Interim Results

RNS Number : 8136Z
Gaming Realms PLC
20 September 2022
 

20 September 2022

 

 

Gaming Realms plc

 

(the "Company" or the "Group")

 

Interim Results

 

Content licensing revenue grows by 57% to £6.4m

 

EBITDA[1] of £3.5m[2] with a 41% EBITDA margin

   

 

Gaming Realms plc (AIM: GMR), the developer and licensor of mobile focused gaming content, is pleased to announce its interim results for the six months to 30 June 2022 (the "Period" or "H1'22").

   

Financial highlights:

 

 

H1 2022

H1 2021

 Change


 m

 m

 %

Revenue (Content licensing)

6.4

4.1

+57%

Revenue (Brand licensing) *

0.3

1.7

-82%

Revenue (Social)

1.8

1.9

-7%

Total revenue

8.5

7.7

+10%

EBITDA before share option and related charges

3.5

3.1

+12%

EBITDA

3.3

2.7

+25%

Profit before tax

1.3

0.8

+66%





 

* Brand licensing revenue decreased due to a significant, non-recurring deal positively impacting revenues in H1 2021.

 

· Total revenue grew 10% from £7.7m in H1'21 to £8.5m in H1'22. Group EBITDA grew 12% to £3.5m2 (H1'21: £3.1m), representing a 41% EBITDA margin (H1'21: 40%).  Excluding brand licensing, revenue grew 36% from £6.0m in H1'21 to £8.2m in H1'22

· Total licensing revenues grew 15% to 6.7m (H1'21: 5.8m), with content licensing revenue up 57% to £6.4m (H1'21: £4.1m)

· Revenues from North America of £4.7m representing 55% of total revenue

· Social revenue decreased 7% to 1.8m (H1'21: 1.9m), but with a reduction in related expenses, this segment increased its EBITDA by 13%

· Profit before tax increased 66% to £1.3m (H1'21: £0.8m)

 

Operational highlights: 

 

· Granted Online Gaming Service Supplier License in Connecticut with launch expected in Q4'22

· Granting of iGaming Supplier License in Ontario and subsequent launch with 8 operators

· Launched in additional regulated markets in Spain and Denmark

· Launched Slingo content with WLA member Loto-Quebec

· Launched games distribution business with 4ThePlayer in New Jersey

· Released 8 new games into the market, including Slingo Shark Week and Slingo DaVinci Diamonds. The Group now has 61 games in its portfolio (Dec'21: 53 games, Jun'21: 48 games)

 

Post period-end:

 

· Licensing revenue increased 53% in the two months post period-end compared to the same period in 2021

· Launched Betway and Pokerstars in Europe

· Released two new Slingo games: Slingo Stampede and Slingo Stinkin' Rich

 

Outlook for FY22:

Gaming Realms has continued to progress during the first half of the year, with its core strategy of developing and licensing games globally to market-leading brands and operators delivering high margin revenues.

This growth is expected to continue into the second half of the year as the Company matures in its key markets. In addition, the Group is aiming to launch in Connecticut, Portugal and Greece, as well as forecasting growth from the recently launched markets of Michigan, Pennsylvania, Ontario, Spain and the Netherlands.

The European market continues to be the largest contributor to content licensing revenues and, with the launch of 8 games plus entry into new regulated markets, has grown 19% period on period. We have more direct integrations with partners, which improves margins and strengthens these relationships.

Our revenues from North American content licensing have increased 160% period on period, with the region accounting for 45% of content licensing revenue. New Jersey continues to be our leading market, but Pennsylvania and Michigan are growing strongly as we launch more games with new partners. At 30 June 2022, we were live with 7 games in Pennsylvania across 6 partners and 17 games across 7 partners in Michigan.

In total we have launched with 26 partners in H1 2022 (H1'21: 11). This growth is supported by the launch of premium games, including Slingo Shark Week and Slingo Da Vinci Diamonds. We are continuing to invest in our remote game server and in the period launched our aggregation business in New Jersey with 4ThePlayer.

