Probability plc
05 December 2007
Probability plc / Index: AIM / Epic: PBTY / Sector: Gaming
5 December 2007
Probability plc ('Probability' or 'the Company')
Interim Results
'Strong growth in line with management expectations'
Probability, the AiM quoted mobile gambling operator, today announces its
interim results for the six months ended 30 September 2007.
Financial Highlights
• Net Gaming Revenues up 83% to £1,174,000 (Six months to 31 March 2007:
£638,000).
• Operating loss of £624,000 in line with management expectations (Six
months to 31 March 2007: loss of £1.6m).
• Operational breakeven (EBIT) achieved in September 2007.
These results are stated for the first time in accordance with International
Financial Reporting Standards adopted for use in the EU. The comparative figures
have been adjusted on a consistent basis. These adjustments are a technical
accounting matter and do not impact the underlying operational performance of
the business. Details of these adjustments are contained in the appendix to this
interim announcement.
Operational Highlights
• Launched 'Private Room' for Casino VIP customers - supporting lifetime
values in excess of £25,000 per customer so far.
• 55,000 registrations to the Company's 'Lady Luck's' mobile Casino and
Bingo brand, launched shortly before the period began.
• Signed three-year white-label deal with Blue Square, the on-line
betting division of Rank Group Plc.
Current Trading
• Since the period end, major white label partnership announced with News
International to operate a mobile casino and bingo service for
'The Sun' newspaper.
• Also entered into a deal with network operator Orange to promote the
Lady Luck's casual gambling games to Orange customers, initially in the
UK, through the Orange World mobile portal.
• Trading in the period 30 September 2007 - 1 December 2007 has seen
further growth including the addition of some 24,000 new Lady Luck's
customers. This growth is prior to Blue Square, Orange and The Sun
deals being activated.
• Full details of trading in Q3 will be provided to investors during
January 2008 in the quarterly KPI statement for the period to
31 December 2007.
Probability Chief Executive Officer, Charles Cohen, said: 'These interim results
demonstrate the core strengths of the Probability business model starting to
prove themselves financially. As a vertically integrated operator with our own
technology platform, brand and fixed overheads we are able to take full
advantage of the expanding opportunity of mobile gambling. This is amply
highlighted by our ability to attract players who spend tens of thousands of
pounds each with us.
'Even before factoring in deals such as Blue Square, the Sun and Orange, we are
confident of delivering growth in line with expectations for the full year and
beyond.'
For further information visit www.probabilityplc.com or contact:
Charles Cohen (CEO) Probability plc Tel: 020 7290 0640
Nick Marsh / Paul Vanstone Arbuthnot Securities Limited Tel: 020 7012 2000
Isabel Crossley St Brides Media & Finance Ltd Tel: 020 7242 4477
Chairman's Statement
This has been, as expected, a very strong first half for Probability. The
Company has continued to deliver consistent revenue growth, quarter on quarter,
whilst controlling costs and effectively managing cash flow.
The business has maintained its commitment to operate at the highest levels of
social and regulatory responsibility with a successful first year inspection
from the Alderney Gambling Control Commission.
Having achieved operating profitability for the first time in September, the
business is now very well positioned to become highly cash generative from a low
and fixed cost base.
Cost effective mobile internet advertising is a major part of this success. We
expect this channel to expand in the coming months as more mobile advertising
space becomes available to us through the general expansion of that sector.
We will also continue to evaluate other potential routes to market, as we
believe that we are still only reaching a small proportion of the potential
market for our services in the UK.
Our focus now is upon consolidating our position as the dominant player in the
emerging mobile gambling sector and to seize the enormous opportunity which this
market presents. We will remain focused on the UK market for the second half,
whilst expanding the range of mobile gambling services which we offer and
deepening our network operator and white label relationships.
