Interim Results

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NetPlay TV plc

Interim Results

NetPlay TV plc (AIM: NPT), the interactive gaming company, announces its interim results for the six months ending 30 June 2015*:

Key Performance Indicators

§ 21% increase in new depositing players to 42,305 (H2 2014: 35,102; H1 2014: 40,585)

§ 13% increase in active depositing players to 63,411 (H2 2014: 56,079; H1 2014: 62,356)

§ Net revenue of £12.7m (H2 2014: £12.9m; H1 2014: £14.5m)

Operational Highlights

§ New three year partnership agreement signed with Channel 5/Viacom†

§ Succesful implementation of revised marketing strategy

§ Key KPIs remain strong

§ Launched fully responsive SuperCasino site ensuring a consistent user experience across all devices

§ Increased average revenue per active depositing players across the casino-only brands of £273 (H2 2014: £270; H1 2014: £265)

Financial Highlights

§ Adjusted EBITDA‡ increased to £1.3m versus prior periods on a like-for-like basis (LFL)§ (H2 LFL 2014: £0.1m; H1 LFL 2014: £0.6m)

§ Betting and gaming duties expense of £1.9m (H2 2014: £0.4m; H1 2014: £0.1m) following the introduction of the UK Point of Consumption (POC) duty

§ Marketing expenditure reduced by 24% to £4.5m (H2 2014: £5.9m; H1 2014: £7.1m) as a result of more efficient expenditure

§ Adjusted profit before tax** of £1.1m (H2 2014: £1.2m; H1 2014: £2.1m) and reported profit before tax of £0.2m (H2 2014: loss of £1.1m; H1 2014: profit of £1.2m)

§ Adjusted earnings per share** of 0.37 pence per share (H2 2014: 0.40 pence per share; H1 2014: 0.70 pence per share)

§ Cash and cash equivalents, increase to £15.8m (H2 2014: £14.2m; H1 2014: £14.3m) with net cash generated from online gaming operations†† of £1.0m (H2 2014: £1.1m; H1 2014: £1.9m)

§ Interim dividend maintained at 0.22 pence per share, ex-dividend date Thursday 1 October 2015

Post Period Events

§ Completion of acquisition of Otherside Inc., an specialist online digital marketing, product development and technology company, for a total consideration of £3.2m‡‡

§ Launch of mobile sportsbook product on Vernons.com which is already taking in excess of 50% of all sportbook bets

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

"We are very pleased to report our decisive action at the end of 2014 has delivered such a positive outcome with all of our KPIs holding strong. In a post POC market, our strategy to focus on TV-led customer acquisition, supported by digital marketing, has proved successful.

"We're excited about the opportunities that the acquisition of Otherside Inc. brings to the Group initially providing a profitable revenue stream whilst adding to our capability in driving traffic to NetPlay's brands once the integration is complete. This alongside the Group's solid marketing performance and opportunistic acquisition strategy supported by a robust cash position gives us confidence for the year ahead and beyond."

Enquiries:

Notes to Editors:

About NetPlay TV plc

NetPlay TV plc is admitted to trading on the AIM market of the London Stock Exchange (NPT). The Group operates a number of interactive gaming services under a UK remote operating license and Alderney gaming license, including SuperCasino.com, Jackpot247.com and Vernons.com. Its TV services can also be viewed 24 hours a day live on Sky Channel 862, and every evening on ITV and Channel 5.

The Company 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 from a common integrated wallet.

Operational and Financial Review

The Board is pleased to report that the decisions made at the end of 2014 are bearing fruit with the core KPIs in H1 2015 holding strong. As announced previously, the Board revised its marketing strategy with a view to deliver positive results in the shadow of the new Point of Consumption (POC) duty in the UK§§. This has resulted in total active depositing player increasing by 13% to 63,411 (H2 2014: 56,079; H1 2014: 62,356) and average revenue per active depositing players (across the casino-only brands) increasing to £273 (H2 2014: £270; H1 2014: £265). In addition the Group focused a significant amount of its marketing effort on servicing existing players through targeted customer retention activity which resulted in 62% (H2 2014: 57%; H1 2014: 55%) of all revenue being generated from players who have had an account for over 12 months.