The Group is continuing to deliver on its clear strategy, expanding into new markets and launching content which is proving popular with players. It has a strong pipeline of deals and integrations and the Board expects trading for FY'22 to be in line with market expectations.

 

Commenting on the first half performance, Michael Buckley, Executive Chairman, said:

 

"The Group has delivered another period of strong growth supported by our ongoing expansion into newly regulated markets in North America and Europe, with content licensing revenue increasing by 57%. Whilst brand licensing declined in the period under review, as a result of the significant contract in last year's comparative period, this was more than made up by increased income from our core content licensing. The growth in licensing income has continued into the second half of this year, with licensing revenues for July and August 2022 being 53% higher than the comparative months in 2021.

 

"We have also continued to expand on our existing partnerships, adding new content through our direct integration agreements, as well as signing new licensing deals and launching a series of new games.

 

"Whilst we are mindful of the impact of higher inflation throughout global markets, the outlook for the Group remains positive. The Group has a strong new business pipeline and will also see additional revenues coming from North America, as well as from the new market entries in Europe. As such we expect to deliver on market expectations for the full year."

 

 

An analyst briefing will be held virtually at 9:30am today. To attend, please contact Yellow Jersey on  gamingrealms@yellowjerseypr.com .

 

The Company also notes that it will be hosting an online presentation to retail investors on Friday 23rd September at 1pm.  Those wishing to join the presentation are requested to register via the following link: Meeting Registration .

 

 

Enquiries

 

Gaming Realms plc

0845 123 3773

Michael Buckley, Executive Chairman

Mark Segal, CFO


 

Peel Hunt LLP - NOMAD and broker

 

020 7418 8900

George Sellar

Andrew Clark

Lalit Bose

 

 

 

Yellow Jersey

 

07747 788 221

Charles Goodwin

Annabelle Wills  


 

Business review

 

The Group delivered overall revenue growth of 10% to £8.5m (H1'21: £7.7m), driven by the Group's core content licensing business.  Total expenses increased 2%, which resulted in a 25% increase in total EBITDA generated across the Group to £3.3m (H1'21: £2.7m).

 

The Group recorded a profit before tax for the period of £1.3m, a 66% increase on the same period in 2021.

 

 

Licensing

 

Licensing segment revenues increased 15% to £6.7m (H1'21: £5.8m), which is broken down as:

 

· Content licensing revenue growth of 57% to £6.4m (H1'21: £4.1m); and

· Brand licensing revenue reduced 82% to £0.3m (H1'21: £1.7m).

 

The segment delivered £3.6m EBITDA in the period, an 8% overall uplift over the £3.4m in H1'21.

 

Content licensing

The core focus of the Group remains delivering growth in the content licensing business. Continued growth in the games portfolio and increasing the distribution footprint to an increased number of operators in Europe and North America underpins the current period's performance.

 

During the period, the Group began operating with partners in three additional regulated markets, Ontario, Spain and Denmark. Outside of going live with partners in these newly entered markets, we also went live with a further 18 partners during the period in existing markets in Europe and North America.

 

An additional 8 new Slingo games were released to the market during the period, bringing the Group's games portfolio to 61 games at the period end (H1'21: 48 games).

 

This all resulted in a 57% increase in content licensing revenues to £6.4m (H1'21: £4.1m).

 

Brand licensing

Revenues from the Group's brand licensing activities, which are non-core, fell 82% to £0.3m (H1'21: £1.7m).  This is a result of a significant brand deal completed in the comparative period which did not repeat in the period.

 

 

Social

 

Revenues in the Group's social publishing business reduced 7% to £1.8m in the period (H1'21: £1.9m) as a result of a reduction in marketing during the period.

 

However, with total segment expenses (excluding share option and related charges) reducing by 16% to £1.1m (H1'21: £1.3m), the segment actually delivered EBITDA growth of 13% to £0.7m (H1'21: £0.6m).

 

The reduction in total segmental expenses comprises a 21% fall in operating costs, which are largely revenue driven, and a 99% reduction in marketing costs from the previous period.

 

 

Cashflow and balance sheet

The Group's cash balance at 30 June 2022 was £4.0m, a reduction of £0.4m from the £4.4m reported at 31 December 2021.

