Latest Results
Interim Results
Gaming VC Holdings S.A., (AIM:GVC) a leading European online gaming company, today announces its interim results for the six months ended 30 June 2009.
Interim Highlights
- Net Gaming Revenue ("NGR") of €26.5 million, up €2.5 million (10%) on H2-08 and €0.4 million on H1-08
- Gross profits increased 4.4% to €22.0 million (H1-08: €21.1 million)
- Clean EBITDA* up to €8.9 million from €8.7 million in H2-08
- Basic earnings per share of €0.26 (H1-08: €0.33)
- Interim dividend per share of €0.20 unchanged, and payable on 6 November 2009
- Net cash resources increased to €20.8 million, equivalent to approximately 60p per share
* before share option charges and exceptional items
Q3 2009 Highlights
- Entered South American market with acquisition of betboo.com for €3 million
- Proposed redomiciliation of the Group from Luxembourg to the Isle of Man
Commenting on the results, Kenneth Alexander, Chief Executive of Gaming VC, said: "I am pleased to report that, despite the challenging economic conditions, we have achieved a strong set of interim results including improvements in both Net Gaming Revenue and gross profit compared to the same period last year, and more importantly to the second-half of 2008. Our strategy of geographic diversification continues and has been underpinned by our move into South America through the completion of our acquisition of betboo.com. I am encouraged with current trading in the third quarter and remain confident about our prospects for the second half of the year."
Chief Executive's Statement
Introduction and financial overview
I am pleased to announce a strong set of interim results against the background of a global recession and reduced consumer spend across Europe. Compared with the six months to 31 December 2008, where many other e-gaming companies reported a drop in revenues, the Group's Net Gaming Revenue ("NGR") rose to €26.5 million from €24.0 million. NGR was also higher than in the first six months of 2008 (€26.1 million).
Player numbers in the six months to 30 June 2009 have not decreased, but Gaming VC has seen some reduction in yields from high roller customers in its German casino, casinoclub.com. This business had over 13,000 unique real-money customers during the six month period, and over 4,800 customers spending (or winning) over €500 during the period.
Stakes on sports events rose to €31.8 million, up from €22.5 million in H1-08 and €28.3 million in H2-08. Sportsbook margins, for the six months ended 30 June 2009 were 16.3% (H1-08: 14.7%), but adverse Italian football results at the end of the season resulted in margins for Q2-09 being 8.8% (Q2-08: 13.9%).
The Group's product and geographical diversification strategy is bearing fruit, with Germany now only representing 45% of NGR (H1-08: 61%), and sports representing 18% (H1-08: 12%). The Board is extremely excited about the Group's recent acquisition of Betboo; not only does it cement Gaming VC's geographic diversification but it also provides the Group with an entry point into the Latin American marketplace which we believe will be one of the fastest growing e-gaming markets..
As more fully reported in the financial review, clean ebitda at €8.9 million was higher than H2-08 (€8.7 million) but lower than H1-08 (€10.9 million), as expected by the Board given the overall economic weakness in the European economies. Operating costs remained flat.
Current trading
Current trading has been encouraging. Despite the high percentage of favourites winning in the early weeks of the football season, Q3-09 sports margins exceeded 12% in the 85 days to 23 September 2009. Daily average gaming revenues for the 85 day period to 23 September 2009 were at a similar level to Q3-08.
Post acquisition, Betboo has continued to grow and trade well. For the first 85 days of Q3-09, average daily revenues were Brazilian Reais 33k (€12k), 25% higher than the same period last year. The launch of casino and poker has now been successfully integrated into the sportsbook and bingo product.
Cash at bank and in hand, at 18 September 2009 (the last date when consolidated figures are available) was €20.5 million (approximately GBP 0.60p per share).
Regulation
The Board continues to monitor the regulatory framework closely. The outcome of the recent Bwin/Portugal case does not directly affect the Group and its operations.
Redomiciliation to Isle of Man
In August 2009, the Group announced its intention, pending formal approval from shareholders, for a redomiciliation from Luxembourg to the Isle of Man. Under the AIM rules, a circular will be sent to shareholders pertaining to the Group's proposed redomiciliation.