Graham Parr
Chairman
Consolidated Income Statement
Half Year Half Year Year Ended
30th September 30th September 31st March
2007 2006 2007
Under IFRS Under IFRS Under IFRS
£'000 £'000 £'000
(unaudited) (unaudited) (unaudited)
Continuing operations
Net gaming revenue 1,174 613 1,251
Operating expenses (370) (239) (677)
Administrative expenses (1,428) (2,502) (4,344)
Other administrative expenses (1,414) (1,031) (2,775)
Share benefit charge (14) (1,471) (1,569)
Operating loss (624) (2,128) (3,770)
Finance income 25 16 76
Finance costs - - (25)
Loss before tax (599) (2,112) (3,719)
Taxation 122
Loss after tax for the
period attributable to equity (599) (1,990) (3,719)
holders of parent
Loss per share from
continuing operations
Basic (3.5p) (11.0)p (23.7p)
Diluted (3.5p) (11.0)p (23.7p)
Consolidated Balance Sheet Half Year Half Year Year Ended
30th September 30th September 31st March
2007 2006 2007
Under IFRS Under IFRS Under IFRS
£'000 £'000 £'000
(unaudited) (unaudited) (unaudited)
Assets
Non-current assets
Intangible assets 142 77 170
Property, plant and equipment 108 60 123
Deferred taxes 195 195 195
445 332 488
Current assets
Cash and cash equivalents 1,033 3,497 1,671
Trade and other receivables 592 704 300
1,625 4,201 1,971
Total assets 2,070 4,533 2,459
Equity and liabilities
Equity attributable to equity
holders of the parent
Share capital 189 180 180
Share premium 3,568 3,627 3,568
Merger reserve 1,380 1,380 1,380
Profit and loss account (3,643) (1,443) (3,069)
Total equity attributable to
equity holders of the parent 1,494 3,744 2,059
Liabilities
Current liabilities
Trade and other payables 576 789 400
Total equity and liabilities 2,070 4,533 2,459
Consolidated Statement of Cash Flows Half Year Half Year Year Ended
30th September 30th September 31st March
2007 2006 2007
£'000 £'000 £'000
(unaudited) (unaudited) (unaudited)
Cash flows from operating activities
Loss before tax (599) (2,112) (3,719)
Adjustments for :
Finance Income (25) (16) (76)
Finance Charge - - 25
Depreciation 83 24 71
Share benefit charge 14 1,471 1,569
Deferred Tax
(Increase)/ decrease in trade receivables (292) (386) 20
(Decrease)/increase in trade and other payables 176 214 (175)
Cash used in operations (643) (805) (2,285)
Cash Flow from investing activities
Purchase of intangibles (19) (27) (102)
Purchase of property , plant and machinery (10) (44) (173)
Finance income 25 16 76
Net cash used in investing activities (4) (55) (199)
Cash flows from financing activities
Issue of shares 9 3,804 3,627
Finance costs - - (25)
Dividends paid - - -
Net cash (used)/generated from financing activities 9 3,804 3,602
Net increase/decrease in cash and cash equivalents (638) 2,944 1,118
Cash and cash equivalents at the beginning of the 1,671 553 553
period
Cash and cash equivalent at the end of the period 1,033 3,497 1,671
Consolidated statement of recognised income and expense
30th September 30th September 31st March
2007 2006 2007
£'000 £'000 £'000
(unaudited) (unaudited) (unaudited)
Loss for the period (599) (1,990) (3,719)
Total recognised expense for
the period (599) (1,990) (3,719)
The total recognised expenses for each period is attributable to the
equity holders of the parent
General information
Probability is a public limited company incorporated in the United Kingdom under
the Companies Act 1985 (Registration No. 5830059). The Company's registered
address is Staple Court, 11 Staple Inn Buildings, London, WC1V 7QH. The
company's ordinary shares are traded on the Alternative Investment Market ('
AiM'). Copies of this report will be sent out to shareholders. Further copies of
the report may be obtained from the above address or on the Investor Relations
section of the Company's website at www.probabilityplc.com
Basis of Accounting
Probability has historically prepared its accounts under UK Generally Accepted
Accounting Practice ('UK GAAP'), however, as required by AiM rules, Probability
will in future prepare its results under International Financial Reporting
Standards and International Financial Reporting Council 'IFRIC' interpretations
as adopted by the European Union ('IFRS'). Probability has adopted IFRS with
effect from 1 April 2007. The company will apply IFRS in its financial
statements in its annual report for the year ending 31 March 2008. Therefore
these interim statements for the period ended 30 September 2007 are prepared
using accounting policies in accordance with IFRS that are expected to be
applicable to the financial statements for the year ending 31 March 2008.
These standards remain subject to outgoing amendment and/or interpretation and
are therefore still subject to change. Accordingly information contained in
these interim financial statements may need to be updated for subsequent
amendments to IFRS required for first time adoption or for new standards issued
after the balance sheet date.
The basis of preparation and accounting policies followed in the Interim Report
differ from those set out in the Annual Report and Accounts for the year ended
31 March 2007, which were prepared in accordance with UK GAAP. As permitted this
report has not been prepared in accordance with IAS34 'Interim Financial
Reporting'.
A detailed explanation of the impact of the Transition from UK GAAP to IFRS,
setting out the restatement of the comparatives is provided in Appendix A.
