Interim Results
betinternet.com PLC
4 February 2002
betinternet.com plc
Interim Statement
Six months ended 30 November 2001
OFFICERS AND PROFESSIONAL ADVISERS
DIRECTORS
Vincent Edward Caldwell Chairman & Managing Director
David Peter Craine Finance Director
William David Mummery Technical Director
Patrick Michael Flanagan Operations Director
Sean Patrick Ciaran Graham Deputy Operations Director
Harley Corkill Non-Executive Director
Mark Child Non-Executive Director
SECRETARY
David Peter Craine
REGISTERED OFFICE
Burleigh Manor
Peel Road
Douglas
Isle of Man
IM1 5EP
PRINCIPAL BANKERS
Barclays Bank Bank of Ireland
Eagle Court St Stephens Green
Circular Road Dublin 2
Douglas Ireland
Isle of Man
ADVOCATES SOLICITORS
Laurence Keenan Binchys
Victoria Chambers 40 Lower Baggot Street
47 Victoria Street Dublin 2
Douglas Ireland
Isle of Man
IM1 2LD
AUDITORS
Deloitte & Touche
Chartered Accountants
Grosvenor House
P O Box 250
66/67 Athol Street
Douglas
Isle of Man
IM99 1XJ
NOMINATED BROKER NOMINATED ADVISER REGISTRARS
Capital International Limited Insinger English Trust Northern Registrars Limited
PO Box 15 44 Worship Street Northern House
Mill Court London Woodsome Park
Hope Street EC2A 2JT Fenay Bridge
Castletown Huddersfield
Isle of Man HD8 0LA
IM99 5XH
CHAIRMAN'S REPORT
Interim results for the six months ended 30 November 2001
• Gross profit up 474%
• Gross profit margin up to 6.84% from 1.13%
• Value of Internet bets increased to £14m from £2.6m for same period
2000
• Internet betting equals 62% of turnover compared to 11% last year
• Euro off-track is live
• Significant new funding in place
• World Cup offers further expansion of Asian client base
I am pleased to be able to report that, during the six months ended 30 November
2001, the Company achieved a gross profit, before administration expenses and
interest payable, of £1,551,000, compared with £270,000 for the comparable
period last year, an increase of 474 per cent. As a result, the loss after
taxation has been reduced from £1,456,000 (1.85p per share) last year to
£596,000 (0.76p per share) for the first six months of this financial year.
The marginal reduction in total turnover from £23,794,000 to £22,676,000
reflects the Board's deliberate strategy of increasing the proportion of betting
turnover placed over the Internet. Whilst the volume of telephone bets accepted
has been the subject of a managed reduction to £8.6 million for the period under
review from £21.2 million for the comparative period, the gross margin achieved
from telephone betting has improved significantly to 6.66 per cent up from 0.99
per cent for the same period last year. For the period under review, 62 per cent
of bets were placed on-line, producing revenues of £14 million, compared with 11
per cent creating revenues of £2.6 million for the previous period. The success
of this strategy is demonstrated by the increase in the overall gross profit
margin to 6.84 per cent for the six months to 30 November 2001, compared with
1.13 per cent for the comparative period and 2.46 per cent for the year ended 31
May 2001.
The Directors expect gross margins to improve further as the proportion of
betting turnover placed on-line increases and the average bet size reduces.
During the six months under review an average of 1,500 new Internet accounts
were opened each month. Investment in technology and marketing initiatives are
delivering significant business benefits. These have resulted in the number of
bets placed on-line increasing from 60,000 in May 2001 to in excess of 120,000
in October 2001. During December 2001 136,000 Internet bets were placed,
representing approximately 75 per cent of turnover, with an average bet size of
£33. The increase in Internet betting has also been facilitated by the Company
in September 2001, providing a fully secure, multi-currency on-line
transactional facility with a turn round time of six seconds. Month on month
turnover is continuing to increase, surpassing £5.8 million for December 2001.
