Probability plc
14 December 2006
Probability plc / Index: AIM / Epic: PBTY / Sector: Travel & Leisure
Probability plc ('the Company')
Interim Results
Probability plc, the AIM quoted mobile phone gambling specialist, announces its
unaudited interim results for the six months ended 30 September 2006.
Financial highlights
Six months ended Six months ended Year ended
30 Sep 2006 30 Sep 2005 31 March 2006
Turnover £1,743,000 £287,000 £833000
Operating loss before goodwill and exceptional £642,000 £29,000 £733,000
items
Net cash £3,497,000 £107,000 £572,000
Overview
• Established position as a leading fully integrated pure mobile gambling
company.
• Rapidly increasing player numbers - 45,456 new U.K. players registered
during the six month period (total UK players: 106,648 on 30 Sept 06).
• Distribution achieved on several mobile operator portals in the UK
including Three, T-Mobile, Orange and O2 I-Mode.
• Affiliate partnerships established with Victor Chandler, Groupe Partouche
and Interactive World plc.
• Development of proprietary mobile gambling platform completed.
• E-Wallet integrated to banking, billing and pre-pay networks.
• New game formats added to portfolio including Bingo, Blackjack and two
slots variants.
• Commenced operations under E-Gaming Licence in Alderney.
• Raised £3.7m (net) in August, and admitted to AIM.
• Expects to be profitable and cash generative in the UK in 2007.
Probability's Chief Executive Officer, Charles Cohen, said: 'Probability is at
the forefront of the new gambling opportunity created by the boom in mobile
phone ownership. During the six month period we doubled player numbers and
achieved significant operational milestones. Following our fund raising in
August, we have sufficient capital to fund our growth plans and to capitalise on
our first mover advantage in the U.K. We look forward to strong and rapid growth
further as we invest to create greater distribution, new games and more
players.'
For further information visit www.probabilityplc.com or contact:
Charles Cohen (CEO) Probability plc Tel: 020 7290 0640
Ravi Ruparel (FD) Probability plc Tel: 020 7290 0640
Isabel Crossley St Brides Media & Finance Ltd Tel: 020 7242 4477
Caroline Evans-Jones St Brides Media & Finance Ltd Tel: 020 7242 4477
Stuart Andrews Evolution Securities Tel: 020 7071 4300
Chairman's Statement
I am delighted to present our maiden interim results for the half year ended 30
September 2006. Having successfully been admitted to trading on AIM in August
2006, I believe the Company is positioned for real growth both in the U.K. and
internationally. The Company's intention is to be the leading provider of
gambling services for mobile phone users and it is making the investments needed
to achieve that goal.
Financial Review
In line with management expectations, Probability is reporting an interim
pre-tax loss before exceptional items of £642,000 (2005: £29,000) on a turnover
of £1,743,000 (2005: £287,000).
Having raised £3.7m (net) m at the time of its AIM flotation, the Company's cash
position at 30 September 2006 was £3,497,000. The Directors do not believe that
any additional financing will be required. Importantly, the Company expects to
be profitable and cash generative at an operational level in the UK in 2007.
Key performance indicators
It is the Directors intention to update the market on a quarterly basis,
particularly in respect of three key performance indicators ('KPI's'), namely
the total number of registered players on our platform at the end of the
quarter, the total amount of cash players who have deposited cash during the
quarter ('cash depositors') and the amount of gross wagers during the quarter.
1. During the quarter ended 30 September 2006 the Company registered 16,680 new
players.
2. The total cash depositors in the quarter ended 30 September 2006 was 10,000
3. The gross value of wagers processed during the quarter ended 30 September
2006 was £3,900,000.
Operating Review
During the period under review the Company continued the build-out of its mobile
gambling platform and gaming portfolio, undertook a placing to raise £3.7m and
listed on AIM and was granted a full E-Gaming licence by the Alderney Gambling
Control Commission.
