25th Sep 2006 13:58
Gaming VC Holdings S.A.25 September 2006 The following replaces the Interim Results announcement released earlier today,25 September 2006 under RNS No. 3896J. The record date for the dividend hasbeen amended to 6 October 2006. The full amended release appears below. Press Release 25 September 2006 Gaming VC Holdings S.A. ("Gaming VC" or "the Group") Interim Results Gaming VC Holdings S.A. (AiM:GVC), a leading European online casino provider,today announces its Interim Results for the six months ended 30 June 2006. Financial Highlights• Interim revenue and profits in line with market expectations• Revenues of €21.2 million show recovery to H1 2005 levels (2005: H1 €21.3 million H2 • 19.2 million) as a result of direct mail marketing campaigns• Gross profit of €15.7 million (2005: H1 €16.5 million H2 €14.3 million)• Operating profit of €6.8 million (2005: H1 €11.2 million H2 €2.2 million)• Profit before tax €6.7 million (2005: H1 €11.1 million H2 €1.2 million)• Basic earnings per share €0.21 (2005: H1 €0.36 H2 €0.05)• Soft launch of Russian language casino with Russian joint venture partner• Increased marketing spend on poker• September revenue below expectations• Second half anticipated to be materially below expectations• Recommended interim dividend of 13 pence per share (2005: H1 21 pence H2 21 pence) Business Highlights H1 2005 H2 2005 H1 2006New registrations 13,200 19,600 26,900New depositing customers 8,100 9,900 12,700Daily average revenue €117,500 €106,350 €117,000 Commenting on the results, Steve Barlow, Chief Executive of Gaming VC, said: "Performance in the first half of 2006 was strong, however, as we anticipatedthe months of July and August have showed some seasonal weakness. In addition,due to unforeseen direct mail disruptions, combined with an extremely hot summerand post World Cup weakness, our Casino business has also been further impacted.Hopes for a September recovery have not yet fully materialised and therefore webelieve that the outcome of second half is likely to be affected. "In order to try and overcome many of these issues, the Group has continued itsinvestment into alternate channels, games and territories, as well asstrengthening the Board and the management team. As in the past, the Group willlook to return excess capital to shareholders in the form of a dividend and theBoard will continue to work hard towards delivering shareholder value for thefull year." - Ends - For further information:Gaming VC Holdings S.A.Steve Barlow, Chief Executive Tel: +44 (0) 20 7398 [email protected] www.gamingvc.com Media enquiries:AbchurchHenry Harrison-Topham / Franziska Boehnke Tel: +44 (0) 20 7398 [email protected] www.abchurch-group.com Operating and Financial Review Overview The results for the six months ended 30 June 2006 show a gross profit of €15.7million (six months to 30 June 2005 €16.5 million). This represents an increaseof 10% on the gross profit in the second half of last year. The net profit of€6.8 million (six months to 30 June 2005: €11.0 million) was an increase of over300% on the second half of last year. Earnings per share on profit after taxwere €0.21 (H1 2005: €0.36). The Group reported in July 2006 that the first half performance was satisfactorywith the business objectives for both organic and geographic growth continuing.Revenue growth has continued and the Group delivered on its promise of a formalcontract with a Russian joint venture partner which has already led to the softlaunch of a Russian language casino. New marketing channels have been established, including an internet newsletterfor existing customers, the introduction of local educational poker events inGermany and the development of a TV campaign that refers players to aneducational 'not for gain' website which is due to launch in the fourth quarter. Operations The performance in our casino operations was strong throughout the first half ofthe year and marketing innovations executed in June for the World Cup kept bothrevenue and net profit at the half year in line with our expectations. The anchor marketing campaign has now been operating for twelve months and thecore business has recovered to the H1 2005 revenue levels as shown below: H1 2005 H2 2005 H1 2006New registrations 13,200 19,600 26,900New depositing customers 8,100 9,900 12,700Daily average revenue €117,500 €106,350 €117,000 Phase two of the Spanish marketing campaign went live in March 2006. However,the reactive feedback controls which are integral to Gaming VC marketingindicated that the acquisition cost per new player remained unattractive inrelation to other potential opportunities. The Spanish language Casino willremain live but all material marketing promotions in the Iberian Peninsula havenow been wound down. The Group's poker business has experienced growth, but to date this growth hasnot offset the apparent slowdown in the higher gross margin casino revenuegrowth. Poker is also a very competitive and crowded market. The Group will invest resources to increase poker revenue through hostingregional tournaments, focusing on education. Early trials have been extremelyencouraging, and the Group is currently preparing a TV initiative to utilise theCasino Club brand awareness and strength. The direct mail marketing campaign experienced