Dividend
The Board has declared an interim dividend per share of €0.20 (2008: €0.20) payable on 6 November 2009 to holders on the register at the close of business on 6 October 2009.
Additional analysis and comments on the financial performance and financial position are included in the Financial Director's Report.
We remain confident about our prospects for the rest of the year.
Kenneth Alexander
Chief Executive
25 September 2009
Group Finance Director's Statement
Net Gaming Revenue ("NGR")
NGR is stated after ordinary winnings, jackpot winnings, chargebacks, and promotional bonuses. Revenues for the first half of 2009 were €26.5 million, €2.5 million (11%) higher than H2-08 and €0.4 million higher than the same period last year (€26.1 million). The break down between gaming and sports revenues is as follows:
| H1 2009 | H1 2008 | H2 2008 | |
| € million | € million | € million | |
| Gaming revenues | €21.6 | €22.9 | €20.9 |
| Sport revenues | €4.9 | €3.2 | €3.1 |
Non-German revenues continue to increase, and reached €14.6 million representing 55% of total revenues, compared to €10.2 million (39%) in the first half of 2008 and €12.7 million (55%) in the second half of 2008.
Sports margins held up at 16.3% (H1-08: 14.7%; H2-08: 11.9%). This was despite the unfavourable impact arising from the soccer results in the closing weeks of the season.
Gross profits
Gross profit percentages at 83% were consistent with H2-08 and marginally higher than H1-08.
Contribution
Contribution is defined as gross profits less marketing costs and affiliate commissions and similar.
Contribution, at €13.5 million was 8% higher than H2-08 (€12.5 million), but lower than H1-08 (€15.4 million). This reflects a greater proportion of lower margin non-German business. Encouragingly, contribution from sports rose 110% from €0.7 million in H1-08 to €1.5 million, in H1-09.
Operating expenses
The total operating expenses, which now include the costs for Winzingo, were €5.5 million, 6% higher than H1-08, mainly as a result of €0.3 million of exceptional charges relating to restructuring the Italian and Tel Aviv operations. Share option charges under IFRS 2 fell as more options reached the end of their vesting period.
All other operating expenses were flat at €4.6 million. Personnel costs, at €2.5 million, were lower than H1-08 (€2.6 million) but higher than H2-08 (€2.2 million) largely reflecting the costs for Winzingo. Professional fees, €0.6 million, dropped by a third over H1-08 (€0.9 million) and remained flat with H2-08. Office running costs, €1.2 million were higher than both H1-08 (€0.8 million) and H2-08 (€1.0 million), reflecting a full period of operations in Malta, Italy and Tel Aviv. An analysis of these costs is shown below:
| €000's 6 months To June 2009 |
€000's 6 months To June 2008 |
€000's 12 months To Dec 2008 |
|||
| Personnel expenses (other than share option charges) | 2,465 | 2,634 | 4,817 | ||
| Professional fees - Fort Knox | - | (32) | (384) | ||
| Professional fees - Other | 598 | 924 | 1,486 | ||
| Office running | 1,184 | 756 | 1,755 | ||
| Foreign exchange differences | 104 | 13 | 36 | ||
| Other | 288 | 280 | 674 | ||
| Total | 4,639 | 4,575 | 8,384 |
Foreign exchange differences arose principally on the settlement of certain GBP accruals, translated at the year-end rate of 1.0342 Euro to GBP. They were settled when the GBP had strengthened to around 1.15 Euro.
The Group's operating and accounting currency is the Euro, but it has a small exposure to both GBP and Israeli Shekels. Following the acquisition of Betboo, the Group has a currency exposure to the Brazilian Reais, but this is expected to be minimal for the next 24 months. On an exceptional basis, the Group hedges its currency exposures, as it did for the forward purchase of the initial purchase price for Betboo (€3 million).