Of the Company's on-line turnover, some 76 per cent is now represented by
betting on soccer, and approximately 62 per cent emanates from the Far East,
where 45 per cent of the Company's registered clients are based. The Directors
believe the Company is well placed to benefit from the forthcoming Soccer World
Cup which is taking place in Japan and Korea later this year, and which is
expected to generate substantial turnover growth and provides a unique
opportunity to capitalise on significant numbers of potential new customers. In
October 2001 the Company's 50-50 joint venture, Euro off-track, went live
(euroofftrack.com). Euro off-track has the unique ability to co-mingle wagering
data into host track pools The Euro off-track wagering data hub is the largest
pari-mutuel 'Super Hub' built to date by Amtote International, and can support
multi-community transactions and process nearly 29 million transactions per
hour.
Euro off-track has been appointed by The Racing Network International (TRNI) as
one of its strategic hubs, transmitting wagering data directly into host track
pools at premier USA horse and greyhound racing tracks.
Euro off-track has also been appointed as the exclusive international hub for
the American Greyhound Broadcast Association and the Irish Greyhound Board. In
addition Euro off-track has been granted exclusive international broadcast
rights by the Irish Greyhound Board. To date the Euro off-track hub is connected
to 18 North American horse and greyhound tracks. The hub has just successfully
completed its beta testing with the Irish Greyhound Board's totalisator
facilities in Ireland. During March Euro off-track will commence the broadcast
of Irish Greyhound racing to an international audience and will offer B2C
bettors the ability to wager into the pools at Irish Greyhound racetracks.
During 2002 Euro off-track intends to increase the number of premier
thoroughbred horse and greyhound tracks connected to the hub to 40.
Of the value of wagers processed by the hub, Euro off-track retains a risk free
commission.
During the coming year Euro off-track intends to extend the hub's services to
other bookmakers as a gateway into our exclusive racing content and the host
track pools.
The Directors believe that, in the future, a very substantial portion of major
sports wagering will be based on the risk free pari mutuel model and Euro
off-track is well placed to capitalise on this change.
As part of its strategy, in November the Company ceased opening fixed odds
accounts for USA residents.
The Directors believe that Euro off-track will, in the future, make a
substantial contribution through the provision of a risk free revenue stream and
positions the Company as the 'prime mover' in the co-mingling of global
pari-mutuel wagers.
In November 2001 the Company announced that it had entered into a subscription
agreement with Burnbrae Limited and others for the subscription of a total of
30,000,000 new ordinary shares in the Company to provide £3,000,000 of working
capital over the next 12 months the subscription was accompanied by a bonus
issue to all shareholders of warrants to subscribe for approximately 27 million
new ordinary shares in the Company at an exercise price of 12p per share.
Following the approval of these arrangements by shareholders in general meeting
on 10 December 2001, Mr Mark Child, one of the subscribers, was appointed to the
Board as a Non-Executive Director.
Significant milestones have been achieved during the first half of the financial
year. Over the next period we shall complete the third pillar of our gaming
strategy. betinternet.com has applied for an on-line casino licence on the Isle
of Man and is in discussion with a number of established casino operators. The
company intends to offer on-line casino products to our clients in the future.
The Directors believe that their integrated on-line strategy for fixed odds,
casino and pari mutuel wagering greatly enhances the Company's aspiration to be
a significant player in the e-gaming industry.
V.E.CALDWELL 4th February 2002
CHAIRMAN
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six Months to Six Months to
30 November Year Ended 30 November
2001 31 May 2001 2000
£'000 £'000 £'000
Unaudited Audited Unaudited
Turnover
Betting stakes received
Internet 14,005 8,985 2,625
Telephone 8,671 39,551 21,169
22,676 48,536 23,794
Share of joint venture turnover 10 - -
Total group turnover 22,686 48,536 23,794
Cost of sales
Winnings paid and bets laid off (21,047) (47,194) (23,451)
Betting duty paid (88) (146) (73)
Gross profit 1,551 1,196 270
Administration expenses (1,993) (3,494) (1,755)
Total Operating loss (442) (2,298) (1,485)
Operating Loss Analysis
betinternet Group (399) (2,290) (1,485)
Joint Venture (43) (8) -
Total Group Operating loss (442) (2,298) (1,485)
Interest receivable and similar income 9 71 54
Interest payable and similar charges (163) (93) (25)
Loss on ordinary activities before and after taxation
and retained loss for the year/period (596) (2,320) (1,456)
Basic Loss Per Share (pence) (0.76) (2.96) (1.85)
Diluted Loss Per Share (pence) (0.67) (2.46) (1.50)
The directors consider that all results derive from continuing operations for
both the current period and or the year ended 31 May 2001. A statement of total
recognised gains and losses is not required as there were no recognised gains
and losses other than the loss for the current period. This was also the case
for the previous periods shown.