interruptions due to newproviders learning the business, and concerns from existing suppliers due to theincreased regulatory actions in Europe. We believe that the former issues arelikely to be short term but the latter will require the Group to reassess theemphasis of the marketing strategy and revise it appropriately. The Group is not aware of any regulatory change since the business was floatedfor online gaming companies in Europe. The general regulatory environment in2005 appeared to be liberalising but since the summer of 2006 there is aperception that this has reversed in the marketplace. The online gamingenvironment remains challenging, and the Group continues to monitor closely thedevelopments across applicable regulatory environments. This forms part of theGroup's risk assessment processes. Competitors in the online gaming industry have been challenged this summer inboth the US and in certain European markets. Gaming VC continues not totransact any wagering activity on behalf of players in the United States, and inEurope, the Group does not operate a sportsbook. As anticipated the months of July and August showed some seasonal weakness. Inaddition, due to unforeseen direct mail disruptions, combined with an extremelyhot summer and post World Cup weakness, the business was further impacted. Anexpected strong September pickup after the summer has not materialised and thethird quarter is expected to produce a daily average revenue of €102,000 (Q32005: 98,500) against the €126,000 which was originally projected. The shortfall is attributed to increased competition from competitive poker operationsattracting Casino Club members' discretionary spend, and the operationalchallenges discussed above. This will affect the Group's second half resultswhich are anticipated to be materially below our original expectations. New territories In July 2006, after over nine months of groundwork and negotiation, a marketingpartnership was agreed to promote the recently launched Russian language Casino.Gaming VC's Russian partner will provide the local knowledge needed to supportrevenue growth. With the full framework in place, a full marketing programmefocussed on Moscow, will be rolled out, over the balance of this year. Group Financial performance Total gross wagers placed, excluding poker, were €787 million (H1 2005: €880million), and net revenues were €21.2 million (H1 2005: €21.3 million). Thegross profit for the first six months of 2006 was €15.7 million (H1 2005: €16.5million) with the Group's primary cost of service sold being the turnkey onlinecasino services provided by Boss Media S.A. and its subsidiaries. In the six months to 30 June 2006 there were no significant one-off jackpotwinners in the Group's slot machine games with associated 'progressive'jackpots. The total of the available jackpots at the end of June 2006 was €2.2million (30 June 2005: €1.3 million) with the largest individual jackpot being€1.2 million (30 June 2005: €0.7 million). In both July and August 2006jackpots of over €150,000 were won by Casino members. The Group operating profit for the six months to 30 June 2006 was €6.8 million(H1 2005: €11.2 million) after the deduction of distribution and administrativeexpenses. The significant change from 2005 is primarily due to the launching ofthe acquisition direct mail marketing campaign in the second half of 2005. Thisaddressed a significant erosion in Casino membership and associated revenue. Distribution costs of €3.6 million (H1 2005: €0.9 million) reflect the thirdparty marketing costs incurred by the Group to recruit active members to theCasino. Approximately €2.7 million was related to direct mail and theCasino-Club magazine, and the balance on testing alternative marketingtechniques, poker promotion, a trial in Spain, and planning for the Russiancasino. The level of ongoing spend will be greater to support the increasedpoker marketing activities. The major items within the administrative expenses incurred for the first halfof 2006 are detailed below: 6 month period 6 month period ended ended 30 June 2006 30 June 2005 •'000 •'000 Direct employment costs 1,473 847Share options charge 636 144Legal, accounting and tax 719 903Amortisation of intangible assets 1,435 1,395All other costs 997 1,148 Total administrative expenses 5,260 4,437 The increase in employment costs reflects the fact that the business waseffectively a start up in 2005 and many employees were recruited in the firstsix months of 2005. The share options charge has increased as employee stockoptions were granted to most of the employees in the period between June 2005and June 2006. The 2005 legal, accounting and tax costs are significantly higher than 2006 asthey include a 'one-off' charge for a full audit of the Group's Interim resultsin 2005 (€0.2 million). The amortisation of intangible assets is a non-cash charge that primarilyreflects the reduction in economic value over the useful lives of thoseintangible assets acquired on the purchase of the Casino business in December2004. In accordance with the Group's policy a full review of the carrying valueof these assets will occur at the year end. The trading and commercialenvironment between now and the end of the first quarter of 2007 will have amajor impact on the review. The Group