 

The current period fall in cash was largely driven by the £2.0m cash inflow from operations, offset by £2.1m development costs capitalised during the period and £0.2m acquisition of tangible and intangible assets.

 

Subsequent to the period end, the cash balance increased to £4.6m at 31 August 2022, with negative working capital movements in the first half of the year reversing.

 

The Group has a convertible loan of £3.0m owed to Gamesys Group plc (see Note 11), due for repayment in December 2022.

 

Net assets totalled £16.1m (31 December 2021: £13.1m).

 

 

Consolidated statement of comprehensive income

for the 6 months ended 30 June 2022

 


 

6M

6M



30 June 2022

30 June 2021



Unaudited

Unaudited

 

Note

 

 

 Revenue

2

  8,507,887

  7,745,982

 Marketing expenses


  (53,274)

  (207,428)

 Operating expenses


  (1,179,301)

  (1,185,859)

 Administrative expenses


  (3,795,212)

  (3,256,425)

 Share option and related charges

10

  (162,819)

  (442,571)





 EBITDA

2

  3,317,281

  2,653,699





 Amortisation of intangible assets

6

  (1,752,572)

  (1,461,832)

 Depreciation of property, plant and equipment

5

  (124,071)

  (97,282)

 Finance expense

3

  (117,769)

  (302,221)

 Finance income

3

  13,038

  11,564

 Profit before tax

 

  1,335,907

  803,928

 Tax credit


  44,719

  38,347

 Profit for the period


  1,380,626

  842,275

 Other comprehensive income

 



 Items that will or may be reclassified to profit or loss:

 


 

 Exchange gain / (loss) arising on translation of foreign operations


  713,266

  (84,998)

 Total other comprehensive income


  713,266

  (84,998)

 Total comprehensive income


  2,093,892

  757,277

 Profit / (loss) attributable to:

 



 Owners of the parent


  1,380,626

  843,833

 Non-controlling interest


  - 

  (1,558)



  1,380,626

  842,275

 Total comprehensive income attributable to:

 



 Owners of the parent


  2,093,892

  758,835

 Non-controlling interest


  - 

  (1,558)

 


  2,093,892

  757,277





 Earnings per share

 

Pence

Pence

 Basic

4

0.47

0.29

 Diluted

4

0.46

0.28

 

 

Consolidated statement of financial position

as at 30 June 2022

 

 

 

 

30 June
2022

31 December
2021



Unaudited

Audited

 

Note

 

 

 Non-current assets

 



 Intangible assets

6

12,930,360

11,815,598

 Property, plant and equipment

5

464,250

484,578

 Other assets


138,798

150,646



13,533,408

12,450,822

 Current assets

 



 Trade and other receivables

7

4,680,813

3,260,687

 Cash and cash equivalents


3,995,382

4,412,375



8,676,195

7,673,062

 Total assets


22,209,603

20,123,884

 Current liabilities

 



 Trade and other payables

8

2,138,487

2,241,114

 Lease liabilities


157,794

172,887

 Other creditors

11

2,950,901

3,489,278

 Derivative liabilities

11

638,000

744,000



5,885,182

6,647,279

 Non-current liabilities

 



 Deferred tax liability


153,034

199,876

 Lease liabilities


95,886

168,227



248,920

368,103

 Total liabilities


6,134,102

7,015,382

 Net assets


16,075,501

13,108,502

 Equity

 



 Share capital

9

29,200,676

28,970,262

 Share premium


87,653,774

87,370,856

 Merger reserve


(67,673,657)

(67,673,657)

 Foreign exchange reserve


2,131,535

1,418,269

 Retained earnings


(35,236,827)

(36,977,228)

 Total equity


16,075,501

13,108,502



Consolidated statement of cash flows

for the 6 months ended 30 June 2021

 

 


 

30 June
2022

30 June
2021



Unaudited

Unaudited


 Note

£

 

 Cash flows from operating activities

 



 Profit for the period


1,380,626

842,275

 Adjustments for:

 



