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Stride Gaming PLC (STR)

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Thursday 28 May, 2015

Stride Gaming PLC

Interim Results

RNS Number : 4350O
Stride Gaming PLC
28 May 2015
 

28 May 2015


Stride Gaming plc

("Stride Gaming", the "Company", or "the Group")

 

Interim Results for the six months ended 28 February 2015

Successful listing on AIM with robust financials and strong growth potential

 

Stride Gaming plc (AIM: STR), the multi-branded online bingo-led operator, today announces its maiden interim results for the six months ended 28 February 2015 ("the Period").

 

H1 2015 Trading highlights:

 

·      Successful IPO on AIM post period end on 19 May 2015 raising £11.2m (before expenses)

·      Pro forma* H1 2015 Net Gaming Revenue ("NGR") up 173% to £11.7m (H1 2014: £4.3m)

·      Funded players** up 64% to 52,000 (H1 2014: 31,600)

·      Yield per player up 147% to £279 (H1 2014: £113)

·      Current trading is strong and ahead of management's expectations

 

Operational highlights:

 

·      Launch of two new brands: Bingo Extra and Magical Vegas

·      Acquisition of the trade and assets of Table Top Entertainment Limited ("TTE") including the brands Jackpot Café, Jackpot Liner and King Jackpot and the acquisition of the propriety gaming platform from Nextec Software Inc; in aggregate for total consideration of £14.7m

·      25% of pro forma* NGR now coming from Mobile (H1 2014: 20%)

·      Acquisition of Spacebar Media for consideration of £6.0m

·      Obtained an Italian gaming license

 

Financial summary:

 

 

Unaudited

Six months ended

28 February 2015

£'000

 

Unaudited

Six months

ended

28 February 2014

£'000

Revenue

11,749

4,310

Adjusted EBITDA***

3,591

-

EBITDA

3,195

-

Profit/(loss) before taxation

1,573

(127)

Basic EPS  (p)

3.8

(0.0004)

Total Assets

32,629

4,312

Net Assets

14,078

3,614

Cash and cash equivalents

2,392

-

 

 

 

* Stride Gaming plc was incorporated on 25 February 2015 and was dormant at the period end of 28 February 2015. Subsequent to the period end, on 19 May 2015, the Company acquired, via a share for share exchange, the entire share capital of the group headed by Daub Alderney Limited. The pro forma financial information has therefore been prepared as though the share for share exchange had completed by 28 February 2015 and the Group structure had always existed (see note 3 for further details).

 ** Funded player means an active player has made a deposit with his own funds within the period.

*** Adjusted EBITDA excludes income or expenses that relate to exceptional items and non-cash charges relating to share-based payments.

 

 

 

 

Commenting on the results, Nigel Payne, Non Executive-Chairman of Stride Gaming, said:

 

"I am delighted to present the maiden results for Stride Gaming plc as a listed company, which are at record levels across all of the key performance indicators of the business. The organic growth of the business continues at a robust pace and current trading is strong and ahead of management's expectations. I am optimistic about the Group's future potential and we believe that the outlook for Stride Gaming is exciting.

 

The Group successfully listed on AIM post-period end in an oversubscribed placing, demonstrating confidence in the Group's growth strategy and in the management team to deliver and generate returns. The listing provides us with a platform to pursue our aggressive organic and acquisitive growth plans. We believe there are significant acquisition opportunities available to the Company driven by regulatory changes. Going forward, we intend to develop our proprietary software and in-house platform, expand into other regulated markets, push into the fast-growing mobile bingo sector and expand into complementary verticals.  

 

With these strong foundations now in place, we believe that Stride Gaming is well placed to capitalise upon the strategic opportunity in the online bingo sector and we look to the future with significant confidence."

 

 

 

Enquiries:

 

Stride Gaming plc                                                                                                         

 

Nigel Payne (Non-Executive Chairman)

Eitan Boyd (Chief Executive Officer)

Ronen Kannor (Chief Financial Officer)

   + 44 (0) 20 7284 6080

 

 

 

 

Cantor Fitzgerald Europe (NOMAD and BROKER)

 

Corporate Finance:

Catherine Leftley / Mark Percy / William Goode

 

Sales:

Mark Westcott / David Banks

 

 

 

 

 

+44 (0) 20 7894 7000

 

Yellow Jersey PR

Alistair de Kare-Silver

Dominic Barretto

 

 

 

 

   +44 (0) 7738 076 304

+44 (0) 7768 537 739

 

 

About Stride Gaming:

 

Stride Gaming is a UK focused, real money, bingo-led online operator, using its proprietary and purchased software to provide online bingo and related gaming activities to players. Stride Gaming only operates in regulated markets, principally the UK. The Group has over 150 employees across the UK, Mauritius, and South Africa with its headquarters in London.

The Group operates a multi-branded strategy, which includes the online bingo brands Kitty Bingo, Lucky Pants Bingo, Bingo Extra, Jackpot Café, Jackpot Liner, King Jackpot, together with the online casino brands Spin and Win, Magical Vegas and direct slots.

