Admission and First Day of Dealings

RNS Number : 8328C

XLMedia PLC

21 March 2014

 



For immediate release

21 March 2014

XLMedia PLC

 ("XLMedia" or the "Group" or the "Company")

Admission and First Day of Dealings

Placing to raise $69.5 million significantly oversubscribed  

XLMedia, a leading provider of digital performance marketing services, is pleased to announce that Admission and trading of its Ordinary Shares commences at 8.00am today on the AIM market of the London Stock Exchange ("AIM").

Admission details:

·      The fundraising, which was significantly oversubscribed, raised approximately $69.5 million (£41.8 million*), before expenses, through the issue of 67,026,152 new Ordinary Shares and 18,330,686 existing Ordinary Shares at the Placing Price of 49 pence per share;

·      The total number of Ordinary Shares in issue at Admission will be 189,563,652, giving the Company a market capitalisation of approximately $154.5 million (£92.9 million) at the Placing Price;

·      The proceeds of the fundraising will be used to fund acquisitions and country specific joint ventures to accelerate organic growth and expansion into new territories as well as for investment in IT systems;

·      Cenkos Securities plc is acting as Nominated Adviser and Broker; and

·      XLMedia's TIDM Code is XLM and its ISIN number is JE00BH6XDL31.

* Where relevant, all amounts are based on an exchange rate of US$1.6631:£1, being the prevailing rate at 16.34 GMT on 14 March 2014, the latest practicable date prior to the publication of the Company's AIM admission document (the "Admission Document") on 17 March 2014.

Operational highlights:

·      XLMedia is a leading provider of marketing services to online gambling operators. The Group attracts players through online marketing techniques and directs them to gambling operators, in return for a share of the revenue generated by such players, a fee per player acquired, fixed fees or a hybrid of these;

·     The Directors believe that the Group is one of the largest independent online traffic providers to the gambling industry, generating customer traffic for over 120 online gambling operators including Betsson, Mr. Green, Vera & John and other established industry brands such as 888.com, Bet365 Ladbrokes, Unibet and William Hill;

·      The online gambling market was estimated to be worth approx. €24 billion per annum in 2012 and is estimated to grow at an average annual growth rate of 10 per cent. per annum to 2018.  As regulation of the online gambling market continues to develop, the Directors expect this market to continue to grow and see significant opportunities for the Group to expand its reach into new and existing territories and other verticals;

·     XLMedia controls over 2,000 websites, providing content in 17 languages. Some of these websites are highly ranked on the most popular search engines and provide consistent, high value traffic to gambling operators. The Group utilises a variety of business intelligence tools in order to track the flow of traffic to its customers and to analyse the quality and conversion of such traffic into revenue so as to improve the Group's return on investment as well as providing high quality services to its affiliates;

·      The Company's business model is largely performance based.  Approximately 75 per cent. of the Group's revenues for the six months ended 30 June 2013 came from a lifetime revenue share model, aligning the Group's interests with those of the gambling operators, deepening the business relationship, facilitating XLMedia's high client retention levels and providing the Group with high quality recurring revenues;

·      The Group's business has a consistent track record of profitable growth and cash generation. In FY 2012, revenues were $26.1 million with EBITDA of $12.5 million, representing compound annual growth rates of 61.0 per cent. and 78.0 per cent. respectively since FY 2009.  Revenue and EBITDA (excluding share based payments) for the six months ended 30 June 2013 was $16.0 million and $7.2 million respectively; and

·     The Board's proposed policy is to pay out at least 50 per cent. of retained earnings in any financial year by way of dividend.

Ory Weihs, Chief Executive Officer of XLMedia, commented,

"We are delighted with the strong support shown by investors, which we believe is a positive endorsement of XLMedia's business model, product offering and market opportunity.  Our Admission to AIM represents a major step forward for our business as we seek to capitalise on a number of high growth opportunities that exist across our business. 

The team has established a strong operational base over the last six years and our specific expertise within the online gambling sector has enabled us to develop a market leading offering.  We are excited by the benefits of being an AIM quoted company and we look forward to enhancing shareholder value." 

Unless the context otherwise requires, defined terms shall have the meaning ascribed to them in the Admission Document.