The earnings per share calculation is based upon the loss for the period after
taxation and the weighted average number of shares in issue throughout the
period.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all diluted potential ordinary
shares. These represent share options granted to employees, and bonus warrants
granted to shareholders, where the exercise price is less than the average
market price of the Company's shares during the year.
CONSOLIDATED BALANCE SHEET
Six months to Year Ended Six months to
30 November 31 May 30 November
2001 2001 2000
£'000 £'000 £'000
Unaudited Audited Unaudited
FIXED ASSETS
Intangible assets 476 377 281
Tangible assets 244 227 344
Investments in joint ventures
- share of gross assets 269 132 -
- share of gross liabilities (312) (131) -
Investments 112 117 -
789 722 625
CURRENT ASSETS
Debtors 978 834 534
Cash at bank and in hand 973 947 1,792
1,951 1,781 2,326
CREDITORS :
amounts falling due within one year (2,594) (1,761) (1,337)
NET CURRENT (LIABILITIES)/ASSETS (643) 20 989
TOTAL ASSETS 146 742 1,614
CAPITAL AND RESERVES
Called up share capital 783 783 783
Share premium 3,618 3,618 3,627
Profit and loss account (4,255) (3,659) (2,796)
EQUITY SHAREHOLDERS' FUNDS 146 742 1,614
CONSOLIDATED CASH FLOW STATEMENT
Six months to Year Ended Six months to
30 November 31 May 30 November
2001 2001 2000
£ 000 £ 000 £ 000
Note Unaudited Audited Unaudited
Net cash outflow from operational activities 2 (155) (2,071) (1,359)
Returns on investments and servicing of finance 3 (154) (22) 29
Capital expenditure and financial investment 3 (287) (278) (250)
Cash outflow before use of liquid
resources and financing (596) (2,371) (1,580)
Financing 3 521 3 11
Decrease in cash in the period/year (75) (2,368) (1,569)
RECONCILIATION OF NET CASH FLOW TO NET FUNDS
Opening net funds 926 3,294 3,294
Decrease in cash in the period/year (75) (2,368) (1,569)
Closing net funds 851 926 1,725
Represented by
Cash at bank and in hand 973 947 1,792
Bank overdrafts (122) (21) (67)
851 926 1,725
NOTES TO THE INTERIM STATEMENT
1. BASIS OF PREPARATION
This Interim Statement, which is unaudited, complies with the relevant
accounting standards and should be read in conjunction with the 2001 Annual
Report. The accounting policies are in accordance with accounting principles
generally accepted in the United Kingdom (UK GAAP) and have, in all material
respects, been applied on a consistent basis with those applied in the 2001
Annual Report.
2. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
Six months to Year Ended Six months to
30 November 31 May 30 November
2001 2001 2000
£'000 £'000 £'000
Unaudited Audited Unaudited
Operating Loss (399) (2,290) (1,485)
Depreciation and amortisation charges 172 248 200
Loss on disposal of leasehold property - 2 -
Write down of associate 6 47 -
Increase in debtors (144) (630) (329)
Increase in creditors 210 552 255
(155) (2,071) (1,359)
3. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
Six months to Year Ended Six months to
30 November 31 May 30 November
2001 2001 2000
£'000 £'000 £'000
Unaudited Audited Unaudited
Returns on investments and servicing of
finance
Interest receivable and similar income 9 71 54
Interest payable and similar charges (163) (93) (25)
(154) (22) 29
Capital expenditure and financial
investment
Payments to acquire tangible fixed assets
including long leasehold property 77 150 68
Payments on development expenditure
Receipts from sales of tangible fixed - (119) -
assets
287 278 250
Financing
Issue of shares including share premium - 3 11
Other loans 521 - -
521 3 11
4. DIRECTORS' SHARE INTERESTS
21 January 2002 21 January 2001 21 January 2000
Beneficial Beneficial Beneficial
Holdings Options Bonus Warrants
No. No. No.