The Group listed on AIM on 19 May 2015 to provide it with the capital to increase its market share, by pursuing an acquisitive and organic growth strategy, in order to take advantage of the market opportunity in the online bingo sector as a result of increased regulation.

Further information on the Group is available at  www.stridegaming.com

 

 

Chief Executive's Report

I am pleased to report the Group's results for the six months ended 28 February 2015 in which the Group has acquired and integrated Table Top Entertainment and Spacebar Media, enhanced its leading in-house software platform, whilst at the same time delivering growth at record levels across all the key performance indicators of the business.

Financial Review

Stride Gaming plc was incorporated on 25 February 2015 and was dormant at the period end of 28 February 2015 having only issued share capital. The balance sheet of the Company has therefore been included to 28 February 2015 but, as the Company had not traded in the period to 28 February 2015, no income statement, statement of cash flows or statement of changes in equity have been prepared.   

Post period end, on 19 May 2015, the Company completed a share for share exchange to acquire 100 per cent. of the issued share capital of the group headed by Daub Alderney Limited. We have therefore prepared pro forma financial information for the period ended 28 February 2015 as though the share for share exchange had completed by 28 February 2015 and the Group structure had always existed (see note 3 for further details).

The Group has seen a significant growth in all its key performance indicators in H1 2015. Benefitting from the acquisition of the trade and assets of Table Top Entertainment Limited in September 2014, pro forma NGR increased by 173% to £11.7m (H1 2014: £4.3m) with total funded players increasing to 52,000 (H1 2014: 31,600). Cost of sales increased by £0.8m (H1 2014: £Nil) principally due to the introduction of the point of consumption tax in December 2014.

Pro forma distribution costs were £4.2m (H1 2014: £3.6m) mainly due to the increase of volume related processing fees to £0.56m (H1 2014: £0.3m) and costs relating to the launch of two new brands, Magical Vegas and Bingo Extra of £0.2m (H1 2014: £Nil). 

Pro forma administrative expenses (excluding IPO costs) increased to £3.1m (H1 2014: £0.8m) as a part of the setup of an in-house back office and administrative support function including customer relationship management, chat moderation, marketing services, brand management, IT and online gaming software development.

Overall, revenue and NGR growth has resulted in an increase in Adjusted EBITDA of £3.6m against the corresponding prior period. Profit before taxation totalled £1.5m (H1 2014: loss of £0.1m) and earnings per share were 3.8 pence (H1 2014: loss per share 0.0004 pence).

Operational Review

The first half of the financial year 2015 saw a number of exciting developments for the Group. In September 2014 we acquired the trade and assets of Table Top Entertainment enhancing our multi-brand strategy with three well-respected brands. NGR has grown by 173% to £11.7m following the acquisition, including an increase in the number of funded players, which grew by 64% with 52,000 players funding in the first half of the financial year (2014: 31,600). In addition to the increase in NGR and player base, the Group has successfully integrated the back office operation of the acquired TTE sites; with expected annualised administration cost savings in excess of £400,000.  

We also launched our new Responsive (RAD) platform, which enables us to maintain a consistent user experience across a multitude of devices, as well as enabling the Group to increase its mobile centric customer base. In addition, we successfully introduced two of our brands onto the new platform; Magical Vegas and Bingo Extra. The RAD platform puts immense focus on mobile usability and we believe it will only expedite our growth in the fast-growing mobile bingo sector. The Group is already experiencing significant growth in mobile revenue with mobile gaming revenues up to 25% YOY.

With our half-year results to 28 February 2015 showing mobile trading now delivering in excess of 25% ofNGR, we are delighted with the performance of this new addition to our in-house suite of software.

By optimising the dynamics of our in-house platform, we have also increased our player yield by 147% to £279 per player (2014: £113) as well as acquiring just under 25,000 first time depositors in the Period.

In addition to the bingo development, the Group has introduced five propriety side games onto its download platform and integrated top tier games from Net Entertainment onto its web based offering.

The Group also obtained a remote gambling license from the UK and Italian Gambling Commission. We strongly believe the new changes in regulation will only enhance our growth prospects.

Outlook

The six months to 28 February 2015 has been a successful period for Stride Gaming. The organic growth of the business continues at a strong pace and current trading is strong and ahead of management's expectations. Having successfully listed on AIM post Period end, I believe the outlook for Stride Gaming is exciting and we will continue to lay strong foundations for future growth.

We intend to embark on our buy and build strategy to take advantage of the consolidation in the online bingo sector, and we believe there are significant acquisition opportunities driven by regulatory and taxation changes. Our aim is to push into the fast-growing mobile bingo sector and expand into complementary verticals such as the social gaming space.  

We expect to see further growth in the coming months as the Group continues to develop our proprietary software and in-house platform. We believe that opportunities exist to expand the Group internationally into those markets that operate similar levels of regulation to the UK, particularly within Europe. The Group is well positioned to prosper from the regulatory changes that only serve to enhance our growth prospects.  

