Sportingbet PLC
28 February 2007
Sportingbet Plc
__________________________________________________________________________
Unaudited results for the second quarter ended 31 January 2007
Sportingbet, the online sports betting and gaming group, announces its results
for the second quarter ended 31 January 2007.
In order to aid comparison, the financial and operational information for the
prior period is stated excluding the US business that was sold in October 2006
resulting in Sportingbet's complete exit from this market. Highlights and
commentary on the results for the six months to 31 January 2007 are included at
the end of this announcement.
Financial highlights - Second quarter ended 31 January 2007
• Gross profit from continuing operations up 40% to £34.7m (2006: £24.7m)
• Group operating profit* up 54% to £2.0m (2006: £1.3m), despite legacy
costs
• Cash on the balance sheet, net of customer liabilities, of £35.5m
• Diluted earnings per share* of 0.5p (2006: 0.1p loss)
(* Stated pre goodwill amortisation and FRS 20 share option charges)
Business highlights - Second quarter ended 31 January 2007
• Business now benefiting from the swift management actions taken to
restructure and reduce cost base
• £56m of annualised costs removed from the ongoing group so far with
additional initiatives in place to further improve efficiencies
• Strong growth in sports active customer numbers (up 28%) and sports bet
volumes (up 44%)
• New software agreement with Boss Media combining all the Group's poker
players onto the Boss Network
• Acquisition of assets of Turkish marketing partner for an initial £3.5m
and deferred consideration of up to 35.3m Sportingbet Plc shares, wholly
dependent on future performance
• Further investment in Sportingbet Italia taking ownership from 50% to 90%
Andrew McIver, Group Chief Executive, said:
'We are very pleased with these results in what has been a difficult and
turbulent time for the industry and for our staff in particular. We are
particularly pleased with the growth in Group gross profit, up 40%, driven by
the Group's core offering of European sports betting.
Our strong KPI performance is flowing through into solid profitability as a
direct result of the significant restructuring and cost reductions undertaken
following our complete withdrawal from the US market. Whilst profits were
inevitably impeded by legacy issues, we saw a significant acceleration in
profitability during the period. The full benefit of the restructuring, along
with a number of additional operational initiatives, will stand us in good stead
as we look towards the balance of the year and beyond.'
For further information please contact:
Sportingbet Plc Tel: 020 7184 1800
Andrew McIver, Group Chief Executive
Simon Gregory, Director of Business Development
Smithfield Consultants Tel: 020 7903 0669
George Hudson
FINANCIAL RESULTS
In order to aid comparison, the financial and operational information for the
prior periods is stated excluding discontinued businesses. Highlights and
commentary on the results for the six months to 31 January are included at the
end of this announcement.
Second quarter ended 31 January 2007 - Continuing operations
Turnover for the second quarter ended 31 January 2007 was £281.9m (2006:
£223.2m), earning a gross profit of £34.7m (2006: £24.7m) at 12.3% of turnover
(2006: 11.1%). Sports betting turnover in Europe was £157.0m (2006: £119.7m),
earning a gross profit of £16.9m (2006: £7.3m). Casino and gaming, and European
poker contributed a further £8.0m and £3.9m respectively to both turnover and
gross profit (2006: £7.0m and £3.1m).
A strong European margin percentage was however partially offset by a weaker
Australia margin percentage and lower income from Paradise Poker due to reduced
year on year liquidity. Australian sports betting turnover was £109.7m (2006:
£88.9m), earning a gross profit of £2.6m (2006: £2.8m). Paradise Poker
contributed gross profit of £3.3m (2006: £4.5m) during the period.
Turnover and margin for the period are stated after a deduction for customer
bonuses of £1.5m (2006: £1.9m). The European and Australian sports gross profit
as reported was 10.8% and 2.3% of turnover respectively (2006: 6.1% and 3.2%).
Without the bonus deduction the equivalent numbers would have been 11.1% and
2.4% (2006: 6.6% and 3.3%).
Costs (excluding exceptional items, share option charge and goodwill
amortisation) in the second quarter were £32.7m (2006: £23.4m).
Operating profit (before exceptional items, share option charge and goodwill
amortisation) for the second quarter was £2.0m (2006: £1.3m).
Operating loss after charging share option charge of £2.1m (2006: £1.1m) and
goodwill amortisation of £1.2m (2006: £1.4m) was £1.3m (2006: £1.2m).
