Preliminary Results
Empire Online Limited
04 April 2006
EMPIRE ONLINE LIMITED MAIDEN PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 2005
Empire Online Limited (the 'Company' or 'Empire Online'), a leading
multi-channel online gaming and marketing services company, today announces its
maiden preliminary results for the year ended 31 December 2005.
OPERATING HIGHLIGHTS:
• Successful acquisitions of Club Dice casino and bingo platforms and
Noble Poker, the largest poker operator on the iPoker network
• Final dividend of US6.8cents (3.9pence) per Ordinary Share
• Successful listing on AIM market raising $222m in gross proceeds
• Assignment of Empire Online's PartyGaming related 'skin' operations
to PartyGaming for $250 million cash
FINANCIAL HIGHLIGHTS:
• Reported net gaming revenues up 102% to $97.4m (2004: $48.3m.)
Reported profit after amortisation and non recurring charges before
taxation up 57% to $41.2m (2004: $26.2m)
• Pro forma* net gaming revenues up 61% to $105.2m (2004: $65.2m)
• Pro forma* gross profit up 33% to $51.9m (2004: $38.9m)
• Pro forma* profit before amortisation and non recurring charges up
33% to $50.1m (2004: $37.7m)
• Active Real Money Players at the end of 2005 rose by 59% to 165,310
(2004: 104,177)
Commenting on the results, Noam Lanir, CEO of Empire Online Limited, said: '2005
was an extremely busy year for Empire with our successful listing on the AIM
market of the London Stock Exchange and our evolution from a marketing services
provider to a successful online gaming platform. We are extremely pleased with
the performance of the Company during the period, and are very encouraged with
the growth in both our poker and casino offerings globally and in particular in
geographical territories outside of the USA.
The Company added around 450 new real money sign ups per day in the first 4
weeks of March in the new financial year. The Board reiterates its confidence
in achieving an EBITDA of $37m for the year to 31 December 2006.'
*The pro-forma financial information has been prepared so as to provide
comparable information for the transitional year of 2005 during which certain
assets were acquired by the Group from Tradal Ltd, a related company
incorporated in St. Vincent and the Grenadines. Further details are disclosed
within this statement.
There will be a presentation to analysts at 9.00am today at Citigate Dewe
Rogerson, 3 London Wall Buildings, London EC2M 5SY. For further investor
information please go to http://investors.ep.com/company_information.htm
Enquiries:
Empire Online Limited +44(0) 20 7638 9571
Noam Lanir, Chief Executive Officer
Andrew Burns, Chief Financial Officer
Andrew Burnett, Head of Mergers & Acquisitions
Citigate Dewe Rogerson +44(0) 20 7638 9571
Sarah Gestetner
Ged Brumby
Chairman's Statement
I would like to welcome all shareholders and investors to Empire Online's maiden
preliminary results.
This has been a big year of change for all at Empire Online and I would like to
express my gratitude to Noam Lanir and the rest of the directors and staff for
all of their efforts during this period. Noam has a great understanding of this
sector and I believe that with his ongoing enthusiasm and experience the Company
is extremely well placed to meet the challenges ahead.
Following the settlement from PartyGaming, Empire Online is in a very strong
position financially. The $250m received is currently on deposit and is
available to finance the acquisition of complementary businesses that can be
acquired at a sensible price. The sector is widely expected to go through a
period of consolidation and the Company in uniquely placed to emerge as one of
the key players in the industry.
Opportunities for organic growth also remain strong and are being achieved with
admirable geographic diversity. At the same time we have significant downside
protection to the Company in the unlikely event of any disruption to our US
business through any regulatory activities.
Diluted earnings per share after amortisation and non recurring charges were
US16.0cents per share for the year. The Board is pleased to recommend a final
dividend of $20m which is US 6.8cents (3.9pence) per share. Subject to approval
at the Company's AGM, the Company anticipates that the final dividend will be
paid in early June.
Together with the interim dividend of $10m or US3.4cents (1.9pence) per share,
this takes the dividends paid to shareholders since the IPO to $30m or
US10.2cents (5.8pence) per share. The Board reiterates its intention to continue
with a 50% dividend payout ratio going forward.
The opportunities that lie ahead are excellent and the Board remains extremely
confident about the future business and profitability of Empire Online.
