes have also grown impressively with NGR up 68% to $73.9m. In the first half our poker offering was released in six new languages and a newJackpot feature has been introduced. Multi hand was also introduced and today arising number of our poker customers use this feature. Continued innovation is key to our customers' experience, and this is whatunderpins sustainable growth. Marketing Much of our success has been due to our marketing skills and our brand power.888 has become, in a relatively short period of time, a recognized brand in theglobal gaming market and among the leaders in the online gaming industry itself.In our brand recognition study in the UK, 888 was the third most recognizedgaming brand after Ladbrokes and William Hill, making 888 the number one onlinegaming brand. Earlier this year we stated that we would use the skills and techniques thatproved so successful in the UK to expand in Continental Europe. In pursuit ofthis we have signed two football shirt sponsorship deals. In France we aresponsoring Toulouse and in Spain with Sevilla, the current UEFA Cup holders andwinners of the 2006 Supercup. These two deals are in addition to our main current sport sponsorships of Middlesborough FC and the World Snooker Championship. They represent further evidence of 888 delivering on its stated strategy of diversified, multi-channel marketing. This brand leverage will continue and is key to our growth strategy. Regulation The Company monitors developments in the legal and regulatory environment foron-line gaming, and their potential impact on its business and continue to take appropriate advice. In July this year, the House of Representatives in the United States passed theInternet Gambling Prohibition and Enforcement Bill. This Bill is now with theSenate for consideration. We await developments as to the final form, if any, ofthe Act. An Act, if passed, may have a material adverse impact on 888'sbusiness. In the six months to 30 June 2006 52% of the Group's NGR was derivedfrom customers based in the US. We are closely monitoring the progress of the recent enforcement actions in theUS against two directors of UK companies involved in Sportsbetting. 888 has noinvolvement in Sportsbetting. Board As of 31 December 2006, I shall step down as Chief Executive and take the role of non-executive Director. I am proud to have led 888, since 2000, through its formative years into the success it is today. Over the past six years, 888 has been a pioneer in the online gaming industry. I led the Company through its successful flotation on the London Stock Exchange and since then have delivered two sets of record results in our first year as a listed company. I am particularly proud of positioning 888 at the forefront of self-regulation. Our industry's rapid growth has often left it ahead of the regulatory framework and during my tenure I have always considered the trust in, and transparency of, 888, to be inextricably linked to the successful growth of the Company. Given the strong position that the company is now in, I have given much thought to its future direction. Over recent months, I have searched for somebody who I believe can take the company forward to its next level. Gigi Levy is an excellent, experienced individual who is more than capable of taking on this challenge. I have no doubt that 888 will continue to thrive under his leadership. Gigi will formally take over at the end of the year and we will continue to work closely together on the operational, day-to-day running of the business until such time. On a personal level I am delighted to remain involved with this exciting business as a non-executive director. Outlook Our results will continue to be driven by our strategy including: investment inBrand; geographic expansion; development of the range and quality of our productoffering; varied and efficient payment processes, and focus on high valuecustomers. Trading during the first 10 weeks of Q3 is in line with management'sexpectations and overall, whilst regulatory uncertainties continue, we remainconfident that we are on track to achieve a satisfactory outcome for the fullyear. We continue to assess carefully potential acquisition targets which will enhanceour existing offering and help drive our geographic and product spread. John AndersonChief Executive Officer Forward-looking statements This announcement includes 'forward-looking statements'. These statements contain the words 'anticipate', 'believe', 'intend', 'estimate', 'expect' and words of similar meaning. All statements other than statements of historical fact included in this announcement, including, without limitation, those regarding the Company's financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to the Company's products and services) are forward-looking statements that are based on current expectations. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance, achievements or financial position of the Company to be materially different from future results, performance, achievements or financial position expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's operating performance, present and future business strategies and the environment in which the Company will operate in the future. These forward-looking statements speak only as at the date of this announcement. Subject to the Listing Rules of the UK Listing Authority, the Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Past performance cannot be relied upon as a guide to future performance. Consolidated Income Statementfor the period ended 30 June 2006 Six months Six months Year ended ended ended 31 December 30 June 30 June 2006 2005 2005 Note US$'000 US$'000 US$'000 (unaudited) (audited) (audited)------------------------------------------------------------------------------------Net Gaming Revenue 163,511 123,744 271,031Operating expenses 41,817 34,615 72,960Research and development expenses 9,165 4,642 11,318Selling and marketing expenses 49,008 51,808 100,009Administrative expenses 2 21,010 7,265 