Basic earnings per share before share option charges and amortisation of
goodwill was 0.6p (2006: 0.1p loss). Diluted earnings per share before share
option charges and amortisation of goodwill was 0.5p (2006: 0.1p loss).
As at 31 January 2007, the Group had £49.7m of cash and liquid resources on its
balance sheet, of which £14.2m related to customer liabilities.
Gross financial liabilities amounted to £5.3m and comprised deferred cash
consideration of £2.1m due to the vendors of the 40% shareholding in Sportingbet
Italia and contingent cash consideration of £3.2m. Of the £3.2m contingent
consideration, £2.0m is due to the vendors of Paradise Poker and £1.2m may be
due to the vendors of the business of ISC Entertainment.
Since the end of the quarter, a compromise settlement has been reached with the
vendors of Paradise Poker for the early cash payment of £1.4m ($2.7m) in respect
of the remaining £2.0m outstanding contingent consideration. This settles all
consideration payments under the terms of the November 2004 acquisition
agreement.
REVIEW OF OPERATIONS
Sportingbet Group
During the quarter the Group has moved quickly to reorganise and restructure its
operations, realigning the cost base. A considerable amount has been achieved
since the passing of the US Unlawful Internet Gaming Enforcement Act ('UIGEA')
and our complete withdrawal from the US market, removing approximately £139m of
annualised costs from the Group. Of this, £83m is attributable to the disposal
of the US Sports and Casino operations. Savings have been achieved through the
reduction in size of the Paradise Poker business, implementation of cost saving
measures in the European business and the removal of £8m of annualised costs
from central head office. Furthermore, the Group has implemented a number of
additional commercial and operational initiatives, which will create further
efficiencies within the business, with the aim of saving further costs as
compared to the current operational structure.
The Group has refined its strategy with a stated aim of becoming the mass
market, customer champion of on-line retail gaming. To achieve this goal, the
Board has implemented a number of initiatives to enhance the customer experience
and create further efficiencies within the business. One such initiative is the
bringing together of all non-Australian customer service personnel into a single
dedicated customer service centre in Dublin, Ireland. As well as generating
efficiencies, this operation will provide first rate customer service for all
Sportingbet products in a seamless manner. This facility goes live during March
2007. In addition, investment is being made in the IT platform to streamline the
customer experience making tasks such as login, cashier deposits and placing
bets far easier for the customer.
As announced on 9 February 2007, Sportingbet entered into a new three year
casino and poker contract to use Boss Media software to power both its casino
and poker offerings for its European based websites. Whilst retaining the
Paradise Poker brand, Sportingbet will migrate all Paradise based players onto
the Boss network. This action will provide some cost savings for the Group,
through reduced IT spend, and the increased liquidity will aid player retention
and provide for increased yields. Some of this benefit may be offset initially
by the loss of revenue that might occur as a result of migrating players from
one platform to another.
Europe
The number of customers who bet on the region's sports betting websites rose by
28% to 203,653 (2006: 159,661). The cost of acquiring a new active customer
increased to £210 (2006: £157).
The number of sports bets placed by these customers increased by 40% to 12.2m
(2006: 8.7m) at a rate of 60 bets per active customer per quarter (2006: 54
bets), however the average sports bet size was £12.96 (2006: £13.90). The sports
margin percentage after betting tax was 11.1% (2006: 6.6%).
The number of customers who bet on the region's casino and gaming websites
increased by 67% to 67,497 (2006: 40,413). The number of gaming bets placed by
these customers rose by 15% to 48.1m (2006: 41.9m) at an average bet size of
£4.32 (2006: £4.84). The gaming margin percentage was 3.9% (2006: 3.8%).
During the quarter the European region generated £4.1m of poker rake (2006:
£3.5m), up 17% year on year, on the Boss Media platform. In addition, Paradise
Poker generated a further £3.5m of poker rake (2006: £4.6m) from its remaining
non-US players on its proprietary owned software platform.
Australia
The number of customers who bet with the region's sports betting business
increased by 58% to 12,370 (2006: 7,853). The number of sports bets placed by
these customers rose by 80% to 1.8m (2006: 1.0m) at a rate of 146 bets per
customer per quarter (2006: 133 bets). The average sports bet size was lower at
AUS$151 (2006: AUS$201), reflecting the increased activity on the more
leisure-oriented internet platform.
During the quarter, the proportion of bets taken over the internet rose to 81%
(2006: 74%), representing 37% of gross margin (2006: 26%). The margin, after
betting taxes, was disappointing during the quarter at 2.4% (2006: 3.3%),
partially impacted by additional taxes from the Racing Victoria Limited levy.