has been structured to provide maximum earnings efficiency through theuse of advantageous tax treaties between countries where the Group hasestablished legal entities. The result of this is a nil tax charge for thefirst six months of 2006 (H1 2005: €0.01 million). The Group periodicallyreviews all of the relevant and controlling tax regulations to optimise theavailable benefits. A Group effective tax charge of less than 2% of net profitis envisaged to continue for the foreseeable future. In the reporting period the Group generated €8.9 million (H1 2005: €11.9million) from operating activities. After payment of the 2005 final dividend of€9.6 million during the period, the Group's closing cash balance at 30 June 2006was €6.3 million (2005: €12.1 million). Dividend The core business is cash generative and excess capital will continue to bereturned to shareholders. With the commitments to develop the poker businessand the reduction in expected income in 2006 the Board proposes to pay aninterim dividend of 13 pence (gross) (c€0.2) per share (H1 2005: 21 pence).This will consume a total of 4,047,649 GBP (c• 6.0 million) in cash (H1 2005:6,538,511 GBP (c• 9.6 million). The dividend will be paid on 31 October 2006 toholders on the share register at 6 October 2006. Outlook As stated above, given the poor trading experienced in the third quarter of2006, we envisage the results for the year will be materially below our originalexpectations. However, the Group expects to deliver growth in its Germanspeaking markets. The rate of this growth will be impacted by the level ofuncertainty over regulation of online gaming in the markets in which the Groupconducts business. In addition, whilst some uncertainty remains in the Group's core markets,significant effort will be put into developing business in new markets. As previously stated, the Group's strategy is to only commit funds to newmarkets once initial testing stage has proven the market to be viable. This hasbeen achieved in the Russian market and we will subsequently look to roll outthe new Russian casino over Q4 2006. Steve Barlow Nigel Blythe-TinkerChief Executive Chairman Consolidated Income Statement 6 month 6 month 6 month For the period ended 30 June 2006 Period Period Period Year ended ended ended ended 30 June 30 June 31 December 31 December 2006 2005 2005 2005 (Unaudited) (Audited) (Unaudited) (Audited)In thousands of euro Revenue 21,208 21,269 19,174 40,443Cost of Sales (5,523) (4,794) (4,883) (9,677)Gross profit 15,685 16,475 14,291 30,766 Distribution expenses (3,617) (859) (6,551) (7,410)Administrative expense (5,260) (4,437) (5,557) (9,994)Operating profit before financing costs 6,808 11,179 2,183 13,362 Financial income 31 16 30 46Financial expense (163) (138) (463) (601)Net financing costs (132) (122) (433) (555) Profit before tax 6,676 11,057 1,750 12,807Income tax expense - (13) - (13)Profit for the year/period 6,676 11,044 1,750 12,794 Basic earnings per share (euro) 0.21 0.36 0.05 0.41Diluted earnings per share (euro) 0.21 0.35 0.05 0.41 Consolidated statement of recognised 6 month 6 month 6 month income and expense Period Period Period YearFor the period ended 30 June 2006 ended ended ended ended 30 June 30 June 31 December 31 December 2006 2005 2005 2005 (Unaudited) (Audited) (Unaudited) (Audited)In thousands of euro Profit and total recognised income and 6,676 11,044 1,750 12,794expense for the period Consolidated Balance Sheet 30 June 31 30 JuneAs at 30 June 2006 2006 December 2005 2005 (Unaudited) (Audited) (Audited)In thousands of euro AssetsProperty, plant and equipment 73 46 55Intangible assets 101,440 102,752 104,159Total non-current assets 101,513 102,798 104,214 Trade receivables 2,220 2,151 3,192Prepayments 553 531 -Cash and cash equivalents 6,328 7,233 12,058Total current assets 9,101 9,915 15,250Total assets 110,614 112,713 119,464 EquityIssued share capital 38,608 38,608 38,608Share premium 57,927 67,522 67,522Retained earnings 11,421 4,109 11,582Total equity attributable to equity holders of the 107,956 110,239 117,712parent LiabilitiesTrade and other payables 1,388 1,158 1,248Accrued expenses 1,270 1,316 504Total current liabilities 2,658 2,474 1,752Total liabilities 2,658 2,474 1,752Total equity and liabilities 110,614 112,713 119,464 Consolidated Statement of Cashflows 6 month 6 month 6 month Year endedFor the period ended 30 June 2006 Period ended Period Period 31 30 June ended ended December 2006 30 June 31 2005 2005 December 2005 (Unaudited) (Audited) (Unaudited) (Audited)In thousands of euro Cash flows from operating activitiesCash receipts from customers 21,141 19,828 19,083 38,911Cash paid to suppliers and employees (12,220) (7,950) (14,016) (21,966)Net cash from operating activities 8,921 11,878 5,067 16,945 Cash flows from investing activitiesInterest received 30 15 31 46Acquisition of property, plant and (44) (65) (2) (67)equipmentAcquisition of intellectual property (105) (75) - (75)Net cash from investing activities (119) (125) 29 (96) Cash flows from financing activitiesPayment of transaction costs - (849) (18) (867)Dividend paid (9,595) - (9,559) (9,559)Net cash from financing activities (9,595) (849) (9,577) (10,426) Net (decrease) /increase in cash and cash (793) 10,904 (4,481) 6,423equivalentsCash and cash equivalents at