Replacement Interim Results
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 has
been 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 2006
New registrations 13,200 19,600 26,900
New depositing customers 8,100 9,900 12,700
Daily 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 anticipated
the months of July and August have showed some seasonal weakness. In addition,
due to unforeseen direct mail disruptions, combined with an extremely hot summer
and post World Cup weakness, our Casino business has also been further impacted.
Hopes for a September recovery have not yet fully materialised and therefore we
believe 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 its
investment into alternate channels, games and territories, as well as
strengthening the Board and the management team. As in the past, the Group will
look to return excess capital to shareholders in the form of a dividend and the
Board will continue to work hard towards delivering shareholder value for the
full year.'
- Ends -
For further information:
Gaming VC Holdings S.A.
Steve Barlow, Chief Executive Tel: +44 (0) 20 7398 7700
investors@gamingvc.com www.gamingvc.com
Media enquiries:
Abchurch
Henry Harrison-Topham / Franziska Boehnke Tel: +44 (0) 20 7398 7700
franziska.boehnke@abchurch-group.com www.abchurch-group.com
Operating and Financial Review
Overview
The results for the six months ended 30 June 2006 show a gross profit of €15.7
million (six months to 30 June 2005 €16.5 million). This represents an increase
of 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 over
300% on the second half of last year. Earnings per share on profit after tax
were €0.21 (H1 2005: €0.36).
The Group reported in July 2006 that the first half performance was satisfactory
with the business objectives for both organic and geographic growth continuing.
Revenue growth has continued and the Group delivered on its promise of a formal
contract with a Russian joint venture partner which has already led to the soft
launch of a Russian language casino.
New marketing channels have been established, including an internet newsletter
for existing customers, the introduction of local educational poker events in
Germany and the development of a TV campaign that refers players to an
educational '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 of
the year and marketing innovations executed in June for the World Cup kept both
revenue and net profit at the half year in line with our expectations.
The anchor marketing campaign has now been operating for twelve months and the
core business has recovered to the H1 2005 revenue levels as shown below:
H1 2005 H2 2005 H1 2006
New registrations 13,200 19,600 26,900
New depositing customers 8,100 9,900 12,700
Daily 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 marketing
indicated that the acquisition cost per new player remained unattractive in
relation to other potential opportunities. The Spanish language Casino will
remain live but all material marketing promotions in the Iberian Peninsula have
now been wound down.
The Group's poker business has experienced growth, but to date this growth has
not offset the apparent slowdown in the higher gross margin casino revenue
growth. Poker is also a very competitive and crowded market.
The Group will invest resources to increase poker revenue through hosting
regional tournaments, focusing on education. Early trials have been extremely
encouraging, and the Group is currently preparing a TV initiative to utilise the
Casino Club brand awareness and strength.
The direct mail marketing campaign experienced interruptions due to new
providers learning the business, and concerns from existing suppliers due to the
increased regulatory actions in Europe. We believe that the former issues are
likely to be short term but the latter will require the Group to reassess the
emphasis of the marketing strategy and revise it appropriately.
The Group is not aware of any regulatory change since the business was floated
for online gaming companies in Europe. The general regulatory environment in
2005 appeared to be liberalising but since the summer of 2006 there is a
perception that this has reversed in the marketplace. The online gaming
environment remains challenging, and the Group continues to monitor closely the
developments across applicable regulatory environments. This forms part of the
Group's risk assessment processes.
Competitors in the online gaming industry have been challenged this summer in
both the US and in certain European markets. Gaming VC continues not to
transact any wagering activity on behalf of players in the United States, and in
Europe, the Group does not operate a sportsbook.
As anticipated the months of July and August showed some seasonal weakness. In
addition, due to unforeseen direct mail disruptions, combined with an extremely
hot summer and post World Cup weakness, the business was further impacted. An
expected strong September pickup after the summer has not materialised and the
third quarter is expected to produce a daily average revenue of €102,000 (Q3
2005: 98,500) against the €126,000 which was originally projected. The short
fall is attributed to increased competition from competitive poker operations
attracting Casino Club members' discretionary spend, and the operational
challenges discussed above. This will affect the Group's second half results
which are anticipated to be materially below our original expectations.
New territories
In July 2006, after over nine months of groundwork and negotiation, a marketing
partnership was agreed to promote the recently launched Russian language Casino.
Gaming VC's Russian partner will provide the local knowledge needed to support
revenue growth. With the full framework in place, a full marketing programme
focussed 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: €880
million), and net revenues were €21.2 million (H1 2005: €21.3 million). The
gross profit for the first six months of 2006 was €15.7 million (H1 2005: €16.5
million) with the Group's primary cost of service sold being the turnkey online
casino services provided by Boss Media S.A. and its subsidiaries.