For further information, contact:

XLMedia PLC                                                                                                                     

Ory Weihs                                                                                                                          Via Buchanan on the day

                                                                                                                                               Tel: [phone] thereafter

 

Buchanan

Jeremy Garcia / Sophie McNulty / Clare Akhurst                                              Tel: [phone]

www.buchanan.uk.com 

 

Cenkos Securities plc

                                                                                                                                               Tel: [phone]

Camilla Hume/ Ivonne Cantu/ Callum Davidson

Company website: www.xlmedia.com

 

Introduction

XLMedia PLC, whose operations were established in 2008, is a global digital publisher and marketing company which attracts paying users from different online channels and directs them to online gambling operators.

The Group provides marketing services to online gambling operators. The Group attracts players through online marketing techniques and subsequently seeks to channel high value ''traffic'' (i.e. players) to gambling operators who, in turn, convert such traffic into paying customers. Online gamblers are attracted by the Group's publications and advertisements and are then directed, by the Group, to online gambling operators in return for a share of the revenue generated by such players, a fee generated per player acquired, fixed fees or a hybrid of any of these three models.

Online gambling operators typically invest heavily in brand building through online and offline advertising to attract online players, and also use a network of marketing partners, known as affiliates, to promote their products and services. These partners are remunerated by the gambling operators for each player they refer to them.

The Group generates revenue using three primary marketing methodologies:

•              Content and search;

•              Digital media buying; and

•              Through its own affiliate network,

with each segment contributing approximately 58.6 per cent., 24.8 per cent. and 16.6 per cent. respectively of the Group's revenue for the six months ended 30 June 2013.

The Directors believe that the Group is one of the largest independent online traffic providers to the gambling industry, generating customer traffic for over 120 online gambling operators including Betsson, Mr. Green, Vera & John (all in Scandinavia) and other established industry brands such as 888.com, Bet365, Ladbrokes, Unibet and William Hill.

The Company's business model is largely performance based.  Approximately 75 per cent. of the Group's revenues for the six months ended 30 June 2013 came from a lifetime revenue share model in respect of players that the Group originates for the gambling operators. The rest of the Group's revenues for the same period were derived from models such as Cost Per Acquisition or fixed payments. The Directors believe that this revenue model aligns the Group's interests with those of the gambling operators, deepening the business relationship, facilitates XLMedia's high client retention levels and also provides the Group with high quality recurring revenues.

The Group's business has a consistent track record of profitable growth and cash generation. Since 2008, it has generated year on year growth in revenue, EBITDA and profit after tax. In FY 2012, revenues were $26.1 million with EBITDA of $12.5 million, representing compound annual growth rates of 61.0 per cent. and 78.0 per cent. respectively since FY 2009. Revenue and EBITDA for the six months ended 30 June 2013 were approximately $16.0 million and $7.2 million respectively.

The global gambling industry was estimated to be worth $302 billion in 2012, with the online gambling component gaining an increasing share. As regulation of the online gambling market continues to develop, the Directors expect this market to continue to grow and see significant opportunities for the Group to expand its reach into new and existing territories and other verticals.

Key Strengths and Opportunities

The Directors believe that the Group has the following key strengths and opportunities:

Strong online asset base

The Group controls over 2,000 websites providing content in 17 languages. Certain of these websites are highly ranked on the most popular search engines and provide consistent, high value traffic to gambling operators. In FY 2012 and the six months ended 30 June 2013, these websites generated approximately $14.9 million and $9.4 million of revenue respectively.

Highly skilled and innovative talent base

The Group now has approximately 120 staff with significant experience and understanding of targeted online marketing for the online gambling sector. The Directors believe that the Group's employees are highly motivated as demonstrated by the Group's low staff turnover.

Significant scale and strong financial position

The Directors believe that the Group is one of the largest independent online traffic providers to the online gambling industry. This, together with its strong financial position, allows it to engage with leading gambling operators and attract affiliates who wish to partner with the Group.

Large customer base

XLMedia supplies traffic to over 120 online gambling operators including well known and established companies such as 888.com, Bet365, Betsson, Ladbrokes, Mr Green, Unibet, Vera & John and William Hill.  The Group has very high customer retention and there is a high degree of customer satisfaction.