This statement does not comprise statutory accounts as defined in Section 240 of
the Companies Act 1985. The financial information for the year ended 31 March
2007 is a restated extract from the latest company accounts as at 31 March 2007,
prepared in accordance with UK GAAP, on which the auditors gave an unqualified
opinion. The audit report given on these financial statements did not include
reference to any matters to which the auditors drew attention by way of emphasis
without qualifying their report and did not include a statement under section
237 (2) or (3) of the Companies Act 1985. These financial statements have been
filed with the Registrar of Companies. The results for the period ended 30
September 2007 and for the period ended 30 September 2006 are unaudited.
The financial statements are presented in sterling and all values are rounded to
the nearest thousand pounds (£'000) except where otherwise indicated.
Deferred Tax
Under IFRS deferred tax is provided in full using the balance sheet liability
method, on the basis of temporary differences between the carrying value of
assets and liabilities in the balance sheet and their tax bases. Deferred tax
assets are recognized only to the extent that it is probable that they can be
utilized against future taxable profits. The principal items that result in
adjustments to deferred tax between UK GAAP and IFRS are in respect of share
benefit charges. Consequently, an unprovided deferred tax asset on share benefit
charges at 30 September 2007 amounts to £264,000 ( 30 September 2006 -
457,000 and 31 March 2007- £ 180,000).
Loss per share
The basic loss per ordinary share has been calculated using the loss for the
financial period of £ 599,000 (30 September 2006 - loss of £ 1,990,000 and
31 March 2007 - loss of £ 3,719,000) and weighted average number of ordinary
shares of 18,059,927 (30 September 2006- 17,969,927 and 31 March 2007-
17,969,927).
No diluted loss per ordinary share arises because the conversion of share
options would decrease the net loss per share.
APPENDIX A
EXPLANATION OF TRANSITION TO ADOPTED IFRS
INTRODUCTION
This appendix provides the adjusted consolidated balance sheets and income
statements for Probability for the comparative periods ended 30 September 2006
and 31 March 2007, together with the reconciliation from UK GAAP to IFRS. It
also sets out the significant accounting policy changes from those set out in
the UK GAAP financial statements for the year ended 31 March 2007.
The figures in the appendix are based on those IFRSs expected to be applicable
at 31 March 2008. IFRSs are subject to be possible amendment by and interpretive
guidance from the International Accounting Standards Board ('IASB') as well as
ongoing endorsement and review by the EU and are, therefore, still subject to
further change.
The financial information presented in this appendix is unaudited and does not
constitute statutory accounts within the meaning of section 240 of the Companies
Act 1985.
There are no material differences between the cash flow statement prepared under
UK GAAP and the cash flow statement prepared under IFRS, other than minor
presentational changes. For this reason, no cash flow statements have been
included within this appendix.
DETAILS OF PRINCIPAL CHANGES
Presentation of Net gaming revenue (Adjustment A)
Under UK GAAP income was presented on gross basis with a turnover (representing
bets placed) and cost of sales (representing customer winnings and other
associated costs) being presented separately. On adoption of IFRS, bets placed
and customer winnings have been presented on a net basis within net gaming
revenue, net of promotional bonuses. Other costs, not directly linked to gaming
transactions have been included within operating expenses.
Presentation of deferred tax assets liabilities (Adjustment B)
Under IAS 12 deferred tax balances are calculated based on temporary differences
rather than timing differences. Under IFRS recognised deferred tax assets are
reclassified from current assets to non-current assets.
Presentation of Other reserve (Adjustment C)
Although it is not an IFRS adjustment, on conversion the other reserve
recognised in equity under UK GAAP in respect of share benefit charges has been
transferred to retained loss/profit.