Lord Steinberg
Chairman
Chief Executive's Review
2005 has been a year of considerable change for the Company. We end the year in
a strong and secure position with the last six months in particular seeing a
remarkable transformation in the Company. At the time of our IPO in June we were
principally a provider of marketing services to two of the largest online gaming
companies in their respective fields: CasinoOnNet and PartyPoker. Now, we have
an established and fast growing Licensed Gaming business which operates its own
platforms (Club Dice and Noble Poker) and have $250m cash at our disposal to
pursue acquisitions which will enable us to play a leading part in industry
consolidation.
Operating Review
The twelve months to 31st December 2005 has seen further continued growth across
all aspects and areas of the Company, albeit in a manner different to that
anticipated at the time of the Company's IPO in June 2005. The number of
registered customers across the Group has risen over the course of the twelve
months ending 31st December 2005, by 185,456 (2004: 121,257).
Growth in our casino business has led to a total number of active players at the
end of the year of 42,304 (2004: 32,711). Total pro-forma revenues for the
division were $31.4m (2004: $21.8m) for the year which generated a pro-forma
gross profit of $16.6m (2004: $14.7m) for the year on a pro-forma gross profit
margin of 51% (2004: 67%).
In addition, growth in our poker business has led to a total number of active
players at the end of the year of 123,006 (2004:71,466). Total pro-forma
revenues for the division were $73.8m (2004: $43.3m) for the year which
generated a pro-forma gross profit of $35.3m (2004: $24.3m) for the year on a
pro-forma gross profit margin of 48% (2004: 56%).
We have seen growth across Key Performance Indicators (KPI's) at our Club Dice
casino suite and our Noble Poker brand. Both of these platforms were acquired in
August 2005, with the aim of reducing our reliance on our two technology
providers at the time and to establish our move into licensed gaming, where we
own and operate our own gaming licence.
This growth has been achieved along with a relentless focus on cost containment.
The average cost of acquiring a new real money player across the group during
2005 was $230 (2004: $220). The Board believes that the stability of this
metric, along with the Company's ability to sustain a high level of player
acquisition emphasises the deliverability of future incremental profits.
Club Dice Casino
Empire Online completed the acquisition of the Club Dice Casino suite in August.
The cost of the acquisition was $46.6m.
Club Dice has seen substantial growth in revenues and new sign ups since
inception. At the end of 2005, the Club Dice platforms in aggregate had 26,790
active players. The net revenue per day averaged $79,946 during the fourth
quarter (Q4) of 2005, compared to an average daily income of $65,334, an
increase of 22.4% on the third quarter (Q3) of 2005.
Noble Poker
Empire Online completed the acquisition of the player database, brand and
intellectual property of Noble Poker in August 2005. Noble Poker is the largest
poker operator on the Playtech iPoker network, one of the fastest growing poker
networks on the internet. The cost of the acquisition was $3.6 million.
The Company has implemented strategies to help drive the rate of growth in new
daily signups. This has been successfully executed with Noble Poker achieving an
average of 138 new real money signups per day during the fourth quarter of 2005
against 118 new real money player signups during the third quarter of 2005. The
number of active players was 29,585 at the end of the fourth quarter of 2005,
against 21,809 at the end of the third quarter.
Industry Consolidation / Mergers and Acquisitions
For many years, the industry has talked of consolidation. Now, we are starting
to see that talk become reality. Empire Online has always seen its role at the
centre of this consolidation, believing that our core expertise in marketing is
better leveraged across a larger platform. The Company has always expressed its
intention to pursue industry-consolidating deals as and when they become
available. The large number of online gaming sites and the increasingly higher
barriers to profitable scale mean that consolidation will be seen by many
operators as an attractive exit going forward.
I believe that the cash reserves available to the Company, along with the
ability to use its equity give the Company considerable flexibility in pursuing
merger and acquisition activity over the remainder of the year. Our focus is to
extend the range of the products that we can offer our customers, including a
sportsbook. We will assess areas of geographical acquisition in-line with
regulatory and legislation trends.
Industry Regulation
Since the beginning of the year there has been renewed activity in the US
Congress to bring forward bills that seek to either ban the use of financial
instruments for online gaming or extend existing federal laws to prohibit US
citizens from online gaming completely. Having established this Company in 1998,
I am used to US regulatory threats as an ever present 'soundtrack' to the
industry.
I cannot offer investors any certainty that prohibitive legislation will not
pass Congress, but as CEO of Empire Online, it is my duty to take all actions
necessary to position this Company so that it maximises its exposure to the
upside from this industry and minimises the risks. Our Mergers and Acquisitions
function will seek to exploit, from a position of strength, any opportunities
that may arise from adverse legislation being passed.