In the six months to 30 June 2006 there were no significant one-off jackpot
winners in the Group's slot machine games with associated 'progressive'
jackpots. The total of the available jackpots at the end of June 2006 was €2.2
million (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 2006
jackpots 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 administrative
expenses. The significant change from 2005 is primarily due to the launching of
the acquisition direct mail marketing campaign in the second half of 2005. This
addressed a significant erosion in Casino membership and associated revenue.
Distribution costs of €3.6 million (H1 2005: €0.9 million) reflect the third
party marketing costs incurred by the Group to recruit active members to the
Casino. Approximately €2.7 million was related to direct mail and the
Casino-Club magazine, and the balance on testing alternative marketing
techniques, poker promotion, a trial in Spain, and planning for the Russian
casino. The level of ongoing spend will be greater to support the increased
poker marketing activities.
The major items within the administrative expenses incurred for the first half
of 2006 are detailed below:
6 month period 6 month period
ended ended
30 June 2006 30 June 2005
€'000 €'000
Direct employment costs 1,473 847
Share options charge 636 144
Legal, accounting and tax 719 903
Amortisation of intangible assets 1,435 1,395
All other costs 997 1,148
Total administrative expenses 5,260 4,437
The increase in employment costs reflects the fact that the business was
effectively a start up in 2005 and many employees were recruited in the first
six months of 2005. The share options charge has increased as employee stock
options were granted to most of the employees in the period between June 2005
and June 2006.
The 2005 legal, accounting and tax costs are significantly higher than 2006 as
they include a 'one-off' charge for a full audit of the Group's Interim results
in 2005 (€0.2 million).
The amortisation of intangible assets is a non-cash charge that primarily
reflects the reduction in economic value over the useful lives of those
intangible assets acquired on the purchase of the Casino business in December
2004. In accordance with the Group's policy a full review of the carrying value
of these assets will occur at the year end. The trading and commercial
environment between now and the end of the first quarter of 2007 will have a
major impact on the review.
The Group has been structured to provide maximum earnings efficiency through the
use of advantageous tax treaties between countries where the Group has
established legal entities. The result of this is a nil tax charge for the
first six months of 2006 (H1 2005: €0.01 million). The Group periodically
reviews all of the relevant and controlling tax regulations to optimise the
available benefits. A Group effective tax charge of less than 2% of net profit
is envisaged to continue for the foreseeable future.
In the reporting period the Group generated €8.9 million (H1 2005: €11.9
million) 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 2006
was €6.3 million (2005: €12.1 million).
Dividend
The core business is cash generative and excess capital will continue to be
returned to shareholders. With the commitments to develop the poker business
and the reduction in expected income in 2006 the Board proposes to pay an
interim 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 to
holders on the share register at 6 October 2006.
Outlook
As stated above, given the poor trading experienced in the third quarter of
2006, we envisage the results for the year will be materially below our original
expectations. However, the Group expects to deliver growth in its German
speaking markets. The rate of this growth will be impacted by the level of
uncertainty over regulation of online gaming in the markets in which the Group
conducts 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 new
markets once initial testing stage has proven the market to be viable. This has
been achieved in the Russian market and we will subsequently look to roll out
the new Russian casino over Q4 2006.