The cost of acquiring a new active customer fell to AUS$498 (2006: AUS$1,252).
Business Development
Turkey
Sportingbet today announces that it has agreed to acquire the business and
assets of Maslin Properties Ltd, the Group's Turkish marketing partner, for an
initial consideration of £3.5m and deferred consideration of up to a further
35.3m Sportingbet Plc shares wholly dependent on the performance of the Turkish
business over the next two years. The £3.5m initial consideration is to be
satisfied by the cancellation of a debtor owed by Maslin Properties Ltd.
The initial consideration will be payable immediately upon completion. Up to
35.3m Sportingbet Plc shares may be payable in the two years to 31 December 2008
, should the Turkish business meet certain performance targets.
Maslin Properties Ltd is the Group's Turkish marketing partner and owner of the
domain name, superbahis.com. Maslin Properties Ltd has worked with Sportingbet
since 1998 and currently employs 47 people conducting marketing, web design and
Turkish customer services. In the year ended 31 December 2006 the assets being
acquired generated a profit before tax of £3.8m and are being purchased on a
working capital neutral basis and therefore have zero net asset value. The
transaction is expected to be enhancing to earnings immediately.
Italy
On 16 January 2007, agreement was reached with our Italian partners for the
purchase of a further 40% of Sportingbet Italia S.p.A., taking the Group's total
holding to 90% along with the cancellation of an ongoing 20% commission payment
to the vendors. In aggregate consideration amounts to €4.25m, which was made up
of €3m (£2.1m) in cash and 1.9m Sportingbet Plc shares, due to be issued in
December 2007. As Sportingbet Italia is currently consolidated into the Group's
financial statements, the additional profit contribution from the additional
stake will be evident in lower minority interest deductions. In addition, the
cancellation of the 20% commission payment removed £3.2m of contingent
consideration from the Group balance sheet.
Regulatory Developments
Much uncertainty remains regarding regulation in the sector. However, the Board
continues to believe that a properly regulated market remains the most
appropriate structure for any gambling industry. Internally, Sportingbet
continues to implement best practice policies in this regard wherever practical.
The Group also undertakes ongoing regulatory reviews and risk assessment
processes with regard to this uncertainty.
Externally however, there is little sign that the market distortions which now
exist across various global markets show any signs of being resolved. With
diverse government policies ranging from licensing and regulation to blatant
protectionism now in place, the need for clarification has never been greater.
Sadly, there is little sign that authorities such as the EU have the appetite to
address the issue at present.
As part of the Group's ongoing risk assessment process, it continues to monitor
legal and Regulatory developments in jurisdictions where it operates or where
customers have been or continue to be offered services. The Group considers the
potential impact on its business, and continues to take appropriate advice in
this respect. There is uncertainty as to what Regulatory actions, if any, may
occur and any impact such actions may have on the Group.
Board changes
On 31 January 2007, it was announced that Mark Blandford, Executive Director,
and Bob Holt, Non-Executive Director, had decided to step down as directors of
the Company.
In addition, Nigel Payne has today stood down as an Executive Director but will
remain on the board as a Non-Executive Director. Nigel Payne will be Chairman of
the Audit Committee and will continue to advise the Board on regulatory matters.
Following the Board reorganisation, the Group Board now comprises two executive
directors and three non-executive directors.
Trading Outlook
Quarter three has started well, building on the developments that have been put
in place during the second quarter. The Board is pleased with the rate at which
the cost reduction exercise is translating into profit.
A solid platform from which to focus the Group's customer offering is being
established during the current financial year. The first stage of restructuring
has been largely completed. The second stage of migrating poker to a single
platform and the customer service move to Dublin is well underway. Over the
balance of the year and beyond, the Board is confident that the full benefit of
these and other operational initiatives, along with the acquisition of the
Turkish and Italian businesses, will have a significant impact on Group
financials.