The Company is focused on continuing to develop its position in the U.K. where
it is already a dominant supplier with over 100,000 registered players at the
end of September 2006 and distribution through the mobile portals of Three,
T-Mobile, Orange and O2 I-Mode. The Company currently supports over 1,700 models
of mobile phone and operates monitoring systems enabling us to identify and
adapt our technology to new devices within a few days of them entering the
market.
The Company has significantly enhanced its customer yield management to target
customers with personalised promotional offers designed to support, in a
socially responsible manner, many of its KPI's such as deposits, retention and
cost of funds.
The Company's most profitable games continue to be Roulette and Bingo!, closely
followed by the Nudge7 slot machine, which features a progressive jackpot
regularly paying prizes in excess of £5,000. The largest single win in the
period was £25,000 on the Union Jackpot slot machine and one customer won a
total of £15,000 on Roulette in one evening. The average wager across all games
remains in the expected range of under 30p, whilst play periods continue to
reflect short 'snacking' entertainment as the main impulse for customers.
A portfolio approach to product development means the Company is constantly
looking for innovative ways to extend its offering into new gambling formats for
mobile customers. During the period the Company released the first ever
UK-format Bingo! for mobile phones, two new format slot machines, Money Beach
and Union Jackpot, and Professional Blackjack, a full casino rules blackjack.
The Company's strategy for growth in user numbers remains strong distribution
partners and pay-for-performance marketing in the U.K. through affiliate network
distribution.
Outlook
During the second half of the year the Company expects to complete the planned
investment in its platform and operating team as provided for in the business
plan. Management anticipates seeing returns on this investment before the end of
the current financial year. This will principally be measured and reported to
investors by the KPI's of player recruitment, cash depositors and gross wagers.
Management expect the number of registered players to increase, on average, by
10,000 players per month. The number of cash depositors is expected to rise to
13,000 in the quarter ended 31st December 2006 and gross wagers will be above
£4,000,000 for the quarter ended 31st December 2006.
The Company has a strong pipeline of new game formats in development ready in
the final quarter of the calendar year as well as new distribution opportunities
brought about by its 'managed affiliate' programme, which the Company expects to
roll out in December. The managed affiliate programme enables the Company to
reach a wider audience of distribution partners through a single brand - Lady
Luck's - and automated on-line administration of the affiliate scheme. Full
details of the managed affiliate programme and Lady Luck's are available on-line
at http://www.ladylucks.mobi.
The Company does not accept customers from outside the U.K. and has therefore
not been directly affected by the legislative changes facing the internet casino
sector operating in the U.S.
In conclusion, I believe Probability is a first mover in mobile gambling. It has
the technology, expert knowledge and the vision to become a market leader. I
look forward to updating shareholders with our quarterly KPI's ending December
2006 in the New Year.
I would like to thank the whole team for their considerable time and efforts
during the period and in helping the Company join AIM.
Graham Thomas Parr
Chairman
14 December 2006
Consolidated profit and loss account for the six months ended 30 September 2006
Unaudited Unaudited Audited
Notes Six months Six months Year
ended ended ended
30 Sep 2006 30 Sep 2005 31 Mar 2006
£000 £000 £000
Turnover 1,743 287 858
Cost of sales (1,678) (105) (833)
Gross profit 65 182 25
Administrative expenses excluding (707) (211) (773)
exceptional items
Operating loss excluding exceptional (642) (29) (748)
items
Operating exceptional items 2 (1,471) - -
Total administrative expenses (2,178) (211) (773)
Operating loss (2,113) (29) (748)
Net interest - - -
Loss before tax (2,113) (29) (748)
Taxation 3 123 - -
Loss for the period (1,990) (29) (540)
Loss per ordinary share 4
Basic (0.11)p (0.003)p (0.04)p
Excluding exceptional items (0.04)p (0.003)p (0.04)p
Consolidated balance sheet at 30 September 2006
Notes Unaudited Unaudited Audited
30 Sep 2006 30 Sep 2005 31 Mar 2006
£000 £000 £000