Financial Review
Pro-forma net gaming revenue for the year ended 31 December 2005 was $105.2m (12
months to December 2004: $65.2m), earning a pro-forma gross margin of $51.9m
(2004: $39.0m) at 49.3% of turnover (2004: 59.8%). The reduction in pro-forma
gross margin has arisen from additional marketing costs incurred in order to
stabilise the EmpirePoker platform following the separation form PartyPoker on
8th October 2005. Additionally, significant offline campaigns were undertaken
throughout 2005, which initially yield a lower gross margin than the Company's
main online marketing activities.
Pro-forma profit before tax was $50.1m (2004: $37.7m), before amortization and
non recurring costs of $4.5m (2004: nil.)
Pro-forma diluted earnings per share before amortisation and non-recurring costs
were 19cents (2004: $350). Pro-forma diluted earnings per share after
amortisation and non-recurring costs were 17cents (2004: $350).
During the year ended 31 December 2005, the Company generated pro-forma cash
from operating activities of $77.2m (2004: $37.4m). As at 31 December 2005 the
Company had $16.3m (2004: $21.8m) of cash and liquid resources on its balance
sheet.
Trading Outlook
During the first 4 weeks of March in the new financial year the rate of new real
money player growth was around 450 per day. The Company continues to believe
that growth opportunities for all its platforms remain strong. In particular,
the Company is pleased to note that more than 50% of new daily signups originate
from outside of the USA. The cost of acquiring new customers continues to fall
on a quarter by quarter basis.
On the current rate of growth, the Company reiterates its confidence in
achieving an EBITDA of $37 million for the current year.
Noam Lanir
Chief Executive
Consolidated Income Statement
for the year ended 31 December 2005
Pre- Amortisation and
amortisation and non recurring
Note non recurring items
items
2005 2005 2005 2004
$000 $000 $000 $000
Net gaming revenue 97,389 - 97,389 48,319
Cost of sales (49,644) - (49,644) (20,716)
------ ------ ------ ------
Gross profit 47,745 - 47,745 27,603
Administrative expenses 2 (3,171) (4,581) (7,752) (1,643)
------ ------ ------ ------
Operating profit 3 44,574 (4,581) 39,993 25,960
Finance expenditure (55) - (55) (43)
Finance income 1,246 - 1,246 309
------ ------ ------ ------
Profit before taxation 45,765 (4,581) 41,184 26,226
Taxation (10) - (10) -
------ ------ ------ ------
Profit after taxation for the 45,755 (4,581) 41,174 26,226
period
====== ====== ====== ======
Earnings per share
Basic earnings per share ($) 4 $0.18 $0.16 $ 243.85
====== ====== ======
Diluted earnings per share ($) 4 $0.17 $0.16 $ 243.85
====== ====== ======
Dividends
Proposed final dividend per share ($) $0.07 -
====== ======
Proposed final dividend ($000) 20,000 -
====== ======
Dividends paid during the period per
share ($) $0.10 -
====== ======
Dividends paid during the period ($000) 49,043 -
====== ======
The notes on pages 10 to 11 form part of these financial statements.
Consolidated Balance Sheet
as at 31 December 2005
Note 2005 2004
$000 $000
Assets
Non-current assets
Property, plant and equipment 119 -
Intangible assets 224,628 794
------- -------
224,747 794
------- -------
Current assets
Trade and other receivables 11,431 18,331
Cash and cash equivalents 5 16,297 14,830
------- -------
27,728 33,161
------- -------
Total assets 252,475 33,955
======= =======
Equity
Share capital - 1
Share premium 209,807 604
Share option reserve 277 -
Retained earnings 22,297 30,166
------- -------
Total equity 232,381 30,771
------- -------
Liabilities
Current liabilities
Trade and other payables 20,088 3,184
Current tax payable 6 -
------- -------
Total liabilities 20,094 3,184
------- -------
Total equity and liabilities 252,475 33,955
======= =======
These Financial Statements were approved by the Board of Directors on the 3rd of
April 2006.
The notes on pages 10 to 11 form part of these financial statements.