Sportingbet will report its results for the third quarter ended 30 April 2007 on
31 May 2007.
Sportingbet Plc
Unaudited Consolidated Profit and Loss Account
Six months ended 31 January 2007
Notes 3 months 3 months 6 months 6 months
to to to to
31 January 31 January 31 January 31 January
2007 2006 2007 2006
Restated Restated
£m £m £m £m
Turnover - continuing 281.9 223.2 545.2 423.6
operations
- discontinued - 424.5 228.2 704.5
operations
------------------------------------------
Turnover 2 281.9 647.7 773.4 1,128.1
Cost of sales (247.2) (564.6) (672.6) (980.4)
------------------------------------------
Gross profit 34.7 83.1 100.8 147.7
Gross profit % 12.3% 12.8% 13.2% 13.1%
--------------------------------------------------------------------------------------
Exceptional items 3 - - (252.4) -
Share option charge (2.1) (1.5) (2.2) (3.0)
Goodwill amortisation (1.2) (5.5) (6.2) (11.0)
Other administration expenses (32.7) (48.3) (83.9) (90.6)
--------------------------------------------------------------------------------------
Total administration expenses (36.0) (55.3) (344.7) (104.6)
--------------------------------------------------------------------------------------
Group operating profit before
exceptional items, share option charge
and goodwill amortisation 2.0 34.8 16.9 57.1
Exceptional items 3 - - (252.4) -
Share option charge (2.1) (1.5) (2.2) (3.0)
Goodwill amortisation (1.2) (5.5) (6.2) (11.0)
-------------------------------------------------------------------------------------
Group operating
(loss)/profit - continuing
operations (1.3) (1.2) (14.5) (2.7)
- discontinued
operations - 29.0 (229.4) 45.8
------------------------------------------
Group operating
(loss)/profit (1.3) 27.8 (243.9) 43.1
Finance costs 6 0.2 (0.8) 1.4 (1.8)
-----------------------------------------
(Loss)/profit before
taxation (1.1) 27.0 (242.5) 41.3
Taxation (0.1) (0.4) (0.7) (0.7)
-----------------------------------------
(Loss)/profit
after taxation (1.2) 26.6 (243.2) 40.6
Minority interest 0.2 - 0.4 -
-----------------------------------------
(Loss)/profit for the
financial period (1.0) 26.6 (242.8) 40.6
=========================================
(Loss)/earning s per ordinary
share - continuing and
discontinued
operations 8
Basic (0.2)p 6.7p (56.9)p 11.0p
Diluted (0.2)p 6.5p (51.7)p 10.7p
==========================================
(Loss)/earnings per ordinary
share - continuing operations 8
Basic (0.2)p (0.7)p (3.6)p (1.4)p
Diluted (0.2)p (0.6)p (3.3)p (1.3)p
==========================================
Sportingbet Plc
Unaudited Consolidated Balance Sheet
As at 31 January 2007
31 January 31 January 31 July
2007 2006 2006
Restated
£m £m £m
Fixed assets
Intangible assets - goodwill 80.0 377.9 351.6
Tangible assets 16.5 10.5 16.4
Investment in joint venture - 8.8 8.0
------------------------------------
96.5 397.2 376.0
Current assets
Debtors 14.7 22.4 21.9
Cash at bank and in hand 49.7 101.8 97.2
------------------------------------
64.4 124.2 119.1
------------------------------------
Creditors: amounts falling due within one year
Bank loans and overdrafts - 41.4 10.5
Deferred consideration 2.1 - 17.9
Other creditors 40.6 70.4 67.9
------------------------------------
42.7 111.8 96.3
------------------------------------
Net current assets 21.7 12.4 22.8
------------------------------------
Total assets less current liabilities 118.2 409.6 398.8
Provisions for liabilities
Other provisions 0.6 3.5 1.7
Contingent consideration 3.2 26.9 18.8
------------------------------------
3.8 30.4 20.5
------------------------------------
NET ASSETS 114.4 379.2 378.3
===================================
Capital and reserves
Called up share capital 0.4 0.4 0.4