Depreciation and amortisation
Charges for the period were €0.4 million, which is level with H2-08 (€0.4 million) but a little higher than the first half of 2008 (€0.3 million)
Financial income and expense
The dramatic reduction in global interest rates has led to a fall in interest earnings in the first half of 2009 to €0.1 million, down from €0.3 million in H1-08 and €0.3 million in H2-08.
Corporate Taxation
The Group's tax charge was derived primarily from its operations in Malta, where it started trading in August 2007 and became profitable in 2008. Tax is charged at 35% and reduced to 4.17% via a reclaim made by the holding company.
Property, plant and equipment
The Group continued to upgrade its plant and equipment, making additions of €0.2 million during the period.
Intangible assets
A further €0.1 million of additions was made during the period in order to upgrade various websites.
Net current assets, cash and treasury matters
The Group had €21.2 million of net current assets at 30 June 2009 (30 June 2008: €18.9 million), an increase of 12.2%.
The components of the cash balances, €20.8 million (30 June 2008: €18.6 million) were, in Euro equivalents:
| €000’s 30 June 2009 |
€000’s 30 June 2008 |
€000’s 31 Dec 2008 |
|||
| Own funds | 19,751 | 17,995 | 17,502 | ||
| Client funds | 1,037 | 615 | 997 | ||
| Funds held in escrow for founder shareholders | - | - | 335 | ||
| 20,788 | 18,610 | 18,834 | |||
| And split by currency: | |||||
| Euros | 17,795 | 18,456 | 18,651 | ||
| US dollars | 112 | 51 | 22 | ||
| GB Pounds | 2,879 | 103 | 147 | ||
| Other | 2 | - | 14 | ||
| 20,788 | 18,610 | 18,834 | |||
| And analysed by bank: | |||||
| Barclays | 15,764 | 16,046 | 17,185 | ||
| Bank of Valetta | 4,735 | 2,437 | 1,000 | ||
| Other | 289 | 127 | 649 | ||
| 20,788 | 18,610 | 18,834 |
Since 31 December 2008, cash balances have increased by €2.0 million. The constituents of this increase are shown below:
Profits before tax |
€000's 8,109 |
||
| Add back: | Depreciation | 351 | |
| Amortisation | 70 | ||
| Share option charges | 88 | ||
| 509 | |||
| Deduct | Purchase of non-current assets | (231) | |
| Payment of taxes (net) | (1,305) | ||
| Escrow funds remitted | (335) | ||
| Movement in working capital | 1,434 | ||
| Net increase in funds before Payment of dividends |
8,181 |
||
| Dividends paid | (6,227) | ||
| Increase in cash and cash equivalents | 1,954 | ||
| Cash at 30 June 2009 | 20,788 | ||
| Cash at 31 December 2008 | 18,834 | ||
| 1,954 |
Receivables and prepayments at 30 June 2009 were €4.5 million, down €1.6 million from €6.1 million at 30 June 2008. €1.0 million of this reduction was attributable to the write-down, in the second half of 2008, of the working capital loan to Winzingo.
Trade and other payables were €4.7 million at 30 June 2009, down €0.7 million from €5.4 million at 30 June 2008. Around €0.5 million of this reduction was due to the Malta/Italy set-up costs, incurred in H1-08 and accrued at the time, but paid subsequently.
At 30 June 2009, the Group had tax recoverable of €2.0 million and tax payable of €1.2 million. The tax recoverable is from the Maltese tax authorities and the timetable for refund is in Q2-10. The tax is payable at around the same time.
Taxation arises as the Group's principal operating subsidiary is GVC Corporation Limited, a company incorporated in Malta and granted a license by the LGA (the Lotteries and Gaming Authority). The headline rate of corporation tax is 35%. Reclaims of tax are possible provided that the profits of this company are distributed. The post-refund rate of tax nets to 4.17%.
Taxation on activities in the Netherlands Antilles is at 2%, but is sheltered by tax losses created by the write-down of intangible assets in 2006.
To the extent that the Group's subsidiary in Cyprus (which in turn owns 100% of the shares in the Netherlands Antilles company and the Group's Jersey company) receives dividends from profits deemed to have been earned from "non-trading" income, then a non-recoverable 10% withholding tax applies.
