Interim Results

Power Leisure PLC 24 July 2001 POWER LEISURE PLC INTERIM RESULTS FOR THE HALF-YEAR ENDED 30th JUNE 2001 Power Leisure plc, trading as Paddy Power Bookmaker, the leading bookmaker in Ireland with on-line betting services in both Ireland and the UK, announces its Interim Results for the half year ended 30 July 2001. HIGHLIGHTS - Turnover Euro206.4m up 18.6% (H1 2000: Euro174.1m) - 11.2% growth in LBO (Licensed Betting Office) turnover - 10.3% increase in telebetting turnover - Growth in online registrations to 26,846 from 12,437 (31 December 2000) - Ongoing investment in online operations following UK launch in March 2001 - Online turnover at Euro14m represents 7% of Group turnover, up from 2% of Group turnover for full year 2000 - Operating profit excluding online operations Euro9.8m, up 60.7% (H1 2000:Euro6.1m) - Operating profit including online operations Euro4.0m (H1 2000: Euro5.5m) - Interim dividend 1.7c per share Commenting on the results, Group Chief Executive, Stewart Kenny said: 'Good progress was made across all our businesses. The launch of online betting services into the UK market was a particular highlight and is performing satisfactorily. Our telephone betting service continues to expand attracting new customers and increased revenues. Our licensed betting offices traded exceptionally well. The opening of four new offices in Ireland and one in West London brings our total network to 124. The outlook for all our operations remains positive. Our focus is to ensure the continuing development of our three businesses: LBOs, on-line and telephone betting services and the successful development of our online services in the UK.' - End - 24 July 2001 For enquiries contact: Stewart Kenny Peter O'Grady Walshe Chief Executive, Power Leisure plc Finance Director, Power Leisure plc Tel: +353 86 255 6770 Tel: +353 86 255 460 Issued on behalf of Power Leisure plc By: Drury Communications Ltd Holborn Public Relations Contact: Mark Cahalane, Marie Therese Duffy Trevor Phillips Tel: +353 1 260 5000 Tel: +4420 7929 5599 Interim Report 2001 Highlights Six months ended Six month ended 30 June 2001 30 June 2000 Euro'000 Euro'000 % Change Turnover Licensed betting offices 170,368 153,189 +11.2% Telephone betting 22,055 19,988 +10.3% On-line interactive betting 13,993 926 Total Group turnover 206,416 174,103 +18.6% Operating Profit/(Loss) Licensed betting offices 9,363 5,777 +62.1% Telephone betting 480 349 +37.5% On-line interactive betting (5,833) (582) nm Total Operating Profit 4,010 5,544 -27.7% Profit after taxation 3,492 3,974 -12.1% Profit retained for the period 2,691 2,768 -2.8% Earnings per Share Basic earnings per share 7.41c .08c -18.4% Diluted earnings per share 6.90c 8.33c -17.2% Dividends per Share Interim paid nil 1.02c Interim payable 1.70c 1.74c 1.70c 2.76c Net Assets 28,499 18,975 Chairman's Statement To all our Shareholders I am pleased to report to shareholders growth in operations and underlying earnings in the six months ended 30 June 2001. Your Company's turnover grew by 18.6% from Euro174.1 million in H1 2000 to Euro206.4 million in H1 2001. As a result of continuing investment in our on-line betting operations profits after tax declined 12.1% from Euro3.97 million in H1 2000 to Euro3.49 million in H1 2001. This resulted in a 17.2% decline in diluted earnings per share from 8.33c in H1 2000 to 6.90c in H1 2001. This was accomplished notwithstanding the impact of cancelled sporting events caused by movement restrictions resulting from foot and mouth disease. We remain pleased with progress in our on-line betting service ('paddypower.com') since its establishment in April 2000 and its launch in the UK market in March 2001 ('paddypower.co.uk'). These internet-based services were followed by the launch of interactive TV services through ntl and Telewest in March and May 2001 respectively. Monthly turnover through our on-line interactive operations exceeded Euro3 million for the first time in June 2001. The Board has decided to pay an interim dividend of 1.70c per share on 13 August 2001 to shareholders on the register at the close of business on 3 August 2001. In the following pages of this Interim Report you will find a brief review of the operations and finances of your Company during the first six months of 2001. We remain encouraged by progress in all areas of our business since 30 June 2001 and look forward to being in a position to report further progress to you early next year. John Corcoran Chairman 24 July 2001 Operating Review Power Leisure remains focused as a small-stake, fixed-odds sports bookmaker operating under the Paddy Power name. The Company has added to its licensed betting offices ('LBO') and telephone betting operations with the formal launch in June 2000 of our internet-based service, paddypower.com, followed in March 2001 by the launch of online services into the UK market. Licensed Betting Offices During the first six months of 2001 the Company opened a further four (H1 2000: two) Paddy Power LBOs bringing the total number of outlets in operation in Ireland at the period end to 122. In addition, a second LBO was opened in the UK in west London in May 2001. We continue to operate four racecourse LBOs (H1 2000: three). Our relocation program continued during the period with one LBO (H1 2000: one) relocated to larger and better-positioned