Shares to be issued 0.7 40.5 24.0
Share premium 42.7 38.0 38.0
Share option reserve 9.5 3.0 7.3
Other reserves 0.3 0.3 0.3
Profit and loss account 61.3 297.0 308.5
-----------------------------------
SHAREHOLDERS' FUNDS 114.9 379.2 378.5
Minority interest (0.5) - (0.2)
-----------------------------------
114.4 379.2 378.3
===================================
Sportingbet Plc
Unaudited Consolidated Cash Flow Statement
Six months ended 31 January 2007
Notes 3 months 3 months 6 months 6 months
to to to to
31 January 31 January 31 January 31 January
2007 2006 2007 2006
£m £m £m £m
EBITDA 1.6 34.4 5.6 56.2
Net working
capital
movement 0.1 0.6 1.6 20.9
----------------------------------------------
Net cash
inflow from
operating
activities 4 1.7 35.0 7.2 77.1
Returns on
investment and
servicing of
finance 0.2 (0.2) 0.6 (0.4)
Taxation (1.3) - (1.4) (0.1)
Capital
expenditure (2.9) (1.9) (7.9) (3.8)
Acquisitions
and disposals 4 (17.6) (2.3) (19.3) (12.9)
----------------------------------------------
Cash
(outflow)/
inflow before
financing (19.9) 30.6 (20.8) 59.9
Management of
liquid
resources 1.5 (8.5) 2.8 (8.5)
Financing - (14.7) (10.8) (25.1)
----------------------------------------------
(Decrease)/inc
rease in cash
in the period (18.4) 7.4 (28.8) 26.3
==============================================
Reconciliation of net cashflow to
movement in net funds
(Decrease)/inc
rease in cash
in the period (18.4) 7.4 (28.8) 26.3
Cash
(inflow)/
outflow from
(decrease)/inc
rease in
liquid
resources (1.5) 8.5 (2.8) 8.5
Cash outflow
from decrease
in debt - 10.7 10.8 21.4
----------------------------------------------
Movement in
net funds
resulting from
cash flows in
period (19.9) 26.6 (20.8) 56.2
Disposals - - (15.9) -
Other
movements - (0.2) (0.3) (0.5)
----------------------------------------------
Movement in
net funds in
period (19.9) 26.4 (37.0) 55.7
==============================================
Net funds at
start of
period 69.6 33.9 86.7 4.6
----------------------------------------------
Net funds at
end of period 49.7 60.3 49.7 60.3
==============================================
Sportingbet Plc
Unaudited Notes
Six months ended 31 January 2007
1. Consolidated statement of total recognised gains and losses:
3 months to 3 months to 6 months to 6 months to
31 January 31 January 31 January 31 January
2007 2006 2007 2006
£m £m £m £m
(Loss)/profit
for financial
period (1.0) 26.6 (242.8) 40.6
Exchange
translation
differences
on consolidation (2.0) (1.8) (4.4) (3.3)
-----------------------------------------------------------
Total
recognised
gains and
losses for
the financial
period (3.0) 24.8 (247.2) 37.3
-----------------------------------------------------------
2. Analysis of turnover and operating profit:
Turnover:
Discontinued Continuing 3 months to Discontinued Continuing 3 months to
Operations Operations 31 January Operations Operations 31 January
2007 2006
a) Analysis of £m £m £m £m £m £m
revenue by
activity
Sports betting - 266.7 266.7 385.3 208.7 594.0
Casino and
gaming - 8.0 8.0 12.2 7.0 19.2
Poker rake - 7.2 7.2 23.8 7.5 31.3
Fee income - - - 3.2 - 3.2
-------------------------------------------------------------------------
- 281.9 281.9 424.5 223.2 647.7
-------------------------------------------------------------------------
b) Analysis by
geography
Americas - 0.8 0.8 424.5 1.1 425.6
Europe - 171.4 171.4 - 133.2 133.2
Australia - 109.7 109.7 - 88.9 88.9
-------------------------------------------------------------------------
- 281.9 281.9 424.5 223.2 647.7
-------------------------------------------------------------------------
Post the passing of the UIGEA, Americas comprises Canada and Central and South Americas.