 Depreciation of property, plant and equipment

5

124,071

97,282

 Amortisation of intangible fixed assets

6

1,752,572

1,461,832

 Finance income

3

(13,038)

(11,564)

 Finance expense

3

117,769

302,221

 Loss on disposal of property, plant and equipment


-

578

 Income tax credit


(44,719)

(38,347)

 Exchange differences


5,413

29,803

 Share based payment expense

10

253,775

271,859

 Increase in trade and other receivables


(1,427,075)

(877,939)

 (Decrease) / increase in trade and other payables


(145,627)

185,621

 Decrease in other assets


11,848

-

 Net cash flows from operating activities


2,015,615

2,263,621





 Investing activities

 



 Acquisition of property, plant and equipment

5

(99,376)

(119,847)

 Acquisition of intangible assets

6

(83,143)

(98,473)

 Capitalised development costs

6

(2,088,552)

(1,614,370)

 Proceeds from the sale of other investments


-

362,435

 Finance lease asset - sublease receipts


-

78,840

 Net cash used in investing activities


(2,271,071)

(1,391,415)





 Financing activities

 



 Receipt of deferred consideration


-

972,554

 IFRS 16 lease payments


(103,282)

(203,878)

 Issue of share capital on exercise of options

9

13,332

318,221

 Interest paid


(99,393)

(105,218)

 Net cash (used in) / from financing activities


(189,343)

981,679

 Net (decrease) / increase in cash and cash equivalents

 

(444,799)

1,853,885

 Cash and cash equivalents at beginning of period

 

4,412,375

2,105,167

 Exchange gain / (loss) on cash and cash equivalents


27,806

(35,417)

 Cash and cash equivalents at end of period


3,995,382

3,923,635

 


Consolidated statement of changes in equity

for the 6 months ended 30 June 2022

 


 Share capital

 Share premium

 Merger reserve

 Foreign Exchange Reserve

 Retained earnings

 Total to equity holders of parents

 Non-controlling interest

 Total equity


 

 

 

 

 

 

 

 

 1 January 2021

28,664,731

87,258,166

(67,673,657)

1,379,116

(38,768,257)

10,860,099

70,623

10,930,722

 Profit for the period

-

-

-

-

843,833

843,833

(1,558)

842,275

 Other comprehensive income

-

-

-

(84,998)

-

(84,998)

-

(84,998)

 Total comprehensive income for the period

-

-

-

(84,998)

843,833

758,835

(1,558)

757,277

 








 Share-based payment on share options (Note 10)

-

-

-

-

271,859

271,859

-

271,859

 Exercise of options (Note 9)

205,531

112,690

-

-

-

318,221

-

318,221

 30 June 2021 (unaudited)

28,870,262

87,370,856

(67,673,657)

1,294,118

(37,652,565)

12,209,014

69,065

12,278,079


















 1 January 2022

28,970,262

87,370,856

(67,673,657)

1,418,269

(36,977,228)

13,108,502

-

13,108,502

 Profit for the period

-

-

-

-

1,380,626

1,380,626

-

1,380,626

 Other comprehensive income

-

-

-

713,266

-

713,266

-

713,266

 Total comprehensive income for the period

-

-

-

713,266

1,380,626

2,093,892

-

2,093,892

 








 Share-based payment on share options (Note 10)

-

-

-

-

253,775

253,775

-

253,775

 Exercise of options (Note 9)

13,332

-

-

-

-

13,332

-

13,332

 Conversion of loan (Note 11)

217,082

282,918

-

-

106,000

606,000

-

606,000

 30 June 2022 (unaudited)

29,200,676

87,653,774

(67,673,657)

2,131,535

(35,236,827)

16,075,501

-

16,075,501

 


Notes forming part of the consolidated financial statements

For the 6 months ended 30 June 2022

 

1. Accounting policies

 

General Information

 

Gaming Realms plc ("the Company") and its subsidiaries (together "the Group").

 

The Company is admitted to trading on AIM of the London Stock Exchange. It is incorporated and domiciled in the UK. The address of its registered office is Two Valentine Place, London, SE18QH.

 

The results for the six months ended 30 June 2022 and 30 June 2021 are unaudited.