premises. A further three (H1 2000: five) LBOs were refurbished. Telephone Betting Our telephone betting service ('Dial-a-bet') continued its expansion during the first six months of 2001 and ended the period with 22,042 registered customers (31 December 2000: 19,967) and 8,644 active customers (31 December 2000: 7,390). (note: active customers are defined as those that have bet with us in the previous three months). We have achieved measurable increases in our customer call handling response times since December 2000 following the relocation of the operation to larger premises. On-line Betting In June 2000 our internet-based betting service ('paddypower.com') was formally launched. Based on our initial marketing campaign in Ireland we achieved a total of 12,433 account registrations by 31 December 2000. Further intensive marketing and advertising followed from March 2001 in the UK to coincide with the launch of our UK resident site paddypower.co.uk and interactive TV services through the cable systems of ntl Group and Telewest. As a result the number of account registrations has grown to 26,846 by 30 June 2001. Of these 5,064 accounts at 31 December 2000 and 12,497 at 30 June 2001 are active (note: active accounts are those that have placed a bet within the previous three months). Turnover through our on-line interactive services in the first half of 2001 of Euro14.0 million was generated on an average bet size of Euro29.72. This average excludes turnover derived from our lottery results-based product, Lucky Numbers, which has an average bet size of Euro 2.77. During June 2001 active on-line customers each bet, on average, 8.2 times during a four-week period. Our on-line service is now offered, together with the services of other bookmakers, to the interactive (digital) TV customers of ntl Group and Telewest, the two largest cable TV operators in the UK. Account registrations through these services amounted to 1,031 at 30 June 2001. As of 31 March 2001 ntl Group had 757,000 (31 December 2000: 530,000) interactive TV customers in the UK and a target of 1,250,000 by the end of 2001. Telewest announced that on 4 June 2001 it had 532,000 interactive TV customers. We launched our service on the ntl system in March 2001 at the same time as the launch of our internet-based service, paddypower.co.uk, to UK customers. We launched our Telewest-based service in May 2001. The Group substantially increased the level of its expenditure on advertising and marketing in support of the UK launch of our on-line interactive services in H1 2001. We continue to review the results from this expenditure as our UK launch progresses. Financial Review Turnover The Group's turnover increased by 18.6% over H1 2000 to Euro206.5 million. Like for like turnover in our LBOs increased by 7.6%, while aggregate LBO turnover grew by 11.2% which includes the impact of five additional LBOs opened during the period. During the period the average slip value within the LBOs increased by 11.4% from Euro11.57 in H1 2000 to Euro12.89. Telephone betting turnover growth remained strong recording a 10.3% increase in turnover over H1 2000. Average transaction size per call remained virtually unchanged moving from Euro79.79 in H1 2000 to Euro79.49 in H1 2001. Turnover through our on-line interactive operations grew substantially to Euro14 million. Margin Gross margin, measured as bets placed (excluding betting duty and levies) less winnings returned to customers, increased by 32.2% over H1 2000 to Euro28.1 million. Expressed as a percentage of turnover by delivery channel the following margins were achieved: Gross Margins H1 2001 H1 2000 2000 LBOs 14.9% 12.8% 13.4% Telephone betting 9. 8% 8.1% 8.9% On-line 4.5% (2.6%) 8.1% Group Total 13.6% 12.2% 12.8% The gross margins achieved in our LBO and telephone betting operations are higher than we would normally expect to achieve. Gross margin of 4.5% which was achieved on on-line turnover was disappointing. We have taken steps to improve on this performance. Our gross margins must be measured against the burden of Irish government betting duty and levies borne by the Group, which represented 5.3% of turnover (likely to reduce to 5% with effect from 1 July 2001). The willingness and the ability of the Group to bear this taxation burden, which is necessary to maintain competitiveness with operators located in jurisdictions which levy a nominal tax on bets, is now very limited. As a result of the prospective reduction in betting duty in the UK from 6 October 2001 the Group plans to take advantage of this change to offer tax-free betting to our Irish telephone and on-line customers. Operating Profit Operating profit of Euro4.0 million is stated after charging significant launch costs for our on-line-based operations which resulted in a loss of Euro 5.8 million in this segment of our business. These costs include Euro0.8 million in respect of betting duty and levies incurred on behalf of customers and an allocated share of marketing and advertising expenditure amounting to Euro3.2 million. Tax Rate Corporation tax charge for the six months ended 30 June 2001 amounted to Euro 0.8 million (H1 2000: Euro1.7 million) which represents an effective tax rate of 19.3% (H1 2000: 30.0%) against the standard rate of 20% (H1 2000: 24%). The historical difference between the standard rate and our effective rate