Consolidated Statement of Changes in Equity
for the year ended 31 December 2005
Share Share Share Accumulated
capital premium Option profits Total
reserve
$000 $000 $000 $000 $000
Balance at 1 January 2004 1 - - 3,940 3,941
Share capital issued - 604 - - 604
Net profit for the year - - - 26,226 26,226
------ ------- ------ ------ ------
Balance at 31 December 2004 1 604 30,166 30,771
Net profit for the period - - - 41,174 41,174
Issue of new share capital (1) 222,601 - - 222,600
IPO expenses - (13,398) - - (13,398)
Share option reserve - - 277 - 277
Dividends paid - - - (49,043) (49,043)
------ ------- ------ ------ -------
Balance at 31 December 2005 - 209,807 277 22,297 232,381
====== ======= ====== ====== =======
The notes on pages 10 to 11 form part of these financial statements.
Consolidated Statement of Cash Flows
for the year ended 31 December 2005
Note 2005 2004
$000 $000
Cash flows from operating activities
Profit before tax 41,184 26,226
Adjustments for
Depreciation and amortisation 2,898 173
Interest income (1,159) (309)
Interest expense 55 -
Equity settled share options 277 -
-------- --------
43,255 26,090
-------- --------
Changes in working capital
Decrease in trade and other receivables 6,900 881
Increase/ (decrease) in trade and other payables 16,904 (2,109)
Taxation paid (4) -
-------- --------
23,800 (1,228)
-------- --------
Net cash generated from operating activities 67,055 24,862
-------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (131) -
Purchase of intangible assets (5,528) (967)
Acquisition of business (221,192) -
Interest income received 1,159 309
-------- --------
Net cash used in investing activities (225,692) (658)
-------- --------
Cash flows from financing activities
Advance of loans to shareholders - (11,139)
Dividends paid (49,043) -
Proceeds from issue of shares 209,203 -
Share capital cancellation (1) -
Interest paid (55) -
-------- --------
Net cash from/(used in) financing activities 160,104 (11,139)
-------- --------
Net increase in cash and cash equivalents 1,467 13,065
Cash and cash equivalents at the beginning of the year 5 14,830 1,765
-------- --------
Cash and cash equivalents at the end of the year 5 16,297 14,830
======== ========
The notes on pages 10 to 11 form part of these financial statements.
Notes to the Financial Statements
1. Basis of preparation
The audited financial statements of Empire Online have been prepared in
accordance with International Financial Reporting Standards ('IFRS') as adopted
by the European Union. The significant accounting policies applied in the
Financial Statements of the Group in the prior years have been applied
consistently in these Financial Statements. The Group adopted for the first
time IFRS 2 Share Based Payments and IFRS 3 Business Combinations in 2005. The
adoption of the above had no impact on prior years.
The financial information is presented in US dollars because that is the
currency in which the Group primarily operates.
2. Amortisation and non recurring items
Amortisation and non recurring items refer to:
2005 2004
$000 $000
Amortisation of intangible assets 2,266 -
Amortisation of share options 277 -
IPO related expenses 587 -
Non recurring expenses 1,451 -
------ ------
4,581 -
====== ======
3. Operating Profit
2005 2004
$000 $000
Operating profit is stated after charging:
Administration services 936 1,460
Depreciation 12 260
Amortisation 2,886 173
Operating leases 18 -
Auditors' remuneration 90 37
====== ======
Auditor's remuneration is analysed as:
Audit fees 90 37
====== ======
4. Earnings per share
Basic earnings per share has been calculated by dividing the net profit
attributable to ordinary shareholders (profit for the year) by the weighted
average number of shares in issue during the relevant financial periods.
Diluted earnings per share is calculated after taking into consideration the
potentially diluted shares in existence as at the year ended 31 December 2005.
For the year ended 31 December 2004 there were no potentially diluted shares.
Pre- amortisation Post amortisation
and non recurring and non recurring
items items
2005 2005 2004
Net profit attributable to ordinary
shareholders ($000) 45,755 41,174 26,226
============ ============ =========
Weighted average number of ordinary shares in
issue 260,689,492 260,689,492 107,550
============ ============ =========
Basic earnings per share ($) 0.18 0.16 243.85
============ ============ =========
Weighted average number of ordinary shares
including the effect of potentially diluted
shares 261,862,570 261,862,570 107,550
============ ============ =========
Diluted earnings per share ($) 0.17 0.16 243.85
============ ============ =========
Number of Shares
Weighted average number of ordinary shares in
issue 260,689,492 260,689,492 107,550
Effect of dilutive potential ordinary
shares:
Share options 1,173,078 1,173,078 -
------------ ------------ ---------
Weighted average number of ordinary shares
including the effect of potentially diluted
shares 261,862,570 261,862,570 107,550
============ ============ =========
5. Cash and cash equivalents
Cash and cash equivalents included in the cash flow statement comprise the
following at the balance sheet date:
2005 2004
$000 $000
Short term deposits 14,607 12,495
Cash at bank 1,690 2,335
------ ------
16,297 14,830
====== ======
Unaudited Pro-Forma Financial Information
General Information
The pro-forma financial information has been prepared so as to provide
comparable information for the transitional year of 2005 during which certain
assets were acquired by the Group from Tradal Ltd, a related company
incorporated in St. Vincent and the Grenadines.