37,328------------------------------------------------------------------------------------ Operating Profit before share benefit charges 46,392 25,414 66,650 ---------------------------------------------------------------------------------- Charges in respect of shares granted to employees on IPO -- -- 15,087 Charges in respect of share and option awards 3,881 -- 2,147 ---------------------------------------------------------------------------------- Total share benefit charges 3,881 -- 17,234 ---------------------------------------------------------------------------------- Operating Profit 3 42,511 25,414 49,416Finance income 1,622 192 735------------------------------------------------------------------------------------Profit before tax 44,133 25,606 50,151Taxation 1,431 1,119 2,136------------------------------------------------------------------------------------Profit after tax for the period attributable to equity holders ofparent 42,702 24,487 48,015====================================================================================Earnings per shareBasic 4 12.7c 7.3c 14.2cDiluted 12.5c 7.3c 14.2c==================================================================================== All amounts relate to continuing activities. Consolidated Balance Sheetat 30 June 2006 30 June 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000 (unaudited) (audited) (audited)----------------------------------------------------------------------------------------AssetsNon-current assetsIntangible assets -- 400 -Property, plant and equipment 9,449 7,755 8,341Deferred taxes 461 -- 361---------------------------------------------------------------------------------------- 9,910 8,155 8,702Current assetsCash and cash equivalents 116,874 42,137 62,202Trade and other receivables 11,746 15,556 15,013Amounts due from related parties -- 8,204 1,649---------------------------------------------------------------------------------------- 128,620 65,897 78,864----------------------------------------------------------------------------------------Total assets 138,530 74,052 87,566======================================================================================== Equity and liabilitiesEquity attributable to equity holders of the parentShare capital 3,068 3,065 3,068Share benefit reserve 6,028 -- 2,147Retained earnings 69,817 28,500 27,115----------------------------------------------------------------------------------------Total equity attributable to equity holders of the parent 78,913 31,565 32,330----------------------------------------------------------------------------------------LiabilitiesCurrent liabilitiesTrade and other payables 29,589 17,346 25,593Member deposits 30,028 25,141 29,325Amounts due to related parties -- -- 318----------------------------------------------------------------------------------------Total liabilities 59,617 42,487 55,236----------------------------------------------------------------------------------------Total equity and liabilities 138,530 74,052 87,566======================================================================================== Approved by the Board and authorised for issue on 14 September 2006. John Anderson Aviad KobrineChief Executive Officer Chief Financial Officer Consolidated Statement of Changes in Equityfor the period ended 30 June 2006 Share Share benefit Retained capital reserve earnings Total US$'000 US$'000 US$'000 US$'000------------------------------------------------------------Balance at 1 January 2005 3,066 - 27,113 30,179Net Profit for the period - - 24,487 24,487Dividend paid - - (23,100) (23,100)Redemption of preference share capital (1) - - (1)------------------------------------------------------------Balance at 30 June 2005 3,065 - 28,500 31,565------------------------------------------------------------Net Profit for the period - - 23,528 23,528Dividend paid - - (40,000) (40,000)Share benefit charge - 17,234 - 17,234Transfer of shares granted on IPO - (15,087) 15,087 -Redenomination translation effect 3 - - 3------------------------------------------------------------Balance at 31 December 2005 3,068 2,147 27,115 32,330------------------------------------------------------------Net Profit for the period - - 42,702 42,702Share benefit charge - 3,881 3,881------------------------------------------------------------Balance at 30 June 2006 3,068 6,028 69,817 78,913============================================================ Consolidated Statement of Cash Flowsfor the period ended 30 June 2006 Six months Six months ended ended Year ended 30 June 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000 (unaudited) (audited) (audited)---------------------------------------------------------------------------------------Cash flows from operating activitiesProfit before income tax 44,133 25,606 50,151Adjustments forDepreciation 1,883 1,165 2,700Loss on sale of property, plant and equipment -- -- 32Amortisation -- -- 20Impairment -- -- 832Translation effect of redenomination of share capital -- -- 3Interest received (1,551) (192) (683)Share benefit charges 3,881 -- 17,234--------------------------------------------------------------------------------------- 48,346 26,579 70,289Decrease in trade receivables 5,144 589 579Decrease/(Increase) in related party balances 1,331 (6,340) (638)(Increase)/Decrease in other accounts receivable (1,877) (915) 142Increase in trade payables 7,172 4,676 1,177Increase in customer deposits 703 6,000 10,184 (Decrease)/Increase in other accounts payable (2,903) (1,247) 9,680---------------------------------------------------------------------------------------Cash generated from operations 57,916 29,342 91,413 Income tax paid (1,804) (2,553) (3,160)---------------------------------------------------------------------------------------Net cash generated from operating activities 56,112 26,789 88,253Cash flows from investing activitiesPurchase of intangibles -- (400) (400)Cash acquired on combination with ACTeCASH -- -- 263Purchase of property, plant and equipment (2,991) (1,678) (3,831)Interest received 1,551 192 683---------------------------------------------------------------------------------------Net cash used in investing activities (1,440) (1,886) (3,285)Cash flows from financing activitiesReduction in share capital -- (1) (1)Dividends paid -- (23,100) (63,100)---------------------------------------------------------------------------------------Net cash used in financing activities -- (23,101) (63,101)---------------------------------------------------------------------------------------Net increase in cash and cash equivalents 54,672 1,802 21,867Cash and cash equivalents at the beginning of the period 62,202 40,335 40,335---------------------------------------------------------------------------------------Cash and cash equivalents at the end of the period 116,874 42,137 62,202======================================================================================= Notes to the Consolidated Financial Information 1 Basis of preparation The consolidated interim financial information of the group has been prepared inaccordance with International Financial Reporting Standards, includingInternational Accounting Standards ("IAS") and Interpretations (collectivelyIFRS), adopted by the International Accounting Standards Board ("IASB") andendorsed for use by companies listed on an EU regulated market. These results have been prepared on the basis of accounting policies expected tobe adopted in the group's full financial statements for the year ended 31December 2006 which are not expected to be significantly different to those setout in note 2 to the groups audited financial statements for the year ended 31December 2005. The financial information is presented in thousands of US dollars (US$'000)because that is the currency the Group primarily operates in. The financial information for the period ended 30 June 2005 has been audited.The financial statements for the year ended 31 December 2005, which wereprepared under IFRS, have been filed with the Registrar of Companies inGibraltar and received an unqualified audit report. These financial statementsare also available from the Company's website. The financial information contained in this interim announcement is unauditedand does not constitute statutory accounts. 2 Administrative expense Administrative expense includes a provision in the sum of $2,750,000 (2005 -Nil) associated with Mr. John Anderson stepping down as CEO of the group on 31December 2006. In accordance with the terms of employment of Mr. John Andersonthe provision consists of full year remuneration, a 15% contribution towardspension and 200% bonus. Notes to the Consolidated Financial Information 3 Segment informationBusiness segments Six months ended 30 June 2006 Casino Poker Consolidated US$'000 US$'000 US$'000 (unaudited) (unaudited) (unaudited)-----------------------------------------------------------Net Gaming Revenue 89,619 73,892 163,511===========================================================Result Segment result 49,237 45,486 94,723===========================================================Unallocated corporate expenses(1) (52,212)-----------------------------------------------------------Operating Profit 42,511Finance income 1,622Income tax expense (1,431)-----------------------------------------------------------Net Profit for the period 42,702===========================================================AssetsUnallocated corporate assets 138,530-----------------------------------------------------------Total assets 138,530===========================================================LiabilitiesSegment liabilities - Poker 20,432Segment liabilities - Casino 9,596Unallocated corporate liabilities 29,589-----------------------------------------------------------Total liabilities 59,617=========================================================== (1) Including share benefit charges of US$3,881,000. Six months ended 30 June 2005 Casino Poker Consolidated US$'000 US$'000 US$'000 (audited) (audited) (audited)----------------------------------------------------------Net Gaming Revenue 79,874 43,870 123,744==========================================================Result Segment result 38,891 15,914 54,805=============================================Unallocated corporate expenses (29,391)----------------------------------------------------------Operating Profit 25,414Finance income 192Income tax expense (1,119)----------------------------------------------------------Net Profit for the period 24,487==========================================================AssetsUnallocated corporate assets 74,052----------------------------------------------------------Total assets 74,052==========================================================LiabilitiesSegment liabilities - Poker 16,387Segment liabilities - Casino 8,754Unallocated corporate liabilities 17,346----------------------------------------------------------Total liabilities 42,487========================================================== 3 Segment information continued Year ended 31 December 2005 Casino Poker Consolidated US$'000 US$'000 US$'000 (audited) (audited) (audited)-----------------------------------------------------------Net Gaming Revenue 161,214 109,817 271,031===========================================================Result Segment result 79,555 55,169 134,724-----------------------------------------------------------Unallocated corporate expenses(1) (85,308)-----------------------------------------------------------Operating Profit 49,416Finance income 735Income tax expense (2,136)-----------------------------------------------------------Net Profit for the year 48,015===========================================================AssetsUnallocated corporate assets 87,566-----------------------------------------------------------Total assets 87,566===========================================================LiabilitiesSegment liabilities - Poker 20,099Segment liabilities - Casino 9,226Unallocated corporate liabilities 