Fixed assets
Intangible assets 5 77 15 64
Tangible assets 6 61 3 26
138 18 90
Current assets
Debtors 899 247 515
Cash at bank 3,497 107 553
4,396 354 1068
Creditors:
amounts falling due within one year (789) (212) (535)
Net current assets 3,607 142 582
Total assets less current liabilities 3,745 160 582
Creditors:
amounts falling due after more than one - - (13)
year
Provisions for liabilities and charges - (79) (41)
3,745 81 582
Capital and reserves
Share capital 7 180 105 123
Share premium 8 3,628 - -
Merger reserve 8 (120) (104) (120)
Other reserves 8 2,970 430 1,499
Profit and loss account 8 (2,913) (350) (920)
Shareholders' funds 9 3,745 81 582
Consolidated cash flow statement for the six months ended 30 September 2006
Unaudited Unaudited Audited
Six months ended Six months ended Year
Ended
30 Sep 2006 30 Sep 2005 31 Mar 2006
£000 £000 £000
Notes
Net cash inflow from
operating activities 10 (707) (19) (627)
Returns on investments
and servicing of finance
Net interest received 16 - 13
Taxation - - -
Capital expenditure
Purchase of intangible fixed assets (27) (15) (64)
Purchase of tangible fixed assets (44) (3) (32)
_________ _________ _________
Net cash outflow from capital expenditure (71) (18) (96)
_________ _________ _________
Net cash inflow/(outflow) before (762) (37) (725)
financing
Financing
Issue of share capital 3,706 - 1,122
Loans - - 73
_________ _________ _________
Net cash inflow from financing 3,706 - 1,194
_________ _________ _________
Increase/(decrease) in cash 11 2,944 (37) 484
Notes to the unaudited interim report
1. Commentary on financial information
Probability plc was incorporated on 26 May 2006 for the purpose of achieving
admission to trading on Alternative Investment Market ('AIM') of the existing
business of Probability Games Corporation Limited (which was originally
established in 2003) and its subsidiaries. On 12 June 2006, Probability plc
acquired the entire share capital of Probability Games Corporation Limited by
means of a share for share exchange. The transaction qualified as a group
reconstruction within the meaning of Financial Reporting Standard 6 '
Acquisitions and Mergers', and has been accounted for using the merger
accounting method.
This financial information is the first half-yearly results for Probability plc
and reflects the results for the period to 30 September 2006. The financial
information consolidates the results of Probability plc and all its subsidiary
undertakings (the 'Group'), drawn up to 30 September each period.
In the Group financial statements, merged subsidiary undertakings are treated as
if they had always been a member of the Group. The results of such subsidiaries
are included for the whole period in the year they join the Group. The
corresponding figures for the previous period include their results for that
period, the assets and liabilities at the previous balance sheet date and the
shares issued by Probability plc as consideration as if they had always been in
issue. The balance sheet of Probability Games Corporation Limited and its
subsidiaries as at 31 March 2006 and 30 September 2005 are presented as proforma
comparatives. Any difference between the nominal value of the shares acquired
and those issued by Probability plc to acquire them is taken to reserves.
Under the principles of merger accounting, the assets and liabilities of
Probability Games Corporation Limited and its subsidiaries have been brought in
at their book values under the accounting policies of Probability plc.
The group has adopted FRS 20 which deals with share based payments. The fair
value of share options granted is spread over the period that the company
benefits from that grant. The prior year comparative figures have been restated
in accordance with the new standard. The effect of FRS 20 was to increase
administrative expenses for the period ended 30 September 2006 by £1,470,555.
The group's net assets and cash flow statement were unaffected.
The financial information contained in the interim report does not constitute
statutory accounts of the company within the meaning of Section 240 of the
Companies Act 1985.
2. Operating exceptional items
The operating exceptional item is the share option charge arising under FRS 20.
There is no underlying cash flow or financial liability associated with the
charge and it does not reduce shareholders' funds.
3. Deferred taxation
Deferred Tax is provided in full in respect of taxation deferred by timing
differences between the treatment of certain items for taxation and accounting
purposes. The deferred tax balance has not been discounted.