The Group was successful in renegotiating terms with Channel 5 / Viacom to secure its long-term television arrangements. I am pleased to report that in April 2015, the Group signed a new three year partnership agreement, which incorporates the existing post-midnight airtime, supporting pre-midnight media and an option to deliver new show formats. This ensures SuperCasino remains on UK terrestrial TV until December 2018 and is testament to the value this long term relationship brings to both parties and in particular the SuperCasino brand.

From an operational perspective, we are pleased to report that within the period the Group launched the fully responsive SuperCasino site and created the platform to ensure a speedy delivery of Jackpot247 and Vernons brands which will launch later this year. Once complete the player will enjoy a consistent user experience across all devices.

Post period, the Group completed the acquisition of Otherside Inc ("Otherside"), which has given the Group access to a specialist team of digital marketers which will help support the growth of the digital acquisition strategy as well as provide an additional source of income for the Group.

Marketing expenditure & performance

The marketing strategy has always been the key to ensure the Group's success, particularly so in 2015 following the introduction of POC. The change in marketing strategy has been successful; despite the total marketing expenditure decreasing by 24% to £4.5m (H2 2014: £5.9m; H1 2014: £7.1m), total new depositing players have increased by 21% to 42,305 (H2 2014: 35,102; H1 2014: 40,585) showing that overall the Group's cost per acquisition (CPA) has decreased significantly.

The focus on the TV-led player acquisition strategy supported by digital shows that the Group has a firm handle on costs and can continue to drive value from its broadcast partners. Following the acquisition of Otherside Inc. the Group will now look to invest in new sources of player acquisition as we look to grow the business into 2016.

Income statement presentation

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 this section below will focus on the adjusted information.

Like-for-like adjusted EBITDA

The UK POC duty was introduced on 1 December 2014. In order to provide a relative comparative we have created a like-for-like adjusted EBITDA which reflects this headwind to show the impact as if it had been in place during 2014. However the Group would have obtained various contractual offsets (e.g. a reduction in software royalties and revenue-linked marketing expenditure) to reduce the impact of the POC which are also reflected in table below.

Cash flow and cash generation

The table below shows how adjusted EBITDA reconciles to net cash flow from the online gaming operation when stripping out the movement in player balances, working capital, share capital issued, net finance income, reorganisation and other expenses, and dividends paid.

The Group continues to be highly cash generative, with net cash generated from online gaming operations being £1.0m (H2 2014: £1.1m; H1 2014: £1.9m). The Group now has cash and cash equivalents of £15.8m (H2 2014: £14.2m; H1 2014: £14.3m), which net of player balances means there is corporate cash available of £13.9m (H2 2014: £12.1; H1 2014: £12.6m). This is equivalent to 4.7 pence per ordinary share in issue at the 30 June 2015 (4.1 pence per ordinary share in issue at 31 December 2014; 4.3 pence per ordinary share in issue at 30 June 2014).

The positive working capital movement in the period includes timing differences which have been incurred due to the timing of certain payments which have been expensed but not paid. This includes a payment due to HMRC in respect of the POC duty. The reorganisation and other expenses paid relate to items which were expensed in 2014 but were not payable until 2015.

To support our platform for long term growth, during the period the Group has invested in capex associated with software development for the new fully responsive customer facing websites. In addition to this, capital expenditure has been incurred to upgrade the offshore web and hosting environments.

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 to 0.22 pence per share (2014 interim dividend: 0.22 pence per share). The interim dividend will be paid on 22 October 2015 to shareholders on the register on Friday 2 October 2015.