As announced on 27 August 2009, the Company will be seeking shareholder approval to re-domicile to the Isle of Man. This should lead both to financial advantages (no 15% withholding tax on dividends) and to operational advantages (shares become CREST eligible). At the same time, the Group is also currently undertaking some internal corporate restructuring to reduce the number of companies in the Group and to improve its ability to upstream profits without incurring withholding tax.
On 2 July 2009, the Group paid US$4 million (€3 million) as initial purchase consideration for the business and assets of betboo.com. The acquisition comprised an initial consideration and an earn-out, payable in three stages, dependent on profits in the three accounting periods ending 30 June 2010, 2011, and 2012. The maximum earn-out is US$26 million. The cash out-flows in respect of the earn-out are anticipated to be negligible until the final earn-out period (year ended 30 June 2012) and any earn-out for this will be payable in Q4-12.
Richard Cooper
Group Finance Director
25 September 2009
Consolidated Income Statement
For the six month period ended 30 June 2009
| Six month period ended 30 June 2009 (Unaudited) |
Six month period ended 30 June 2008 (Unaudited) |
Year ended 31 Dec 2008 (Audited) |
||||
| Notes | €000’s | €000’s | €000’s | |||
| Net Gaming Revenue | 3 | 26,509 | 26,126 | 50,085 | ||
| Cost of sales | 4 | (4,479) | (5,025) | (9,163) | ||
| Gross profits | 4 | 22,030 | 21,101 | 40,922 | ||
| Marketing and affiliate costs | 5 | (8,511) | (5,666) | (12,990) | ||
| Contribution | 5 | 13,519 | 15,435 | 27,932 | ||
| Operating costs (as below) | 6 | (5,464) | (5,159) | (11,574) | ||
| Other operating costs | (4,639) | (4,575) | (8,384) | |||
| Share option charges | (88) | (276) | (557) | |||
| (4,727) | (4,851) | (8,941) | ||||
| Exceptional items | 7 | (316) | - | (1,917) | ||
| Depreciation and amortisation | (421) | (308) | (716) | |||
| Operating profit | 8,055 | 10,276 | 16,358 | |||
| Financial income | 54 | 261 | 551 | |||
| Financial expense | - | - | (6) | |||
| Profit before tax | 8,109 | 10,537 | 16,903 | |||
| Taxation (charge)/income | 8 | (166) | (218) | (360) | ||
| Profit after taxation | 7,943 | 10,319 | 16,543 | |||
| Earnings per share | € | € | € | |||
| Basic | 9 | 0.255 | 0.331 | 0.531 | ||
| Diluted | 9 | 0.251 | 0.323 | 0.521 | ||
Consolidated Statement of Comprehensive Income
For the six month period ended 30 June 2009
| 6 month period ended 30 June 2009 (Unaudited) | 6 month
period ended 30 June 2008 (Unaudited) |
Year
ended 31 Dec 2008 (Audited) |
|||
| €000’s | €000’s | €000’s | |||
| Profit and total recognised income and expense for the period | 7,943 |
10,319 |
16,543 |
Consolidated Statement of Financial Position
As at 30 June 2009
| 30 June 2009 (Unaudited) | 30 June 2008 (Unaudited) | 31 Dec 2008 (Audited) | ||||
| €000’s | €000’s | €000’s | ||||
| Assets | ||||||
| Property, plant and equipment | 10 | 1,356 | 1,469 | 1,538 | ||
| Intangible assets | 10 | 55,871 | 55,976 | 55,879 | ||
| Deferred tax asset | 8 | 5 | 11 | 11 | ||
| Total non-current assets | 57,232 | 57,456 | 57,428 | |||
| Receivables and prepayments | 11 | 4,516 | 6,058 | 6,367 | ||
| Corporation Tax reclaimable | 8 | 2,001 | - | 2,611 | ||
| Cash and cash equivalents | 20,788 | 18,610 | 18,834 | |||