Deferred tax assets are recognised to the extent that they are recoverable. They
are regarded as recoverable to the extent that, on the basis of all available
evidence, it can be regarded as more likely than not that there will be suitable
taxable profits from which the future reversal of the underlying timing
differences can be deducted.
4. Loss per ordinary share
The basic loss per ordinary share has been calculated using the loss for the
financial period of £1,993,450 (six months to 30 September 2005 - loss of
£29,000; year ended 31 March 2006 - loss of £539,679) and the weighted average
number of ordinary shares in issue of 17,969,927 (six months to 30 September
2005 - 10,542,640; year ended 31 March 2006 - 12,115,998).
No diluted loss per ordinary share has been disclosed because the conversion of
share options would decrease the net loss per share.
5. Intangible fixed assets
Cost £000
At 1 March 2006 64
Addition 27
_______
At 30 September 2006 91
________
Amortisation
At 1 March 2006 0
Charge for the period 14
________
At 30 September 2006 14
________
Net book values
At 30 September 2006 77
=======
31 March 2006 64
=======
30 September 2005 15
=======
6. Tangible fixed assets
£000
At 1 March 2006 34
Addition 44
________
At 30 September 2006 79
________
Amortisation
At 1 March 2006 8
Charge for the period 10
________
At 30 September 2006 18
________
Net book values
At 30 September 2006 61
=======
31 March 2006 26
=======
30 September 2005 3
=======
7. Share capital
Number of Share
Shares capital
000 £000
Shares issued on group reorganisation 12,116 121
Bonus issue 393 4
Placement of shares 5,461 56
________ ________
At 30 September 2006 17,970 180
======== ========
8. Statement of movements on reserves
Share Profit
premium Merger Other and loss
account reserve Reserve Account Total
£000 £000 £000 £000 £000
At 1 April 2006 - (120) 1,499 (920) 459
Premium on issue of shares 3,628 - - - 3,628
Bonus shares - - - (3) (3)
Share option charge (FRS 20) - - 1,471 - 1,471
Retained loss - - - (1,990) (1,990)
_______ _______ _______ _______ _______
At 30 September 2006 3,628 (120) 2,970 (2,913) 3,565
======= ======= ======= ======= =======
9. Reconciliation of movements in shareholders' funds
Unaudited Unaudited Audited
Six months ended Six months ended Year
ended
30 Sep 2006 30 Sep 2005 31 Mar 2006
£000 £000 £000
Loss for the period (1,990) (29) (540)
Shares issued 3,685 109 1,121
Bonus issue (3) - -
Share option charge (FRS 20) 1,471 - -
_________ _________ _________
Net increase in shareholders' funds 3,163 80 581
Opening shareholders' funds 582 1 1
_________ _________ _________
Closing shareholders' funds 3,745 81 582
========= ======== ========
10. Reconciliation of operating loss to net cash outflow
from operating activities
Unaudited Unaudited Audited
Six months ended Six months ended Year
ended
30 Sep 2006 30 Sep 2005 31 Mar 2006
£000 £000 £000
Operating Loss (1,990) (29) (733)
Share option charge 1,471 - -
Depreciation 24 - 8
Movement on provision - - (25)
(Increase)/decrease in debtors (110) 9 (268)
(Decrease)/increase in creditors (102) 1 391
________ ________ ________
Net cash outflow from
operating activities 707 (19) (627)
======== ======== =======
11. Reconciliation of net cash flow to movement in net funds
Unaudited Unaudited Audited
Six months ended Six months ended Year
ended
30 Sep 2006 30 Sep 2005 31 Mar 2006
£000 £000 £000
Increase/(decrease) in cash 2,944 (37) 484
Cash inflow from
increase in debt - - (73)
________ ________ ________
Movement in net debt in the period 2,944 (37) 410
Opening net funds/(debt) 480 480 70
________ ________ ________
Closing net funds 3,424 443 480
======== ========= ========
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