Steve Barlow Nigel Blythe-Tinker
Chief 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 40,443
Cost 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 46
Financial expense (163) (138) (463) (601)
Net financing costs (132) (122) (433) (555)
Profit before tax 6,676 11,057 1,750 12,807
Income 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 0.41
Diluted 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 Year
For 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 12,794
expense for the period
Consolidated Balance Sheet 30 June 31 30 June
As at 30 June 2006 2006 December 2005
2005
(Unaudited) (Audited) (Audited)
In thousands of euro
Assets
Property, plant and equipment 73 46 55
Intangible assets 101,440 102,752 104,159
Total non-current assets 101,513 102,798 104,214
Trade receivables 2,220 2,151 3,192
Prepayments 553 531 -
Cash and cash equivalents 6,328 7,233 12,058
Total current assets 9,101 9,915 15,250
Total assets 110,614 112,713 119,464
Equity
Issued share capital 38,608 38,608 38,608
Share premium 57,927 67,522 67,522
Retained earnings 11,421 4,109 11,582
Total equity attributable to equity holders of the 107,956 110,239 117,712
parent
Liabilities
Trade and other payables 1,388 1,158 1,248
Accrued expenses 1,270 1,316 504
Total current liabilities 2,658 2,474 1,752
Total liabilities 2,658 2,474 1,752
Total equity and liabilities 110,614 112,713 119,464
Consolidated Statement of Cashflows 6 month 6 month 6 month Year ended
For 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 activities
Cash receipts from customers 21,141 19,828 19,083 38,911
Cash 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 activities
Interest received 30 15 31 46
Acquisition of property, plant and (44) (65) (2) (67)
equipment
Acquisition of intellectual property (105) (75) - (75)
Net cash from investing activities (119) (125) 29 (96)
Cash flows from financing activities
Payment 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) 6,423
equivalents
Cash and cash equivalents at beginning of 7,233 1,270 12,058 1,270
the period/year
Effect of exchange rate fluctuations on (112) (116) (344) (460)
cash held
Cash and cash equivalents at end of the 6,328 12,058 7,233 7,233
period/year
Statement of Changes in Shareholders Equity
Share Share Retained Total
Capital premium earnings
In thousands of euro
At 31 December 2004 38,608 67,522 383 106,513
Equity settled transactions net of tax - 155 155
Total recognised income and expense - - 11,044 11,044
Balance at 30 June 2005 38,608 67,522 11,582 117,712
Balance at 1 July 2005 38,608 67,522 11,582 117,712
Equity settled transactions net of tax - - 336 336
Dividend paid in period - - (9,559) (9,559)
Total recognised income and expense - - 1,750 1,750
Balance at 31 December 2005 38,608 67,522 4,109 110,239
Balance at 1 January 2006 38,608 67,522 4,109 110,239
Equity settled transactions net of tax - - 636 636
Dividend paid in period (9,595) - (9,595)
Total recognised income and expense - - 6,676 6,676
Balance 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 with
the requirements of IAS 34 Interim Financial Reporting. The accounting policies
used in the preparation of the interim financial statements comply with the
International Financial Reporting standards ('IFRS') as adopted by the European
Union. They are consistent with those used in the annual financial statements
for the year ended 31 December 2005.
This interim report contains the unaudited financial information of the Company
and its subsidiaries (together referred to as the 'Group') for the 6 months
ended 30 June 2006.
The interim financial statements were authorised for issue by the Directors on
24 September 2006.
These interim financial statements should be read in conjunction with the 2005
consolidated financial statements.
1 Segment reporting
Segment information is presented in respect of the Group's business and
geographical segments.
Business segments
Based on risks and returns the management considers that the primary reporting
format is by business segment. The Directors consider that there currently is
only one business segment being the casino operation of games of chance.
Therefore the disclosures for the primary segment have already been given in
these financial statements. A second business segment of skill based games
which was launched in the last quarter of 2005 only achieved revenue of €798,000
to the half year which has been included in games of chance. It is expected to
be sufficiently material to be disclosed separately in the full year accounts
for 2006.
Geographical segments
Within the year the core business activity has been concentrated in the German
language countries.
Development specifically tailored for other European language countries is
ongoing. Owing to current legislation in the US the company continues to block
access to its games to potential players located there.
Segment capital expenditure is the total cost incurred during the year to
acquire segment assets that are expected to be used for more than one year.
In presenting information on the basis of geographical segments, segment revenue
is based on the geographical location of customers. Segment assets are based on
the location of the assets themselves.
Geographical segments
Germany Austria Other Countries Consolidated
In 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 40,443
chance
Segment assets - - - - 110,614 112,713 110,614 112,713
Capital expenditure - - - - 149 142 149 142
2 Taxation
The group has been structured to provide maximum earnings efficiency through the
use of advantageous tax treaties between countries where the Group has
established legal entities. The result of this structuring is a total tax
charge of €0.01 million in H1 2005 and €Nil in H1 2006. The Group periodically
reviews all of the relevant and controlling tax regulations to optimise the
available benefits. A Group effective tax charge of less than 2% of net profit
is envisaged to continue for the foreseeable future.
3 Dividends
A dividend in respect of the financial year 2005 of GBP 0.21 per share was
declared by the Annual General Meeting held on 16 May 2006 and paid on 22 May
2006.
4 Earnings per share
The calculation of basic earnings per share at 30 June 2006 was based on the
profit for the period attributable to ordinary shareholders of €6,676,000 (2005
interim: €11,044,000; full year: €12,794,000) and on a weighted average number
of 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 the
profit attributable to ordinary shareholders of €6,676,000 (2005 interim:
€11,044,000; full year: €12,794,000) and on a weighted average number of
ordinary 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 impact
on the calculation of the diluted earnings per share.
- Ends -
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