Interim Results

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NetPlay TV plc

Interim Results for the six months ended 30 June 2016

NetPlay TV plc (AIM: NPT), the interactive gaming company, announces its interim results for the six months ending 30 June 2016:

Key Performance Indicators

§ 15% increase in net revenue to £14.7m (H1 2015: £12.7m)

§ 3% increase in new depositing players to 43,723 (H1 2015: 42,305)

§ 3% increase in active depositing players to 65,200 (H1 2015: 63,411)

Financial Highlights

§ Adjusted EBITDA[*] increased 31% to £1.7m (H1 2015: £1.3m)

§ Adjusted profit before tax[†] increased 30% to £1.4m (H1 2015: £1.1m)

§ Adjusted earnings per share increased 30% to 0.52 pence per share (H1 2015[‡]: 0.40 pence per share)

§ Reported profit before tax and total comprehensive income of £1.0m (H1 2015: £0.2m)

§ Cash and cash equivalents of £9.0m (H1 2015: £15.8m) after one-off payments in relation to the special dividend declared at the time of the FY2015 results (£2.2m).

§ Strong contribution from the B2B operating segment with £2.1m of revenue and £0.4m to adjusted EBITDA

Operational Highlights

§ Key broadcast relationship with ITV extended for a further three years

§ Significant roll out of new content and titles across mobile and desktop platforms which widens the product offering for our B2C customers

§ B2B operating segment performing ahead of expectations

Post Period Highlights

§ Launch of the UK's first Apple TV application which streams the full suite of the Group's live roulette products to television

Interim dividend

§ Interim dividend maintained at 0.22 pence per share (H1 2015: 0.22 pence per share)

Commenting on the results and the trading update, Bjarke Larsen, CEO of NetPlay TV said:

"These results show that the momentum delivered in the last year has continued into 2016 and we are very pleased to be reporting growth in overall Group revenue and profit.

"The Group's operational performance in the period has also been significant with not only the renewal of the ITV relationship, but also product enhancements, new site roll-outs and, post period, the launch of the AppleTV application.

"We set out our growth strategy at the beginning of the year and are focused on continuing to deliver against this. There has been significant M&A activity in the industry, and the Group, with its solid balance sheet, is well placed to pursue those opportunities that the board believes will be earnings enhancing."

Enquiries:

Notes to Editors:

About NetPlay TV plc

NetPlay TV plc operates a number of online interactive gaming services under a UK remote operating license and Alderney gaming licence, these include SuperCasino.com, Jackpot247.com and Vernons.com. The Group is focused on the delivery of a converged interactive gaming experience allowing its players to interact with its games on a variety of platforms, TV, internet, mobile and tablet. Its TV services can be viewed every evening on ITV and Channel 5.

The Group also operates a B2B operating segment which is a specialist online digital marketing, product development and technology business. This provides a complementary and profitable revenue stream whilst adding to the Group's capability in driving traffic to NetPlay TV's brands.

The Company is admitted to trading on the AIM market of the London Stock Exchange (NPT). 

Operational and Financial Review

The Group's momentum delivered in 2015 has continued into the first half of 2016 resulting in a 31% increase in adjusted EBITDA to £1.7m (H1 2015: £1.3m) and 30% increase in adjusted earnings per share. Significant operational progress has been made in the first half of the year across all aspects of the business in order to support the momentum achieved and ultimately continue to add shareholder value.

The Group's television broadcast USP remains at the core of NetPlay TV's strategy. The Group successfully secured an additional three-year partnership agreement with ITV, ensuring its long-term television arrangements remain in place on the UK's largest commercial terrestrial TV channel until April 2019. This is testament to the value the long term relationship brings to both parties and in particular the Jackpot247 brand.

As a result of securing agreements with both ITV and Channel 5 (in the prior year), NetPlay TV is able to ensure that the combination of engagement through TV and our mobile platforms drives customer acquisition and player value both now and into the future.

The Group has delivered improved returns for the bingo product, having delivered a fully mobile and web responsive site for our Vernons Bingo brand, supported by a TV advertising campaign. In addition to rolling out the new site the team delivered a significant number of new game titles across mbile (55) and desktop (65), including Playtech's eagerly anticipated "Age of the Gods" slot titles.