Post period highlights

Acquisition of Otherside Inc

In August 2015, the Group acquired Otherside Inc. an online marketing, product development and technology company. The Board believes the acquisition of Otherside will provide NetPlay with a number of key benefits, including:

· A robust media platform and specialist staff which enables the Group to control and tailor its digital marketing strategy;

· Opportunity to deliver additional traffic to the Group's existing brands; and

· Diversify the Groups source of revenue.

The acquisition strategically aligns with our core business and supports our digital strategy across the Group's brand portfolio. Details of the terms of this acquisition are disclosed in Note 9.

Product developments

We are very pleased to announce the successful launch of our mobile sportsbook product on Vernons, which following limited promotion now takes over 50% of our total sportsbook stakes. To support the sportsbook we have also agreed terms with PlayTech to launch virtual sports across Vernons mobile and desktop as well as the SuperCasino and Jackpot brands. The Group has applied for a Virtual Sports license from the UKGC and we are hopeful that this will be granted in the coming weeks.

With the launch of mobile sportsbook and the imminent release of virtual sports we now have an opportunity and scope to market the brand through a Vernons sports marketing campaign.

As highlighted in the operational overview we have launched a fully responsive SuperCasino web/mobile site and platform which will allow us to roll out the new Jackpot247 and Vernons sites before the end of the year. All three of the Group brands will also benefit from the release of new content across mobile and desktop. With over 30 web and 80 mobile titles still to release this year we are confident our players will continue to choose our brands as their favourite place to play.

H2 Outlook

As the Group moves into the second half of the year we remain focused on delivering against the growth strategy we set out at the start of the year.

Over the recent weeks and months, it is clear that the sector is rapidly consolidating, brought about by the introduction of POC. The Board continues to review potential M&A opportunities to take advantage of the changing market conditions and the opportunities that will arise. However any deal will need to be value enhancing and right for Netplay, and to that end the Board has already considered and rejected a number of M&A opportunities which have been identified and reviewed but which were not seen as representing value for shareholders.

Having seen great potential in Otherside, the NetPlay team is working to complete the integration into the Group and then start the process of driving traffic to the Group's brands.

NetPlay TV plc

Consolidated statement of comprehensive income

for the six months ended 30 June 2015

NetPlay TV plc

Consolidated statement of financial position

as at 30 June 2015

NetPlay TV plc

Consolidated statement of cash flows

for the six months ended 30 June 2015

NetPlay TV plc

Consolidated statement of changes in equity

for the six months ended 30 June 2015

Notes to the interim results

1. Basis of preparation

The financial information for the year ended 31 December 2014 does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2014 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2014 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 14 September 2015. 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 2014 and which will form the basis of the 2014 financial statements. A number of new and amended standards have become effective for periods beginning on 1 January 2015, however none of these are expected to materially affect the Group.

2. Segmental Information

The Board is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance. The Group has one reportable segment, being the online gaming segment. This division consists of all online products and ancillary income. The brands operated in this division are SuperCasino.com, Jackpot247.com and Vernons.com which are aggregated into one reportable segment.

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

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. Deferred tax

Deferred income tax assets are recognised for tax loss carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable.

6. Goodwill

7. Intangible assets

8. Share capital

9. Subsequent events

On 12 August 2015 the Group acquired the trade and assets of Otherside Inc., an online marketing, product development and technology company, for total consideration of £3.2m. This acquisition is expected to provide a number a key benefits to the Group including:

· A robust media platform and specialist staff enabling the Group to control and tailor its digital marketing strategies.

· Synergies within the Group's existing gaming operations, delivering additional traffic to the Group's existing brands as well as a marketing skillset complimentary to its core products.

· The diversification of NetPlay's revenue by maintaining Othersides' current revenue streams and growing this business by building on the success of the marketing company to date.

The consideration for the trade and assets comprises of an initial consideration of £2.7m and a further consideration of £0.5 m is payable over 12 months subject to the vendor completing certain deliverables as well as the continued employment of certain key individuals.