Tradal Ltd will continue to play an important role for the Group as some of the
key members of staff are employed by this Company. This Company charges a
service fee for the services provided by its staff members.
Balance Sheet
The aggregated balance sheet as at 31 December 2005 is actually the same as the
Group Balance Sheet as Tradal Ltd's operations that related to the Group have,
by the end of the year, been integrated into the group via the acquisition of
Tradal Ltd's assets.
Basis of aggregation
The pro-forma results of the Group are an aggregation based on Empire Online
Group results for the year ended 31 December 2005 incorporating the trading
results of the acquired business from Tradal Ltd for the first five months of
2005. These results were aggregated so as to provide comparable information.
Unaudited pro-forma Income Statement
for the year ended 31 December 2005
Pre- Amortisation
amortisation and and non
non recurring recurring items
items
2005 2005 2005 2004
$000 $000 $000 $000
Net gaming revenue 105,181 - 105,181 65,186
Cost of sales (53,244) - (53,244) (26,192)
-------- ------- -------- --------
-
Gross profit 51,937 - 51,937 38,994
Administrative expenses (3,249) (4,581) (7,830) (1,827)
-------- ------- -------- --------
Operating profit 48,688 (4,581) 44,107 37,167
Net finance income 1,392 - 1,392 531
-------- ------- -------- --------
Profit before taxation 50,080 (4,581) 45,499 37,698
Taxation (22) - (22) (16)
-------- ------- -------- --------
Profit after taxation for the period 50,058 (4,581) 45,477 37,682
======== ======= ======== ========
Earnings per share
Basic earnings per share ($) $0.19 $0.17 $350
======== ======== ========
Diluted earnings per share ($) $0.19 $0.17 $350
======== ======== ========
Dividends
Proposed dividend per share ($) $0.07 -
======== ========
Proposed dividend ($000) 20,000 -
======== ========
Dividends paid during the period per
share ($) $0.10 -
======== ========
Dividends paid during the period ($000) 49,043 -
======== ========
Unaudited pro-forma Cash Flow Statement
for the year ended 31 December 2005
2005 2004
$000 $000
Cash flows from operating activities
Profit before income tax 45,499 37,698
Adjustments for
Depreciation and amortisation 2,928 317
Equity settled share options 277 -
Interest income (1,395) (625)
Interest expense 90 -
Non cash item: aggregation adjustments - (3,384)
-------- --------
47,399 34,006
-------- --------
Changes in working capital
Decrease in trade and other receivables 14,039 855
Increase in trade and other payables 15,793 2,386
Taxation (paid)/received (4) 1
Decrease in trading investments - 104
-------- --------
29,828 3,346
-------- --------
Net cash generated from operating activities 77,227 37,352
-------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (131) (152)
Purchase of intangible assets (5,558) -
Acquisition of business (221,192) (1,037)
Elimination of Tradal Ltd assets and liabilities 216 -
Interest income received 1,395 627
-------- --------
Net cash used in investing activities (225,270) (562)
-------- --------
Cash flows from financing activities
Advance of loans to shareholders - (16,413)
Dividends paid (49,043) (5,004)
Proceeds from issue of shares 209,203 -
Decrease in Capital Account (18,010) -
Decrease in Treasury Shares 445 -
Interest paid (90) -
-------- --------
Net cash used in financing activities 142,505 (21,417)
-------- --------
Net (decrease)/ increase in cash and cash equivalents (5,538) 15,373
Cash and cash equivalents at the beginning of the year 21,835 6,462
-------- --------
Cash and cash equivalents at the end of the year 16,297 21,835
======== ========
The financial information of the Group set out above does not constitute
statutory accounts. The results for the year ended 31 December 2005 are based
on the audited annual report and consolidated financial statements of Empire
Online Limited which have been reported on by the auditors. The report of the
auditors was unqualified.
Copies of the 2005 annual report and accounts will be sent to shareholders in
due course.
Copies of this announcement are available from the Company's website,
www.ep.com.
This information is provided by RNS
The company news service from the London Stock Exchange
Tuesday, 14th May 2024
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