The Group's casino-only brands experienced slightly lower deposits per customer which led B2C average revenue per depositing player to decrease by 2% to £267 (H1 2015: £273). This was following a slightly weaker Q2 on its casino-only brands. The Group had already commenced a programme to improve its core KPIs, the benefits of which we expect to see in H2 and beyond. This programme includes the phased roll out of our Business Intelligence (BI) dataroom, NetPlay TV's "one-stop-shop" for all player data and analysis. This is a significant project which will continue to be developed over time and supports our data led approach to marketing following the roll-out of an automated predictive customer retention platform across the SuperCasino and Jackpot247 brands.

Additionally during the period the Group is proactively building on an already robust social responsibility programme by launching a number of new features to ensure that all of our customers have the necessary tools available to help them gamble responsibly.

The Group is pleased to report that performance of its B2B operating segment (its digital marketing business), which was acquired in August 2015, has performed ahead of management expectations. Its operational performance has been strong and the Board believes there are still significant opportunities for this business in the coming year and beyond.

Marketing expenditure & performance

In addition to the successful extension with our two commercial broadcast partners, our marketing strategy continues to be effective; B2C marketing costs increased by 4% to £4.7m (H1 2015: £4.5m) and total new depositing players have increased by 3% to 43,723 (H1 2015: 42,305) showing only a 2% increase in the Group's cost per acquisition (CPA) to £173 (H1 2015: £169), on its casino-only brands, despite increased competitive activity in the UK.

The Group has successfully shown that there is a firm handle on marketing costs and that the relationships with TV broadcast partners continue to deliver significant value for the Group.

Income statement presentation

Adj 1: Reclassification of depreciation and amortisation

Adj 2: Reclassification of share based payment charge

Adj 3: Reclassification of acquisition related and other expenses 

The table above reconciles the statutory format of the income statement to adjusted EBITDA and profit before tax which is used by management internally to evaluate the underlying performance of the business. In the opinion of the Board this format better reflects the operational performance of the Group. The discussion in the section below will focus on the adjusted information.

The B2B operating segment was created following the acquisition of the trade and assets of the digital marketing business in August 2015. The full results of the new B2B operating segment as well as the core B2C segment (along with prior period comparatives) are shown in note 2 to the financial information. The Directors are pleased with the performance of the B2B operating segment which contributed £2.1m to net revenue and £0.4m to adjusted EBITDA which is tracking ahead of their expectations.

Cash flow and cash generation

The table below separates player balances, working capital, share capital issued, net finance income, acquisition related and other expenses paid, dividends paid and cash payments in respect of business combinations to show how adjusted EBITDA reconciles to the net underlying cashflow:

The Group continues to be cash generative, with net cash generated from online gaming operations being £1.5m (H1 2015: £1.0m) and an 88% conversion rate from adjusted EBITDA. The Group now has cash and cash equivalents of £9.0m (H1 2015: £15.8m), which net of player balances means there is corporate cash available of £7.5m (H1 2015: £13.9m). This is equivalent to 2.7 pence per ordinary share in issue at the 30 June 2016 (4.7 pence per ordinary share in issue at 30 June 2015).

In August 2015, the Group acquired the trade and assets of a digital marketing business, Otherside Inc, for £3.2m. £2.6m consideration was paid in FY 2015 with £0.3m deferred considertation paid in H1 2016 and a further £0.2m paid in H2 2016.

During the period the Company paid a total of £3.2m (2015: £1.0m) in respect of the final dividend and one-off special dividend (£2.2m) which were both declared at the time of its FY2015 final results and approved at the Company's AGM in May 2016. The working capital movement in the period is due to the timing of committed cash flow incurred in H1 2016 evidenced by total trade and other payables reducing to £6.3m (2015: £7.8m). The level of capex incurred has reduced to £0.2m (H1 2015: £0.3m), however within H2 2016, the Group plans to further upgrade some its studio broadcast equipment to enhance the television viewers' experience.

Earnings per share

The directors have chosen to report an adjusted profit before taxation and adjusted earnings per share as they believe these measures better reflect the underlying performance of the Group. These results are summarised in the table below:

Dividend

Due to the continued strong cash position and generating ability of the Group, the Board is maintaining the interim dividend payable at 0.22 pence per share (2015 interim dividend: 0.22 pence per share). The interim dividend will be paid on 27 October 2016 to shareholders on the register on Friday 7 October 2016.

Post period highlights

As part of the product investment program the Group committed in-house resource to develop its Apple TV application. This was launched in August and allows new and existing players to stream any of our Live Roulette wheels direct to their TV and place bets using their mobile, tablet or desktop device.