 

Basis of preparation

 

The financial information for the year ended 31 December 2021 included in these financial statements does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2021 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2021 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

 

This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the board of directors on 19 September 2022. The financial information in this interim report has been prepared in accordance with UK adopted international accounting standards. The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 December 2021 and which will form the basis of the 2022 financial statements.

 

The consolidated financial statements are presented in Sterling.

 

Going concern

 

The Group meets its day-to-day working capital requirements from the cash flows generated by its trading activities and its available cash resources. 

 

The Group prepares cash flow forecasts and re-forecasts at least bi-annually as part of the business planning process. 

 

The Directors have reviewed forecast cash flows for the period to December 2024, which include the potential repayment of the convertible loan in December 2022 (see Note 11), and consider that the Group will have sufficient cash resources available to meet its liabilities as they fall due.

 

Accordingly, these financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Group will realise its assets and discharge its liabilities in the normal course of business.

 

EBITDA

 

EBITDA is a non-GAAP company specific measure defined as profit or loss before tax adjusted for finance income and expense, depreciation and amortisation.  EBITDA is considered to be a key performance measure by the Directors as it serves as an indicator of financial performance.

 

 

2. Segment information

 

The Board is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance.

 

The Group has two reportable segments.

· Licensing - B2B brand and content licensing to partners in the US and Europe; and

· Social publishing - provides B2C freemium games to the US and Europe.

 

 

Revenue

 

The Group has disaggregated revenue into various categories in the following table which is intended to:

· Depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic date; and

· Enable users to understand the relationship with revenue segment information provided below.

 

 


 Licensing

 Social
publishing

 Other

 Total

 H1 2022 revenue

 

 

 

 

 Primary geographical markets

 




 UK, including Channel Islands

411,529

-

11,000

422,529

 USA

2,857,929

1,788,722

-

4,646,651

 Isle of Man

359,662

-

-

359,662

 Malta

1,224,280

-

-

1,224,280

 Gibraltar

1,208,956

-

-

1,208,956

 Rest of the World

645,809

-

-

645,809


6,708,165

1,788,722

11,000

8,507,887

 





 Contract counterparties

 




 Direct to consumers (B2C)

-

1,788,722

-

1,788,722

 B2B

6,708,165

-

11,000

6,719,165


6,708,165

1,788,722

11,000

8,507,887

 





 Timing of transfer of goods and services

 



 Point in time

6,708,165

1,788,722

11,000

8,507,887

 Over time

-

-

-

-


6,708,165

1,788,722

11,000

8,507,887

 

 


 Licensing

 Social
publishing

 Other

 Total

 H1 2021 revenue

 

 

 

 

 Primary geographical markets

 




 UK, including Channel Islands

381,898

-

-

381,898

 USA

2,533,481

1,930,171

-

4,463,652

 Isle of Man

1,228,087

-

-

1,228,087

 Malta

981,951

-

-

981,951

 Gibraltar

249,143

-

-

249,143

 Rest of the World

441,251

-

-

441,251


5,815,811

1,930,171

-

7,745,982

 





 Contract counterparties

 




 Direct to consumers (B2C)

-

1,930,171

-

1,930,171

 B2B

5,815,811

-

-

5,815,811


5,815,811

1,930,171

-

7,745,982

 





 Timing of transfer of goods and services

 



 Point in time

5,735,657

1,930,171

-

7,665,828

 Over time

80,154

-

-

80,154


5,815,811

1,930,171

-

7,745,982

 

 

EBITDA

 


 Licensing

 Social publishing

 Head Office

 Total

H1 2022

 

 

 

 

 Revenue

  6,708,165

  1,788,722

  11,000

  8,507,887

 Marketing expense

  (13,081)

  (2,063)

  (38,130)

  (53,274)

 Operating expense

  (721,757)

  (457,544)

  - 

  (1,179,301)

 Administrative expense

  (2,256,069)

  (646,386)

  (892,757)

  (3,795,212)

 Share option and related charges

  (77,067)

  (855)

  (84,897)

  (162,819)

 EBITDA

  3,640,191

  681,874

  (1,004,784)