Significant growth and market opportunity

Data compiled by gambling industry consultants H2 Gambling Capital suggests that the global gambling market was worth over €302 billion in 2012 growing, on average, at four per cent. per annum since 2007. The online gambling market was estimated to be worth approximately €24 billion in 2012 and is estimated to grow at an average annual growth rate of 10 per cent. per annum to 2018. The online gambling market has benefitted from improved broadband penetration and speed, technological advances, a growing number of market participants and greater acceptance of online gambling as a mainstream leisure pastime. The majority of markets in which the Group operates have experienced substantial double-digit revenue growth in the past six years. The Directors believe that the prospect of further liberalisation of the US market and the expansion of other regulated markets represents a significant growth opportunity for the Group.

Well positioned to consolidate a fragmented market place

The online gambling marketing sector is highly fragmented. The Directors believe the Group is well placed to consolidate this market through investments and acquisitions in existing and new territories.  The Group has successfully acquired valuable online assets and marketing affiliates and has also identified a pipeline of attractive potential targets.

Strength and depth of the leadership team

The Group's senior leadership team, consisting of Chris Bell, the Group's Chairman, Ory Weihs, the Group's CEO, and other senior executives has extensive experience within the online gambling sector. In 2003, Mr Weihs set up his own affiliate network, adding SEO capabilities and has since overseen the growth of the business to where it is today. Mr Bell was formerly Chief Executive of Ladbrokes plc and is currently a member of the UK Government's Responsible Gambling Strategy Board. Inbal Levi, the General Manager of Webpals Systems S.C. Ltd (the Company's subsidiary), has over ten years' experience within the sector; having previously served as VP Marketing for 888's poker business prior to joining the Group.

Effective systems for analysing the success of its marketing campaigns

The Group utilises a variety of business intelligence tools in order to track the flow of traffic to its customers and to analyse the quality and conversion of such traffic into revenue so as to improve the Group's return on investment as well as providing high quality services to its affiliates.

New Verticals

The Directors believe that the Group's core skill set of digital marketing could readily be transferred to adjacent market verticals, such as specialist financial services including forex, spreadbetting and CFDs, and that, over time, there will be significant opportunities to leverage these skills.

Strategy

The Group's intention is to continue being a leading traffic supplier to the online gambling industry while expanding and diversifying the Group's activities and methodologies. The Directors expect the Group to achieve this through the adoption of three strategies as follows:

Geographic Market Strategy

The Group has a scalable platform which, the Directors believe, provides the basis for growth in existing markets and entry into new territories. While the business has a strong presence in Scandinavia, the Group still has a small market share in those markets and intends to continue to invest and organically develop the Group's position there.

The Group also intends to expand its operations into jurisdictions where the Directors believe significant opportunities exist, with an initial focus on the US. In implementing its international expansion strategy, the Company will take into consideration the overall market potential, the regulatory environment and the competitive landscape already existing in such jurisdictions.

US Strategy

The US online gambling market, which was previously the largest in the world, effectively closed following the enactment of the UIGEA in 2006. It has only recently started to re-open with the US states of Delaware, Nevada and New Jersey operating a licensing regime with further US states expected to follow suit. The Group has already received authorisation from the state regulator in New Jersey enabling it to contract with operators targeting players in that US state on a fixed fee basis and is in the process of applying for a licence which will enable the Group to operate on a more flexible revenue model based on receiving fees per player referred. The Group has signed agreements with 888.com (for New Jersey) and with Caesars Interactive Entertainment Inc (for New Jersey and Nevada) to serve as an online marketing partner for certain of each entity's respective brands, and is in ongoing discussions with other licensed gambling operators. Further, the Group intends to expand its affiliate network in the US to capitalise on the early mover advantage that the Directors believe that the Group has from being one of the first affiliate marketing companies to commence operations in the US online gambling sector.

Acquisition Strategy

The Directors believe that the Group is well positioned, through its scale and financial resources, to engage in consolidation of a highly fragmented market and have identified a pipeline of potential acquisition opportunities. The Group is currently at advanced stages of due diligence with several potential acquisition leads.