H2 Outlook

The NetPlay TV team remains focused on delivering against the growth strategy it set out at the start of the year, underpinned by the Group's television broadcast USP and low customer acquisition costs. The coming period has a clear roadmap of deliverables including the new roulette betting game interface, the investment into the new show's aesthetics, HD cameras for the Group's live gaming roulette wheels, additional game variants to complement the existing live offering and the addition of new product verticals.

The B2B business continues to deliver in the second half of the year and the Directors believe there is further opportunities for future growth. The digital marketing team is focused on a number of areas to support its growth strategy including: expanding the affiliates pool through the launch of the Group's own affiliate programme, improve campaign optimisation including customer retargeting and a number of other product and operational initiatives.

As seen in the recent weeks, the market continues to consolidate and the Board remains open to potential M&A opportunities to build scale particularly given the regulatory environment in which the Group operates. NetPlay TV's ability to acquire and integrate has been illustrated by the success of the B2B digital marketing business acquired in the prior year, and with its continued cash generation and strong balance sheet, the Group is well positioned to bolster its organic growth with either bolt-on or transformational M&A opportunities.

NetPlay TV plc

Consolidated statement of comprehensive income

for the six months ended 30 June 2016

NetPlay TV plc

Consolidated statement of financial position

as at 30 June 2016

NetPlay TV plc

Consolidated statement of cash flows

for the six months ended 30 June 2016

NetPlay TV plc

Consolidated statement of changes in equity

for the six months ended 30 June 2016

Notes to the interim results

1. Basis of preparation

The financial information for the year ended 31 December 2015 does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2015 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2015 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the board of directors on 12 September 2016. The financial information in this interim report has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards as adopted for use in the EU (IFRSs). The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 December 2015 and which will form the basis of the 2016 financial statements. A number of new and amended standards have become effective for periods beginning on 1 January 2016, however none of these are expected to materially affect the Group.

2. Segmental Information

The Group has two reportable segments, being the Business-to-Customer ("B2C") and Business-to-Business ("B2B").

B2C consists of all online products and ancillary income. This segment was known as the Online Gaming segment in prior period. The brands operated in this division are Supercasino.com, Jackpot247.com and Vernons.com. These brands operate online gaming and betting products which management deem to have similar economic characteristics and customers, and therefore are aggregated into one reportable segment.

B2B relates to the online marketing, product development and technology business which was acquired in August 2015.

The Board evaluates performance on the basis of segment contribution. This measurement basis excludes head office costs not derived from operations of any segment and are only disclosed in total.

Income statement presentation for the 6 months ended 30 June 2016

Income statement presentation for the 6 months ended 30 June 2015

Income statement presentation for the year ended 31 December 2015

B2C gross income of £15,893,000 (H1 2015: £17,407,000, FY 2015: £33,871,000) comprises of gross gaming income of £14,963,000 (H1 2015: £17,165,000, FY 2015: £33,102,000) and ancillary income of £930,000 (H1 2015: £242,000, FY 2015: £769,000). B2C net revenue of £12,526,000 (H1 2015: £12,748,000, FY 2015: £25,177,000) is the B2C gross income offset by customer incentives of £3,367,000 (H1 2015: £4,659,000, FY 2015: £8,694,000).

Geographical information

3. Earnings per share

Adjusted earnings per share

An adjusted earnings per share, based on the profit before taxation from continuing operations and before the amortisation of intangible assets arising on acquisitions, share based payments and reorganisation costs, has been presented below in order to highlight the underlying trading performance of the Group.

4. Property, plant and equipment

5. Goodwill

6. Intangible assets

7. Share capital

As approved at the Company's AGM which was held on 12 May 2016, the Company undertook a share consolidation on 31 May 2016. The purpose of the share consolidation was to seek, as far as possible, to ensure that the market price of each ordinary share is maintained at a broadly similar level following the approval of the special dividend.

This effect of the share consolidation was to replace every existing 15 ordinary shares of 1 pence each with 14 ordinary shares of  pence each. This was achieved by the Company initially issuing a Minimis number (3) of ordinary shares of 1 pence each to ensure the Company's ordinary share capital is divisible by 15. Following this, each ordinary share of 1 pence each in the capital of the Company was first sub-divided into 14 ordinary shares of  pence each (the "Intermediate Ordinary Shares"). This was immediately followed by a consolidation of every 15 Intermediate Ordinary Shares into one New Ordinary Share of  pence.