(1p shares) (1p shares) (1p shares)
V E Caldwell 15,633,500 300,000 3,908,375
D P Craine 200,000 100,000 50,000
W D Mummery - 500,000 -
P M Flanagan - 1,000,000 -
S P C Graham - 500,000 -
H Corkill 21,600 100,000 5,400
M Child 1,150,000 - 287,500
5. SUBSTANTIAL INTERESTS
% 21 January 2002
Number of
Ordinary
Shares
Pershing Nominees Limited 16.95 15,636,668
Mill Properties Limited 13.29 13,293,500
Burnbrae Limited 10.83 10,000,000
Jennifer Caldwell 5.35 4,937,600
Diplomat Trust Company Limited 4.87 4,500,000
The directors are not aware of any other individual holdings in excess of 3% of
the company's share capital.
6. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE
At an Extraordinary General Meeting of the Company held on 10 December 2001 a
subscription and shareholders agreement (the Subscription Agreement) with two
new investors (the new investors) to provide for a total investment in the
Company of £3,000,000 was ratified. The principal terms of the Subscription
Agreement were as follows:
• prior to signing the Subscription Agreement £390,920 was lent to the company
by one of the new investors;
• within 3 days of the EGM the new investors subscribed for 10,500,000 new
ordinary 1p shares in the company, issued at 10p per share, for a consideration
of £1,050,000 and the loan of £390,920 was repaid;
• at this time the Chairman and members of his family, or companies nominated
by them, subscribed for 2,500,000 new ordinary 1p shares, issued at 10p per
share, for a consideration of £250,000. The consideration was settled by offset
against the £250,000 loan payable by the company to those parties. This loan was
not in place at 31 May 2001 and has been provided since that date as temporary
working capital for the group. Also at this time other investors were solicited
to invest in the placement of 1,000,000 new ordinary 1p shares at 10p each,
which raised a further £100,000;
• within 6 months of the EGM and conditional on there being no material breach
of the warranties contained in the Subscription Agreement the new investors will
subscribe for 8,000,000 new ordinary 1p shares in the company, issued at 10p per
share, for a consideration of £800,000;
• within 12 months of the EGM and conditional on there being no material
breach of the warranties contained in the Subscription Agreement the new
investors will subscribe for a further 8,000,000 new ordinary 1p shares in the
company, issued at 10p per share, for a further consideration of £800,000.
Also ratified at the EGM was the issue to all existing shareholders and the new
shareholders as detailed above, a bonus warrant on the basis of a warrant to
subscribe for 1 new ordinary 1p share at 12p per share for every 4 held. The new
investors will also have the right to receive additional warrants on the same
basis in respect of their subscriptions within 6 and 12 months of the EGM
described above. All warrants shall terminate 3 years from the date of the issue
of the initial warrants.
AIM INDEPENDENT REVIEW REPORT TO betinternet.com plc
INTRODUCTION
We have been instructed by the company to review the financial information for
the six months ended 30 November 2001 which comprises the profit and loss
account, the balance sheet, the cashflow statement and related notes 1 to 6. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
DIRECTORS' RESPONSIBILITIES
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
also responsible for preparing the interim report in accordance with the listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
REVIEW WORK PERFORMED
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
REVIEW CONCLUSION
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 November 2001.
Deloitte & Touche
Chartered Accountants
Grosvenor House
PO Box 250
Douglas
Isle of Man
IM99 1XJ
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