Discontinued Continuing 6 months to Discontinued Continuing 6 months to
Operations Operations 31 January Operations Operations 31 January
2007 2006
a) Analysis of £m £m £m £m £m £m
revenue by
activity
Sports
betting 201.9 514.9 716.8 637.1 397.5 1,034.6
Casino and
gaming 6.7 15.4 22.1 19.5 12.9 32.4
Poker rake 17.7 14.9 32.6 42.3 13.2 55.5
Fee
income 1.9 - 1.9 5.6 - 5.6
-------------------------------------------------------------------------
228.2 545.2 773.4 704.5 423.6 1,128.1
-------------------------------------------------------------------------
b) Analysis by
geography
Americas 228.2 1.7 229.9 704.5 2.0 706.5
Europe - 336.6 336.6 - 233.6 233.6
Australia - 206.9 206.9 - 188.0 188.0
-------------------------------------------------------------------------
228.2 545.2 773.4 704.5 423.6 1,128.1
-------------------------------------------------------------------------
Sportingbet Plc
Unaudited Notes Continued
Six months ended 31 January 2007
2. Analysis of turnover and operating profit (continued):
Operating profit before exceptional items, share option charge and goodwill
amortisation:
Discontinued Continuing 3 months to Discontinued Continuing 3 months to
Operations Operations 31 January Operations Operations 31 January
2007 2006
Analysis by £m £m £m £m £m £m
geography
Americas - 0.1 0.1 33.5 0.5 34.0
Europe - 3.1 3.1 - 1.8 1.8
Australia - 0.3 0.3 - 0.8 0.8
-----------------------------------------------------------------------------
- 3.5 3.5 33.5 3.1 36.6
Central - (1.5) (1.5) - (1.8) (1.8)
costs
-----------------------------------------------------------------------------
- 2.0 2.0 33.5 1.3 34.8
-----------------------------------------------------------------------------
Discontinued Continuing 6 months to Discontinued Continuing 6 months to
Operations Operations 31 January Operations Operations 31 January
2007 2006
Analysis by £m £m £m £m £m £m
geography
Americas 13.5 0.5 14.0 54.8 0.9 55.7
Europe - 4.8 4.8 - 3.1 3.1
Australia - 2.0 2.0 - 1.8 1.8
-----------------------------------------------------------------------------
13.5 7.3 20.8 54.8 5.8 60.6
Central - (3.9) (3.9) - (3.5) (3.5)
costs
-----------------------------------------------------------------------------
13.5 3.4 16.9 54.8 2.3 57.1
-----------------------------------------------------------------------------
Operating (loss)/profit:
Discontinued Continuing 3 months to Discontinued Continuing 3 months to
Operations Operations 31 January Operations Operations 31 January
2007 2006
Analysis by £m £m £m £m £m £m
geography
Americas - (0.1) (0.1) 30.5 0.3 30.8
Europe - 2.6 2.6 - 0.9 0.9
Australia - 0.2 0.2 - 0.8 0.8
-----------------------------------------------------------------------------
- 2.7 2.7 30.5 2.0 32.5
Central costs - (4.0) (4.0) (1.5) (3.2) (4.7)
-----------------------------------------------------------------------------
- (1.3) (1.3) 29.0 (1.2) 27.8
-----------------------------------------------------------------------------
Sportingbet Plc
Unaudited Notes Continued
Six months ended 31 January 2007
2. Analysis of turnover and operating profit (continued):
Operating (loss)/profit:
Discontinued Continuing 6 months to Discontinued Continuing 6 months to
Operations Operations 31 January Operations Operations 31 January
2007 2006
a) Analysis by £m £m £m £m £m £m
geography
Americas (228.2) 0.1 (228.1) 48.8 0.5 49.3
Europe - 3.7 3.7 - 1.2 1.2
Australia - 2.0 2.0 - 1.7 1.7
-------------------------------------------------------------------------------
(228.2) 5.8 (222.4) 48.8 3.4 52.2
Central costs (1.2) (20.3) (21.5) (3.0) (6.1) (9.1)
-------------------------------------------------------------------------------
(229.4) (14.5) (243.9) 45.8 (2.7) 43.1
-------------------------------------------------------------------------------
3. Exceptional items:
Notes 3 months to 3 months to 6 months to 6 months to
31 January 31 January 31 January 31 January
2007 2006 2007 2006
£m £m £m £m
Impairment of
goodwill - - 132.7 -
Loss on
disposal of
business 5 - - 106.3 -
Write-off of
fixed assets - - 0.8 -
Reorganisation
costs - - 12.6 -
-----------------------------------------------------
- - 252.4 -
-----------------------------------------------------
As previously announced, on 12 October 2006, Sportingbet sold its US-facing
sports betting and casino business to Jazette Enterprises Limited resulting in a
loss of £106.3m. As a result, the carrying value of the US-facing business at
the end of October of £106.3m has been written off.
Sportingbet retained the Paradise Poker business, but ceased taking deposits
from US resident customers. As a result an impairment charge of £132.7m has been
made in the profit and loss account and the carrying value of the goodwill has
been written down from £180.9m to £50.4m. The charge to the profit and loss
account includes a £2.2m loss on exchange. In addition fixed assets of £0.8m
have been written off.
The impact of the passing of the UIGEA and the subsequent decision to close the
US-facing part of Paradise and dispose of the remaining US-facing operations has
resulted in a number of reorganisation costs (including redundancies and other
related costs) amounting to £12.6m.