25,911-----------------------------------------------------------Total liabilities 55,236=========================================================== (1) Including share benefit charges of US$17,234,000. Other than where amounts are allocated specifically to the Casino and Pokersegments above, the expenses, assets and liabilities relate jointly to bothsegments. Any allocation of these items would be arbitrary. Geographical segmentsThe Group's performance can also be reviewed by considering the geographicalmarkets and geographical locations within which the Group operates. Thisinformation is outlined below: Net Gaming Revenue by geographical market Six months Six months ended ended Year ended 30 June 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000 (unaudited) (audited) (audited)-------------------------------------------------------------------------------------USA 85,305 68,599 148,049UK 36,593 22,794 53,871Europe 27,093 23,325 47,289Americas 9,328 5,328 12,007Rest of World 5,192 3,698 9,815------------------------------------------------------------------------------------- 163,511 123,744 271,031===================================================================================== 4 Earnings per shareBasic earnings per shareBasic earnings per share has been calculated by dividing the Net Profitattributable to ordinary shareholders (profit for the period) by the weightedaverage number of shares in issue during the period. Diluted earnings per shareIn accordance with IAS 33, "Earnings per share", the weighted average number ofshares for diluted earnings per share takes into account all potentiallydilutive shares and share options granted, which are not included in the numberof shares for basic earnings per share. Six months Six months ended ended Year ended 30 June 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000 (unaudited) (audited) (audited)-------------------------------------------------------------------------------------Net Profit attributable to ordinary shareholders 42,702 24,487 48,015Weighted average number of Ordinary Shares in issue* 337,096,320 337,096,320 337,096,320Basic earnings per share 12.7c 7.3c 14.2c=====================================================================================Weighted average number of dilutive Ordinary Shares 342,886,703 337,096,320 338,419,476-------------------------------------------------------------------------------------Diluted earnings per share 12.5c 7.3c 14.2c===================================================================================== Earnings per share excluding share benefit chargesReconciliation of Net Profit to Net Profit excluding share benefit charges: Six months Six months ended ended Year ended 30 June 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000 (unaudited) (audited) (audited)-------------------------------------------------------------------------------------Net Profit attributable to ordinary shareholders 42,702 24,487 48,015Share benefit charges 3,881 -- 17,234------------------------------------------------------------------------------------Net Profit excluding share benefit charges 46,583 24,487 65,249Weighted average number of Ordinary Shares in issue* 337,096,320 337,096,320 337,096,320Basic earnings per share excluding share benefit charges 13.8c 7.3c 19.3c-------------------------------------------------------------------------------------Weighted average number of dilutive Ordinary Shares 342,886,703 337,096,320 338,419,476Diluted earnings per share excluding share benefit charges 13.6c 7.3c 19.3c===================================================================================== * Comparative weighted average number of Ordinary Shares in issue has beenrestated in order to reflect the share split that took place on 14 September2005. 5 Interim Dividend The directors have declared an interim dividend of 4.5c per share payable on 31October 2006 to shareholders on the register at 13 October 2006. In addition, the directors have declared a special dividend of 4.0c per sharepayable on 31 October 2006 to shareholders on the register at 13 October 2006. Independent Review Report To The Shareholders of 888 Holdings Public LimitedCompany Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the Group Income Statement,the Group Balance Sheet, the Group Cash Flow Statement, the Group Statement ofChanges in Equity and the related notes 1 to 5. We have read the otherinformation contained within the financial information and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. Our report has been prepared in accordance with the terms of our engagement toassist the Company in meeting the requirements of the Listing Rules of theFinancial Services Authority and for no other purpose. No person is entitled torely on this report unless such a person is a person entitled to rely upon thisreport by virtue of and for the purpose of our terms of engagement or has beenexpressly authorised to do so by our prior written consent. Save as above, we donot accept responsibility for this report to any other person or for any otherpurpose and we hereby expressly disclaim any and all such liability. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in a format equivalent to theListing Rules of the Financial Services Authority which require that theaccounting policies and presentation applied to the financial information shouldbe consistent with those applied in preparing the annual accounts except whereany changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of management and applying analyticalprocedures to the financial information and underlying financial data and basedthereon, assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. BDO Stoy Hayward LLPChartered Accountants8 Baker StreetLondon WIU 3LLUnited Kingdom Date: 14 September 2006 888 Holdings Public Limited CompanySuite 601/701 EuroportEuroport RoadGibraltarT: +350 49800F: +350 48280E: [email protected] This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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