  3,317,281

 

 


 Licensing

 Social
publishing

 Head Office

 Total

H1 2021

 

 

 

 

 Revenue

  5,815,811

  1,930,171

  - 

  7,745,982

 Marketing expense

  (12,389)

  (157,862)

  (37,177)

  (207,428)

 Operating expense

  (606,247)

  (579,612)

  - 

  (1,185,859)

 Administrative expense

  (1,741,832)

  (583,265)

  (931,328)

  (3,256,425)

 Share option and related charges

  (85,401)

  (4,745)

  (352,425)

  (442,571)

 EBITDA

  3,369,942

  604,687

  (1,320,930)

  2,653,699

 

3. Finance income and expense

 


 

6M
30 June 2022

6M
30 June 2021



 

 

 Finance income

 



 Interest received


  - 

  6,306

 Interest income on unwind of deferred income


  13,038

  - 

 Interest income on finance lease asset


  - 

  5,258

 Total finance income

 

  13,038

  11,564





 Finance expense

 



 Bank interest paid


  9,519

  8,743

 Fair value loss on other investments


  - 

  38,856

 Effective interest on other creditor


  94,497

  228,575

 Interest expense on lease liability


  13,753

  26,047

 Total finance expense

 

  117,769

  302,221

 

 

4. Earnings per share

 

Basic earnings per share is calculated by dividing the result attributable to ordinary shareholders by the weighted average number of shares in issue during the period.  The calculation of diluted EPS is based on the result attributable to ordinary shareholders and weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares.  The Group's potentially dilutive securities consist of share options and a convertible loan (see Note 11).  The convertible loan is anti-dilutive and so is ignored in calculating diluted EPS.

 


6M
30 June 2022

6M
30 June 2021


 

 




 Profit after tax attributable to the owners of the parent Company

1,380,626

843,833





 Number

 Number

 Denominator - basic

 


 Weighted average number of ordinary shares

291,309,072

288,157,560




 Denominator - diluted

 


 Weighted average number of ordinary shares

291,309,072

288,157,560

 Weighted average number of option shares

7,442,107

12,332,327

 Weighted average number of shares

298,751,179

300,489,887





 Pence

 Pence

 Basic earnings per share

0.47

0.29

 Diluted earnings per share

0.46

0.28

 

 

5. Property, plant and equipment



 ROU lease assets

 Leasehold improvements

 Computers and related equipment

 Office furniture and equipment

 Total


 

 

 

 

 

 Cost

 





 At 1 January 2022

771,690

62,835

311,325

63,609

1,209,459

 Additions

-

-

98,049

1,327

99,376

 Disposals

-

-

-

-

-

 Exchange differences

10,614

590

8,366

3,856

23,426

 At 30 June 2022

782,304

63,425

417,740

68,792

1,332,261

 






 Accumulated deprecation and impairment

 




 At 1 January 2022

457,574

32,555

179,656

55,096

724,881

 Depreciation charge

75,851

6,718

37,337

4,165

124,071

 Disposals

-

-

-

-

-

 Exchange differences

8,916

496

6,212

3,435

19,059

 At 30 June 2022

542,341

39,769

223,205

62,696

868,011

 






 Net book value

 





 At 31 December 2021

314,116

30,280

131,669

8,513

484,578

 At 30 June 2022

239,963

23,656

194,535

6,096

464,250



6. Intangible assets

 


 Goodwill

 Customer database

 Software

 Development costs

 Licenses

 Domain names

 Intellectual Property

 Total

 

 

 

 

 

 

 

 

 

 Cost

 








 At 1 January 2022

6,673,924

1,490,536

1,262,416

17,470,157

247,322

8,874

5,844,747

32,997,976

 Additions

-

-

54,229

2,088,552

28,914

-

-

2,171,695

 Exchange differences

677,911

165,041

133,003

54,241

309

985

649,699

1,681,189

 At 30 June 2022

7,351,835

1,655,577

1,449,648

19,612,950

276,545

9,859

6,494,446

36,850,860

 









 Accumulated amortisation and impairment

 