Sportingbet Plc
Unaudited Notes Continued
Six months ended 31 January 2007
4. Notes to the Cashflow:
3 months to 3 months to 6 months to 6 months to
31 January 31 January 31 January 31 January
2007 2006 2007 2006
Acquisitions and £m £m £m £m
disposals
Cash consideration
and other sums
paid to vendors (17.6) (2.3) (17.6) (12.9)
Cash disposed of with
disposal of operations - - (1.7) -
----------------------------------------------------
(17.6) (2.3) (19.3) (12.9)
----------------------------------------------------
3 months to 3 months to 6 months to 6 months to
31 January 31 January 31 January 31 January
2007 2006 2007 2006
Reconciliation of operating profit £m £m £m £m
to net cashflow from operating
activities
Operating (loss)/profit (1.3) 27.8 (243.9) 43.1
Amortisation - goodwill 1.2 5.5 6.2 11.0
Depreciation 1.7 1.1 3.5 2.1
Impairment of goodwill - - 132.7 -
Loss on disposal of
business - - 106.3 -
Write-off of fixed assets - - 0.8 -
Share option charge 2.1 1.5 2.2 3.0
Debtors 5.6 (3.0) 1.1 (0.5)
Creditors (6.8) 2.9 0.2 19.3
Unrealised translation
differences (0.8) (0.8) (1.9) (0.9)
----------------------------------------------------
1.7 35.0 7.2 77.1
----------------------------------------------------
Sportingbet Plc
Unaudited Notes Continued
Six months ended 31 January 2007
5. Discontinued Operations:
On 12 October 2006 the group disposed of its US-facing sports and casino
operations. The loss on disposal has been calculated as follows:
£m £m
Consideration
Cash proceeds -
Net assets disposed of:
Fixed assets 3.6
Debtors 5.8
Liquid resources 15.9
Cash 1.7
Creditor (27.0)
Provisions (0.5)
-------------
(0.5)
-------------
Profit before Goodwill 0.5
Goodwill 106.3
Foreign exchange impact (0.5)
-------------
Loss on disposal (106.3)
-------------
6. Finance Costs:
3 months to 3 months to 6 months to 6 months to
31 January 31 January 31 January 31 January
2007 2006 2007 2006
£m £m £m £m
Interest receivable 0.2 0.4 0.8 0.6
Interest payable - (0.6) - (1.2)
Amortisation of loan
agreement fees - (0.2) (0.3) (0.5)
----------------------------------------------------------
0.2 (0.4) 0.5 (1.1)
Finance charge on
discounting
of contingent
consideration
(FRS7) - (0.4) 0.9 (0.7)
----------------------------------------------------------
Total finance
costs 0.2 (0.8) 1.4 (1.8)
----------------------------------------------------------
Sportingbet Plc
Unaudited Notes Continued
Six months ended 31 January 2007
7. Dividends:
3 months to 3 months to 6 months to 6 months to
31 January 31 January 31 January 31 January
2007 2006 2007 2006
£m £m £m £m
Ordinary
shares
----------------------------------------------------------
Dividend of
1.0p (2005 -
nil) per share - (4.2) - (4.2)
----------------------------------------------------------
8. Earnings per share:
For continuing and 3 months to 3 months to 6 months to 6 months to
discontinued 31 January 31 January 31 January 31 January
operations: 2007 2006 2007 2006
(Loss)/earnings per
ordinary share
Basic (0.2)p 6.7p (56.9)p 11.0p
Diluted (0.2)p 6.5p (51.7)p 10.7p
======================================================
For continuing operations:
Loss per ordinary share
Basic (0.2)p (0.7)p (3.6)p (1.4)p
Diluted (0.2)p (0.6)p (3.3)p (1.3)p
======================================================
For continuing and discontinued operations:
Adjusted earnings per ordinary share
(before exceptional items, share option
charge and goodwill amortisation)
Basic 0.6p 8.4p 4.2p 14.8p
Diluted 0.5p 8.2p 3.9p 14.4p
=======================================
For continuing operations:
Adjusted earnings/(loss) per ordinary
share (before exceptional
items, share option charge and
goodwill amortisation)
Basic 0.6p (0.1)p 0.6p (0.1)p
Diluted 0.5p (0.1)p 0.6p (0.1)p
=======================================
The basic earnings per share for the three months is based on the loss on
ordinary activities after taxation of £1.0m (2006: £26.6m profit) and on the
weighted average number of shares in issue of 431,750,322 (2006: 399,342,613).
The diluted earnings per share for the financial period is based on the loss on
ordinary activities after taxation of £1.0m (2006: £26.6m profit) and the
weighted average number of shares in issue adjusted to assume the exercise of
options over shares and the effect of dilutive earn-out shares to be issued, of
471,436,643 (2006: 411,341,598).