RECONCILIATION STATEMENTS
Consolidated Income Statement
for the period ended 30 September 2006
Under UK GAAP Adjustment A Adjustment B Adjustment C Under IFRS
£'000 £'000
(unaudited) (unaudited)
Continuing operations
Group turnover 1,745 (1,745) - - -
Cost of sales (1,679) 1,679 - - -
Net gaming revenue - 613 - - 613
Operating expenses - (239) - - (239)
Administrative expenses (2,178) (324) - - (2,502)
Other administrative expenses (707) (324) - - (1,031)
Share benefit charge (1,471) - - - (1,471)
Operating loss (2,112) (16) - - (2,128)
Finance income - 16 - - 16
Finance costs - - - - -
Loss before tax (2,112) - - - (2,112)
Taxation 122 - - - 122
Loss after tax for the
period attributable to equity (1,990) - - - (1,990)
holders of parent
Loss per share from
continuing operations
Basic (11.0)p - - - (11.0)p
Diluted (11.0)p - - - (11.0)p
Consolidated Balance Sheet
at 30 September 2006
Under UK GAAP Adjustment A Adjustment B Adjustment C Under IFRS
£'000 £'000
(unaudited) (unaudited)
Assets
Non-current assets
Intangible assets 77 - - - 77
Property, plant and equipment 60 - - - 60
Deferred taxes - - 195 - 195
Current assets
Cash and cash equivalents 3,497 - - - 3,497
Trade and other receivables 899 - (195) 704
Total assets 4,533 - - - 4,533
Equity and liabilities
Equity attributable to equity
holders of the parent
Share capital 180 - - - 180
Share premium 3,627 - - - 3,627
Merger reserve 1,380 - - - 1,380
Other reserve 1,470 - - (1,470) -
Profit and loss account (2,913) - - 1,470 (1,443)
Total equity attributable to
equity holders of the parent 3,744 - - - 3,744
Liabilities
Current liabilities
Trade and other payables 789 - - - 789
Total equity and liabilities 4,533 - - - 4,533
Consolidated Income Statement
for the period ended 31 March 2007
Under UK GAAP Adjustment A Adjustment B Adjustment C Under IFRS
£'000 £'000
Continuing operations
Group turnover 11,942 (11,942) - - -
Cost of sales (11,798) 11,798 - - -
Net gaming revenue - 1,251 - - 1,251
Operating expenses - (677) - - (677)
Administrative expenses (3,914) (430) - - (4,344)
Other administrative expenses (2,345) (430) - - (2,775)
Share benefit charge (1,569) - - - (1,569)
Operating loss (3,770) - - - (3,770)
Finance income 76 - - - 76
Finance costs (25) - - - (25)
Loss before tax (3,719) - - - (3,719)
Taxation
Loss after tax for the
period attributable to equity (3,719) - - - (3,719)
holders of parent
Loss per share from
continuing operations
Basic (23.7p) - - - (23.7p)
Diluted (23.7p) - - - (23.7p)
Consolidated Balance Sheet
at 31 March 2007
Under UK GAAP Adjustment A Adjustment B Adjustment C Under IFRS
£'000 £'000
Assets
Non-current assets
Intangible assets 123 - - - 123
Property, plant and equipment 170 - - - 170
Deferred taxes - - 195 - 195
Current assets
Cash and cash equivalents 1,671 - - - 1,671
Trade and other receivables 495 - (195) - 300
Total assets 2,459 - - - 2,459
Equity and liabilities
Equity attributable to equity
holders of the parent
Share capital 180 - - - 180
Share premium 3,568 - - - 3,568
Merger reserve 1,380 - - - 1,380
Other reserves 1,569 - - (1,569) -
Profit and loss account (4,638) - - 1,569 (3,069)
Total equity attributable to
equity holders of the parent 2,059 - - - 2,059
Liabilities
Current liabilities
Trade and other payables 400 - - - 400
Total equity and liabilities 2,459 - - - 2,459
PRINCIPAL ACCOUNTING POLICIES
Significant accounting policy changes on conversion to IFRS.
Basis of consolidation
On 12 June 2006, Probability Plc, a company with no trade and no significant
assets, acquired the entire share capital of Probability Games Corporation Ltd
by means of a share-for-share exchange. Due to the relative sizes of the
combining companies and the ownership and management structure of the group
before and after the transaction, the directors consider reverse acquisition
accounting to be the most appropriate treatment. In consequence, Probability
Games Corporation Ltd, the legal subsidiary has been treated as the acquirer
and, Probability Plc, the legal parent has been treated as acquiring company.
This treatment gives rise to a merger reserve in the group balance sheet which
represents the difference between the cost of investment in the legal parent and
the book value of the net assets in Probability Games Corporation Ltd.
Revenue
Revenue is recognised to the extent that it is probable economic benefits will
flow to the group and the revenue can be reliably measured.
Revenue comprises of net gaming revenue derived from mobile gaming operations.
Net gaming revenue is defined as the difference between the amount of bets
placed by players less amounts won by players. It is stated after deduction of
certain bonuses granted to players.
Commission that is derived from the group's 'white label' operations (third
party entities that use the group's platform) is included within net gaming
revenue.
Deferred Taxation
Deferred tax assets and liabilities are recognised where the carrying amount of
an asset or liability in the balance sheet differs from its tax base.
Recognition of deferred tax assets is restricted to those instances where it is
probable that taxable profit will be available against which the differences can
be utilised. Deferred tax balances are not discounted.
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