 At 1 January 2022

1,650,000

1,490,536

1,218,108

12,102,389

43,469

8,874

4,669,002

21,182,378

 Amortisation charge

-

-

28,052

1,310,340

33,558

-

380,622

1,752,572

 Exchange differences

127,503

165,041

133,003

14,398

-

985

544,620

985,550

 At 30 June 2022

1,777,503

1,655,577

1,379,163

13,427,127

77,027

9,859

5,594,244

23,920,500

 









 Net book value

 








 At 31 December 2021

5,023,924

-

44,308

5,367,768

203,853

-

1,175,745

11,815,598

 At 30 June 2022

5,574,332

-

70,485

6,185,823

199,518

-

900,202

12,930,360

 


 

7 . Trade and other receivables

 

 

30 June
2022

31 December
2021

 

 

 

 Trade receivables

2,666,693

1,372,749

 Other receivables

31,280

41,957

 Tax and social security

569,065

394,749

 Prepayments and accrued income

1,413,775

1,451,232


4,680,813

3,260,687

 

All amounts shown fall due for payment within one year.

 

 

8. Trade and other payables

 

 

30 June
2022

31 December
2021

 

 

 

 Trade payables

633,140

531,939

 Other payables

114,638

158,726

 Tax and social security

274,052

236,491

 Accruals

1,116,657

1,313,958


2,138,487

2,241,114

 

The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.

 

 

9. Share capital

 


30 June
2022

30 June
2022

31 December
2021

31 December
2021

 Ordinary shares

 Number

 

 Number

 

 Ordinary shares of

292,006,775

29,200,676

289,702,626

28,970,262

 10 pence each

 

The increase of 2,304,149 ordinary shares relates to (i) the exercise of share options during the period and (ii) the £500,000 partial conversion of the convertible loan (see Note 11).  The changes in share capital and share premium as a result of these events is shown below.

 


 Share option exercises

 Loan conversion

 Total


£

£

£

  13,332

  217,082

  230,414

 Share premium

  - 

  282,918

  282,918


  13,332

  500,000

  513,332

 

 

10. Share based payments

The share option and related charges income statement expense comprises:

 


6M
30 June 2022

6M
30 June 2021


 

 

 IFRS 2 share-based payment charge

253,775

271,859

 Direct taxes related to share options

(90,956)

170,712


162,819

442,571

 

IFRS 2 (Share-based payments) requires that the fair value of equity settled transactions are calculated and systematically charged to the statement of comprehensive income over the vesting period.  The total fair value that was charged to the income statement in the period in relation to equity-settled share-based payments was £253,775 (H1 2021: £271,859).

 

Where individual EMI thresholds are exceeded or when unapproved share options are exercised by overseas employees, the Group is subject to employer taxes payable on the taxable gain on exercise.  Since these taxes are directly related to outstanding share options, the income statement charge has been included within share option and related charges.  The Group uses its closing share price at the reporting date to calculate such taxes to accrue.  The tax related income statement credit for the period was £90,956 (H1 2021: £170,712 charge).

 

On 6 January 2022, the following share options were granted:

 

· The Group's 2 Executive Directors were granted 2,000,000 share options with an exercise price of 32.5 pence per share.  The options lapse on the 3rd anniversary of grant and vest upon certain non-market-based conditions.

 

· The Group's 2 Executive Directors and certain employees were granted 1,900,000 share options, which vest in three equal tranches on 15 October 2022, 15 October 2023 and 15 October 2024.  The options all have an exercise price of 32.5 pence per share.

 

 

11. Arrangement with Gamesys Group plc

In December 2017 the Group entered into a complex transaction with Gamesys Group plc and Group companies (together 'Gamesys Group').  The transaction includes a £3.5m secured convertible loan agreement alongside a 10-year framework services agreement for the supply of various real money services.  Under the framework services agreement the first £3.5m of services are provided free of charge within the first 5 years.