of tax was primarily due to significant investment in computer equipment which we depreciate over a three year period and depreciation on premises which is not tax deductible. Cash Flow Net cash flow from operating activities fell by 44.9% over H1 2000 to Euro4.9 million. This cash was partially utilised in payments amounting to Euro3.6 million (H1 2000: Euro3.1 million) to acquire fixed assets. Cash balances amounted to Euro14.3 million at 30 June 2001 (30 June 2000: Euro8.7 million). This increase partly reflects the Euro3.6 million net proceeds of the share placing in December 2000. Cash balances include Euro0.9 million held on behalf of customers. Dividends The Board has approved an interim dividend of 1.7c per share. This is the first interim dividend payable since the Company was floated and is not directly comparable to interim dividends paid in previous years. It is the Board's intention to adopt a progressive dividend payment policy mindful of the short-term requirements of our UK launch of on-line services and possible acquisition opportunities. It is also the Board's intention that final dividends will tend to be approximately twice the size of interim dividends. Outlook The outlook for all our operations remains positive. Our biggest challenge for 2001 remains to ensure the successful development of our internet-based paddypower.co.uk together with the interactive service on the ntl and Telewest digital cable TV systems in the UK. We look forward to the benefits of the shift (in the UK) from a turnover-based tax to a gross profits-based tax with effect from 6 October 2001. Euro The Group continues to review the future impact of the introduction of the Euro to its business and in particular cash handling and processing procedures during early 2002. The costs associated with the introduction of the Euro are not expected to be material. Management Ross Ivers has been appointed finance director designate and will assume the position of finance director during September 2001 when Peter O'Grady Walshe steps down as finance director and resumes his role as a non-executive director of the Company. Ross Ivers worked in a number of senior financial positions with Viapay Limited, Astec (BSR) plc and the Jardine Matheson Group. John O'Reilly has been appointed chief operations officer with responsibility for all day-to-day operations of the Group including on-line interactive operations. This appointment will allow the CEO to increase his focus on the strategic development of the Group and the marketing and development of the Paddy Power brand. Consolidated Profit and Loss Account Six months ended 30 June 2001 (unaudited) Six months Six months Year ended ended ended 30 June 2001 30 June 2000 31 December Euro'000 Euro'000 Euro'000 (unaudited) (audited) (audited) Turnover 206,416 174,103 362,825 Cost of winning bets paid (178,340) (152,865) (316,511) Gross profit 28,076 21,238 46,314 Operating expenses (24,066) (15,694) (35,685) Operating profit 4,010 5,544 10,629 Interest payable and similar charges (12) (15) Interest receivable and similar income 315 144 336 Profit on ordinary activities before 4,325 5,676 10,950 taxation Tax on profit on ordinary activities (833) (1,702) (2,937) Profit on ordinary activities after 3,492 3,974 8,013 taxation Dividends (801) (1,206) (1,756) Retained profit for the period 2,691 2,768 6,257 Retained profit brought forward 16,867 10,610 10,610 Retained profit carried forward 19,558 13,378 16,867 Earnings per Share Basic 7.41c 9.08c 18.20c Diluted 6.90c 8.33c 16.87c Dividend per share 1.70c 2.76c 3.92c Consolidated Balance Sheet 30 June 2001 (unaudited) 30 June 30 June 31 December 2001 2000 2000 Euro'000 Euro'000 Euro'000 (unaudited) (audited) (audited) Fixed assets Tangible assets 22,565 16,968 21,336 Intangible asset 1,206 1,327 1,267 23,771 18,295 22,603 Current assets Debtors 1,168 415 671 Cash at bank and in hand 14,318 8,738 16,054 15,486 9,153 16,725 Creditors (amounts falling due within one (10,758) (8,473) (13,240) year) Net current assets 4,728 680 3,485 Total assets less current liabilities 28,499 18,975 26,088 Capital and reserves Called up share capital 4,714 4,630 4,714 Share premium 3,305 305 3,585 Capital redemption reserve fund 662 662 662 Capital conversion reserve fund 260 - 260 Profit and loss account 19,558 13,378 16,867 Shareholders' funds 28,499 18,975 26,088 Consolidated Cash Flow Statement Six months ended 30 June 2001 Six months Six months Year ended ended ended 31 December 30 June 30 June 2000 2001 2000 Euro Euro Euro Euro Euro Euro '000 '000 '000 '000 '000 '000 Net cash inflow from 4,897 8,887 20,104 operating activities Returns on investments and servicing of finance Interest received 315 144 336 Interest element of finance lease - (12) (15) payments 315 132 321 Taxation Corporation tax paid (2,556) (1,906) (2,216) Capital expenditure & financial investments Acquisition of tangible fixed assets (3,632) (3,150) (9,612) Sales proceeds on disposal of fixed 69 62 61 assets (3,563) (3,088) (9,551) (550) (888) (1,650) Equity dividends paid Net cash (outflow)/inflow before (1,457) 3,137 7,008 financing Financing Capital element of finance lease (239) (418) payments Issue of new shares including share (279) 3,624 premium less costs of issue Net cash (outflow)/inflow (1,736) 2,898 10,214
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