beginning of 7,233 1,270 12,058 1,270the period/yearEffect of exchange rate fluctuations on (112) (116) (344) (460)cash heldCash and cash equivalents at end of the 6,328 12,058 7,233 7,233period/year Statement of Changes in Shareholders Equity Share Share Retained Total Capital premium earningsIn thousands of euroAt 31 December 2004 38,608 67,522 383 106,513Equity settled transactions net of tax - 155 155Total recognised income and expense - - 11,044 11,044Balance at 30 June 2005 38,608 67,522 11,582 117,712 Balance at 1 July 2005 38,608 67,522 11,582 117,712Equity settled transactions net of tax - - 336 336Dividend paid in period - - (9,559) (9,559)Total recognised income and expense - - 1,750 1,750Balance at 31 December 2005 38,608 67,522 4,109 110,239 Balance at 1 January 2006 38,608 67,522 4,109 110,239Equity settled transactions net of tax - - 636 636Dividend paid in period (9,595) - (9,595)Total recognised income and expense - - 6,676 6,676Balance at 30 June 2006 38,608 57,927 11,421 107,956 Notes to the interim consolidated financial statements Basis of preparation Gaming VC Holdings SA (the ''Company'') is a company registered in Luxembourg.These interim consolidated financial statements are presented in accordance withthe requirements of IAS 34 Interim Financial Reporting. The accounting policiesused in the preparation of the interim financial statements comply with theInternational Financial Reporting standards ("IFRS") as adopted by the EuropeanUnion. They are consistent with those used in the annual financial statementsfor the year ended 31 December 2005. This interim report contains the unaudited financial information of the Companyand its subsidiaries (together referred to as the "Group") for the 6 monthsended 30 June 2006. The interim financial statements were authorised for issue by the Directors on24 September 2006. These interim financial statements should be read in conjunction with the 2005consolidated financial statements. 1 Segment reporting Segment information is presented in respect of the Group's business andgeographical segments. Business segments Based on risks and returns the management considers that the primary reportingformat is by business segment. The Directors consider that there currently isonly one business segment being the casino operation of games of chance.Therefore the disclosures for the primary segment have already been given inthese financial statements. A second business segment of skill based gameswhich was launched in the last quarter of 2005 only achieved revenue of €798,000to the half year which has been included in games of chance. It is expected tobe sufficiently material to be disclosed separately in the full year accountsfor 2006. Geographical segments Within the year the core business activity has been concentrated in the Germanlanguage countries. Development specifically tailored for other European language countries isongoing. Owing to current legislation in the US the company continues to blockaccess to its games to potential players located there. Segment capital expenditure is the total cost incurred during the year toacquire segment assets that are expected to be used for more than one year. In presenting information on the basis of geographical segments, segment revenueis based on the geographical location of customers. Segment assets are based onthe location of the assets themselves. Geographical segments Germany Austria Other Countries ConsolidatedIn thousands of euro 2006 2005 2006 2005 2006 2005 2006 2005 Revenue from games of 16,214 30,293 3,714 7,742 1,280 2,408 21,208 40,443chanceSegment assets - - - - 110,614 112,713 110,614 112,713Capital expenditure - - - - 149 142 149 142 2 Taxation The group has been structured to provide maximum earnings efficiency through theuse of advantageous tax treaties between countries where the Group hasestablished legal entities. The result of this structuring is a total taxcharge of €0.01 million in H1 2005 and •Nil in H1 2006. The Group periodicallyreviews all of the relevant and controlling tax regulations to optimise theavailable benefits. A Group effective tax charge of less than 2% of net profitis envisaged to continue for the foreseeable future. 3 Dividends A dividend in respect of the financial year 2005 of GBP 0.21 per share wasdeclared by the Annual General Meeting held on 16 May 2006 and paid on 22 May2006. 4 Earnings per share The calculation of basic earnings per share at 30 June 2006 was based on theprofit for the period attributable to ordinary shareholders of €6,676,000 (2005interim: €11,044,000; full year: €12,794,000) and on a weighted average numberof ordinary shares in issue during the period, which totalled 31,135,762 shares(2005 interim: 31,135,762; full year: 31,135,762). The calculation of diluted earnings per share at 30 June 2006 was based on theprofit attributable to ordinary shareholders of €6,676,000 (2005 interim:€11,044,000; full year: €12,794,000) and on a weighted average number ofordinary shares outstanding at 30 June 2006 of 31,135,762 shares (2005 interim:31,382,665; full year: 31,135,762). The share options issued in the period are anti-dilutive and have had no impacton the calculation of the diluted earnings per share. - Ends - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
GVC.L