| Total current assets | 27,305 | 24,668 | 27,812 | |||
| Liabilities | ||||||
| Trade and other payables | 12 | (4,712) | (5,401) | (5,477) | ||
| Corporation Taxes payable | 8 | (1,205) | (236) | (2,982) | ||
| Other taxes payable | (186) | (157) | (173) | |||
| Deferred tax liability | 8 | (22) | - | - | ||
| Total current liabilities | (6,125) | (5,794) | (8,632) | |||
| Current assets less current liabilities | 21,180 |
18,874 |
19,180 |
|||
| Total assets less current liabilities | 78,412 | 76,330 | 76,608 | |||
| As represented by: | ||||||
| Equity | ||||||
| Issued share capital | 13 | 38,608 | 38,608 | 38,608 | ||
| Share premium | 8,748 | 13,832 | 13,832 | |||
| Retained earnings | 31,056 | 23,890 | 24,168 | |||
| Total equity attributable to equity holders of the parent | 78,412 |
76,330 |
76,608 |
|||
Consolidated Statement of Changes in Equity
For the six month period ended 30 June 2009
| Attributable to equity holders of the parent company | Share Capital |
Share Premium |
Retained earnings |
Total |
| €000's | €000's | €000's | €000's | |
| Balance at 1 Jan 2008 | 38,608 | 51,977 | (18,623) | 71,962 |
| Share option charges | - | - | 276 | 276 |
| Transfer between reserves | - | (38,145) | 38,145 | - |
| Dividend paid | - | - | (6,227) | (6,227) |
| Total comprehensive income | - | - | 10,319 | 10,319 |
| Balance as at 30 June 2008 | 38,608 | 13,832 | 23,890 | 76,330 |
| Balance at 1 July 2008 | 38,608 | 13,832 | 23,890 | 76,330 |
| Share option charges | - | - | 281 | 281 |
| Dividend paid | - | - | (6,227) | (6,227) |
| Total comprehensive income | - | - | 6,224 | 6,224 |
| Balance at 31 Dec 2008 | 38,608 | 13,832 | 24,168 | 76,608 |
| Balance at 1 Jan 2009 | 38,608 | 13,832 | 24,168 | 76,608 |
| Share option charges | - | - | 88 | 88 |
| Dividend paid | - | (5,084) | (1,143) | (6,227) |
| Total comprehensive income | - | - | 7,943 | 7,943 |
| Balance at 30 June 2009 | 38,608 | 8,748 | 31,056 | 78,412 |
Consolidated Statement of Cashflows
For the period ended 30 June 2009
| 6 month period ended 30 June 2009 (Unaudited) |
6 month period ended 30 June 2008 (Unaudited) |
Year ended 31 Dec 2008 (Audited) |
|||
| €000’s | €000’s | €000’s | |||
| Cash flows from operating activities | |||||
| Cash receipts from customers | 30,766 | 25,939 | 47,528 | ||
| Cash paid to suppliers and employees | (21,145) | (15,700) | (30,703) | ||
| Taxes paid (note 8) | (1,305) | - | (8) | ||
| Net cash from operating activities | 8,316 | 10,239 | 16,817 | ||
| Cash flows from investing activities | |||||
| Interest received | 63 | 261 | 542 | ||
| Acquisition of property, plant & equipment (note 10) | (169) |
(1,084) |
(1,453) |
||
| Acquisition of intangible assets | (62) | (424) | (435) | ||
| Net cash from investing activities | (168) | (1,247) | (1,346) | ||
| Cash flows from financing activities | |||||
| Interest paid | - | (6) | |||
| Dividend paid | (6,227) | (6,227) | (12,454) | ||
| Net cash from financing activities | (6,227) | (6,227) | (12,460) | ||
| Net increase in cash and cash equivalents | 1,921 | 2,765 | 3,011 | ||
| Cash and cash equivalents at beginning of the year | 18,834 | 15,859 | 15,859 | ||
| Effect of exchange rate fluctuations on cash held | 33 | (14) | (36) | ||
| Cash and cash equivalents at end of the year | 20,788 | 18,610 | 18,834 |
Notes to the Interim Financial Information
The notes are available in the PDF download.