Reasons for Admission and Use of Proceeds

The net proceeds from the Placing receivable by the Company are expected to be approximately $48.4 million (£29.1 million) and are intended to be used as follows:

·   the acquisition of qualified marketing companies in the EU and US from an identified pipeline of opportunities to accelerate organic growth and expansion into new territories;

·   to fund the acquisitions of high potential domains and country specific joint ventures with operators; and

·   for investment in IT systems.

The Directors believe that Admission will assist XLMedia in its development by (i) raising its profile in the sector; (ii) providing investment to fund growth; (iii) facilitating access to capital and providing currency for acquisitions, thereby assisting the Group's ability to grow; and (iv) providing transparent incentives for existing and future management and employees.

Dividend Policy

The Company has historically paid dividends and intends to continue doing so. The Board's proposed policy is to pay out at least 50 per cent. of retained earnings in any financial year by way of dividend. The Directors will continue to monitor the level of cash retained within the business as well as investment opportunities available to the Group and, from time to time, review the continued appropriateness of such policy.

Directors and Senior Management

On Admission, the Board of the Company will comprise one executive Director and four non-executive Directors.

Ory Weihs, 33 - Chief Executive Officer

Mr. Weihs is one of the Founders and leads the Group's business development and key strategy. Mr. Weihs is an entrepreneur who has been deeply involved in the online gambling industry for over ten years. He is a common speaker at industry events and is known as an expert in online marketing. He has a B.Sc. in Industrial Engineering from the Technion - Israeli Institute of Technology from 2007.

Chris Bell, 56 - Independent Non-Executive Chairman

Mr. Bell was Ladbrokes plc's CEO for nine years before leaving in 2010. Mr. Bell has 20 years' experience in the gambling industry. Having joined Ladbrokes in 1991, he became managing director in 1994 and joined the Hilton board in 2000. Mr. Bell is also a senior independent director at Quintain Estates and Development plc, a non-executive director at Spirit plc and a member of the Responsible Gambling Strategy board which advises government on gambling policy. Prior to joining Ladbrokes plc, Mr. Bell held senior marketing positions at Victoria Wine Co and Allied Lyons plc.

Richard Rosenberg, 58 - Independent Non-Executive Director

Mr. Rosenberg is a qualified chartered accountant and a partner in SRLV, a London-based multidisciplinary accountancy and consultancy firm which he co-founded in 1988. Mr. Rosenberg is the Non-Executive Chairman of Livermore Investments Group Limited, an AIM quoted investment company.

Alicia Rotbard, 68 - Independent Non-Executive Director

Ms. Rotbard is an experienced entrepreneur, founding and managing technology companies. Ms. Rotbard serves on a number of boards including Israel Discount Bank, the third largest bank in Israel, Pointer, a fleet management company traded on NASDAQ, Hadera Paper, a public company trading on the Tel Aviv Stock Exchange and Queenco Leisure International Ltd, a public hotels and leisure company traded on the London Stock Exchange. Ms. Rotbard served as the deputy General Manager of the Tel Aviv Stock Exchange from 1980 - 1985.

Yaron Eitan, 57 - Non-Executive Director

Mr. Eitan is a partner of Columbus Nova Technology Partners, a technology-focused venture capital fund and joined the Board in conjuction with an investment by IVPL (a shareholder of the Company which will own approximately 10.11 per cent. of the Enlarged Share Capital) and is also the founder and managing partner of Selway Capital, an investment management firm whose portfolio includes equity holdings in private and public companies in the technology and healthcare industries. Prior to launching Selway, Mr. Eitan ran several companies including Reshef Technologies, Patlex, and Geotek Communications. He currently serves as Chairman of a number of companies including Healthcare Corporation of America, DVTel Inc, Magnolia Broadband, and Software Technology, Inc. He is also a director of LifePrint Group and Cyalume Technology Holdings. Mr. Eitan served in the Israeli Defense Forces for six years, where he reached the rank of Major. He received his bachelor's degree in economics from Haifa University and an M.B.A. from the Wharton School of Business at the University of Pennsylvania.

 

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