Adjusted basic and diluted earnings per ordinary share before goodwill and share
option charges exclude amortisation of goodwill of £1.2m (2006: £5.5m) and share
option charges of £2.1m (2006: £1.5m).
The basic earnings per share for the six months is based on the loss on ordinary
activities after taxation of £242.8m (2006: £40.6m profit) and on the weighted
average number of shares in issue of 426,618,583 (2006: 368,066,310).
Sportingbet Plc
Unaudited Notes Continued
Six months ended 31 January 2006
The diluted earnings per share for the financial period is based on the loss on
ordinary activities after taxation of £242.8m (2006: £40.6m profit) and the
weighted average number of shares in issue adjusted to assume the exercise of
options over shares and the effect of dilutive earn-out shares to be issued, of
469,458,046 (2006: 380,065,295).
Adjusted basic and diluted earnings per ordinary share before goodwill and share
option charges exclude amortisation of goodwill of £6.2m (2006: £11.0m) and
share option charges of £2.2m (2006: £3.0m).
As at 31 January 2007 there were 432,517,844 shares in issue. In addition to
these shares there are 1,943,593 shares in relation to consideration owing to
our Italian joint venture partners (these will be issued in December 2007) and
45,176,273 outstanding share options of which 40,931,870 are accounted for as
dilutive for the six months to 31 January 2007 (37,751,128 for the three months
to 31 January 2007). Under the terms of the agreement with the Group's Turkish
marketing partner, further shares of up to 35,294,118 may be issued in the
period up to 31 December 2008.
9. Impact of accounting changes:
During the period the Group adopted FRS 20 'Share-based Payment', and has
restated its comparatives accordingly. Under FRS 20 the cumulative share option
charge as at 1 August 2006 is £0.6m (previously £Nil) and the share option
charge for the year ended 31 July 2006 is £6.7m (previously £6.4m).
10. These results have been prepared on the basis of the accounting policies set
out in the Group's 2006 statutory accounts, except as stated in Note 9. These
results do not constitute statutory financial statements within the meaning of
section 240 of the Companies Act 1985.
Sportingbet Plc
Continued
Six months ended 31 January 2006
Highlights - Six months ended 31 January 2006
• Group operating profit* of £16.9m (2006: £57.1m)
• Loss before tax of £242.5m (2006: profit of £41.3m), including
previously reported exceptional charges of £252.4m
• Cash generated from operating activities of £7.2m (2006: £77.1m)
• Diluted earnings per share* of 3.9p (2006: 14.4p)
(* Stated pre goodwill amortisation and FRS 20 share option charges)
FINANCIAL RESULTS
Six months ended 31 January 2007
Turnover for the first half ended 31 January 2007 was £773.4m (2006: £1,128.1m),
earning a gross profit of £100.8m (2006: £147.7m) at 13.2% of turnover (2006:
13.1%). Sports betting turnover was £716.8m (2006: £1,034.6m), earning a gross
profit of £44.2m (2006: £54.2m) at a gross profit percentage of 6.2% (2006:
5.2%). Casino and gaming, poker and fee income contributed a further £22.1m,
£32.6m and £1.9m respectively to both turnover and gross margin (2006: £32.4m,
£55.5m and £5.6m).
Turnover and margin for the period are stated after a deduction for customer
bonuses of £5.8m (2006: £11.7m). The sports gross margin as reported was 6.2%
(2006: 5.2%), however without the bonus deduction, the equivalent number would
have been 6.5% (2006: 5.8%).
Costs (excluding exceptional items, share option charge and goodwill
amortisation) in the six month period were £83.9m (2006: £90.6m).
Operating profit (before exceptional items, share option charge and goodwill
amortisation) for the six months was £16.9m (2006: £57.1m). Loss before tax was
£242.5m (2006: £41.3m profit), after expensing exceptional items of £252.4m
(2006: £Nil), share option charges of £2.2m (2006: £3.0m), goodwill amortisation
of £6.2m (2006: £11.0m) and net finance income of £1.4m (2006: £1.8m charge).
Basic earnings per share before share option charges and amortisation of
goodwill, was 4.2p (2006: 14.8p). Diluted earnings per share, before share
option charges and amortisation of goodwill, was 3.9p (2006: 14.4p).
During the six months ended 31 January 2007, the Group generated cash from
operating activities of £7.2m (2006: £77.1m).
This information is provided by RNS
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