 

The convertible loan has a duration of 5 years and carried interest at 3-month LIBOR plus 5.5%, which has been updated to a fixed 5.75% following cessation of LIBOR on 31 December 2021.  It is secured over the Group's Slingo assets and business.  At any time after the first year, Gamesys Group plc may elect to convert all or part of the principal amount into ordinary shares of Gaming Realms plc at a discount of 20% to the share price prevailing at the time of conversion.  To the extent that the price per share at conversion is lower than 10p (nominal value), then the shares can be converted at nominal value with a cash payment equal to the aggregate value of the convertible loan outstanding multiplied by the shortfall on nominal value payable to Gamesys Group plc.  Under this arrangement the maximum dilution to Gaming Realms shareholders will be approximately 11% assuming the convertible loan is converted in full.

 

The option violates the fixed-for-fixed criteria for equity classification as the number of shares is variable and as a result is classified as a liability.

 

The fair value of the conversion feature is determined each reporting date with changes recognised in profit or loss.  The initial fair value was £0.6m based on a probability assessment of conversion and future share price.  This is a level 3 valuation as defined by IFRS 13.  The fair value as at 30 June 2022 was £0.7m (31 December 2021: £0.7m) based on revised probabilities of when and if the option will be exercised.  The key inputs into the valuation model included timing of exercise by the counterparty (based on a probability assessment) and the share price.

 

The initial fair value of the host debt was calculated as £2.7m, being the present value of expected future cash outflows.  The initial rate used to discount future cash flows was 14.1%, being the Group's incremental borrowing rate.  The rate was calculated by reference to the Group's cost of equity in the absence of reliable alternative evidence of the Group's cost of borrowing given it is predominantly equity funded.  Expected cash flows are based on the directors' judgement that a change in control event would not occur.  Subsequently the loan is carried at amortised cost.

 

The residual £0.2m of proceeds were allocated to the obligation of provide free services.

 

On 23 February 2022, Bally's Corporation (owner of Gamesys Group) exercised their option to convert £500,000 of the £3,500,000 convertible loan.  The issue of 2,170,817 new ordinary shares to satisfy the conversion resulted in an increase in share capital of £217,082 and share premium of £282,918.  As a result of the conversion, a £106,000 reclassification from the fair value of the derivative liability into retained earnings was made, being the 14.29% portion of the total loan converted.

 

Following conversion, the principal convertible loan balance is £3,000,000.

 


 Fair value of debt host

 Obligation to provide free services

 Fair value of derivative Liability

 Total


 

 

 

 

 At 1 January 2022

3,429,278

60,000

744,000

4,233,278

 Utilisation of free services

-

(43,000)

-

(43,000)

 Conversion of loan

(500,000)

-

(106,000)

(606,000)

 Effective interest

94,497

-

-

94,497

 Interest paid

(89,874)

-

-

(89,874)

 At 30 June 2022

2,933,901

17,000

638,000

3,588,901

 

 

12. Related party transactions

 

Jim Ryan is a Non-Executive Director of the Company and the CEO of Pala Interactive, which has a real-money online casino and bingo site in New Jersey. During the period, total license fees earned by the Group were $10,401 (H1 2021: $24,862) with $940 due at 30 June 2022 (30 June 2021: $12,668).  Towards the end of the period the Group began distributing its content to certain North American partners via Pala's B2B platform distribution network, with platform fees of $108 being incurred (H1'21: $Nil) which were all owed at the period end (30 June 2021: $Nil).

 

Jim Ryan is a Director of Bally's Corporation ("Bally's") and was previously a Non-Executive Director of Gamesys Group prior to its acquisition by Bally's. In December 2017 the Group entered into a 10-year framework services agreement and a 5-year convertible loan agreement for £3.5m with Gamesys Group plc (see Note 11).

 

During the period £75,000 (H1 2021: £75,000) of consulting fees were paid to Dawnglen Finance Limited, a company controlled by Michael Buckley. No amounts were owed at 30 June 2022 (30 June 2021: £Nil).

 

 

 



[1] EBITDA is profit before interest, tax, depreciation and amortisation expenses and is a non-GAAP measure.  The Group uses EBITDA to comment on its financial performance.

[2] EBITDA before share option and related charges is also discussed above which is EBITDA with the share option and related charge in the income statement added back on the basis it is a material non-cash charge.

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