 

Eitan Boyd,

Chief Executive Officer

27 May 2015

 

 

STRIDE GAMING PLC

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the period ended 28 February 2015

 

 

 

 

Unaudited

As at 28 February 2015

Unaudited

As at 28 February  2014

 

 

 

 

 

Notes

£'000

£'000

 

 

 

 

Net gaming revenues

 

11,749

4,310

Cost of sales

 

(830)

-

Gross profit

 

10,919

4,310

Distribution costs

 

(4,192)

(3,585)

Administrative expenses

 

(3,136)

(725)

 

 

 

 

Adjusted EBITDA

 

3,591

-

Listing costs

 

(396)

-

 

 

 

 

EBITDA

 

3,195

-

Amortisation of intangible assets

Depreciation

 

(1,092)

(13)

(127)

-

Finance expense

 

(517)

-

Profit (loss) before taxation

 

 

 

1,573

(127)

 Tax charge

 

(8) 

-

Profit (loss) after tax and total comprehensive income for the period attributable to the equity holders of the parent entity

 

1,565

(127)

Basic and diluted profit (loss) per share

 

 

 

 

 

 

 

Basic (p)

4

3.8

(0.0004)

Diluted (p)

4

3.5

(0.0004)

 

 

STRIDE GAMING PLC

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the period ended 28 February 2015

 

 

 

Unaudited

At 28 February 2015

Unaudited

At 31 August 2014

 

 

 

 

 

Notes

£'000

£'000

 

 

 

 

Non-current assets

 

 

 

Other receivables

Intangible assets

 

5

248

20,676

83

-

Property, plant and equipment

 

155

-

 

 

21,079

83

Current assets

 

 

 

Trade and other receivables

6

9,158

5,746

Cash and cash equivalents

 

2,392

-

 

 

11,550

5,746

 

 

 

 

Total assets

 

32,629

5,829

 

 

 

 

Non-current liabilities

 

 

 

Contingent consideration

9

2,474

-

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

Deferred and contingent consideration

7

9

4,321

11,756

1,242

-

 

 

16,077

1,242

 

 

 

 

Total liabilities

 

18,551

1,242

 

 

 

 

 

 

 

 

Net assets

 

14,078

4,587

 

 

 

 

Equity attributable to equity holder:

 

 

 

Share capital

 

417

312

Merger reserve

 

3,013

(312)

Shares to be issued reserve

Capital contribution

 

4,132

7,363

-

6,999

Retained earnings

 

(847)

(2,412)

Total equity

 

14,078

4,587

 

 

STRIDE GAMING PLC

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the period ended 28 February 2015

 

 

Share capital

Shares to be issued

Capital contribution

Merger reserve

Retained earnings

Total equity

 

 

 

 

 

 

 

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

At 31 August 2013          

312

-

4,999

(312)

(3,258)

1,741

 

 

 

 

 

 

Total comprehensive income

-

-

-

-

(127)

(127)

At 28 February 2014

312

-

4,999

(312)

(3,385)

1,614

 

 

 

 

 

 

Total comprehensive income

-

-

-

-

973

973

Capital contribution

-

-

2,000

-

-

2,000

At 31 August 2014

312

-

6,999

(312)

(2,412)

4,587

 

 

 

 

 

 

Total comprehensive income

-

-

-

-

1,565

1,565

Acquisition of business through issue of shares

105

-

-

3,325

-

3,430

Acquisition of intangible asset for shares

-

-

-

-

4,132

Capital contribution

-

-

364

-

-

364

At 28 February 2015                                         

417

4,132

7,363

3,013

(847)

14,078

 

 

STRIDE GAMING PLC

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued)

For the period ended 28 February 2015

 

The following describes the nature and purpose of each reserve within equity:

 

Share capital

Represents the shares issued to the shareholders of Daub Alderney Limited as part of the share for share exchange that completed on 19 May 2015.

 

Capital contribution

Represents the release of the Group's obligation to repay borrowings of £6,999,000 and also the contribution by a shareholder of the entire share capital of Baldo Line SRL.

 

Merger reserve:

Represents the difference between the nominal value of shares acquired by the Company in the share for share exchange with Daub Alderney Limited and those issued to acquire them as well as the satisfaction of the initial consideration in respect of the acquisition of the trade and assets of Table Top Entertainment Limited.

 

Shares to be issued reserve

Represents the shares to be issued in respect of the acquisition of certain intangible assets. 

 

Retained earnings

Represents the cumulative net gains and losses recognised in the pro forma condensed consolidated statement of comprehensive income. 

 

 

STRIDE GAMING PLC

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the period ended 28 February 2015

 

 

 

Unaudited

6 Months to 28 February 2015

Unaudited

6 Months to 28 February 2014

 

 

£'000

£'000

Cash flow from operating activities

 

 

 

Profit / (loss) for the period before taxation

 

1,565

(127)

Adjustments for:

 

 

 

 

Amortisation of intangible assets

 

1,092

127

Depreciation of property, plant and equipment

 

13

-

Finance expense

 

517

-

 

Operating cash flow before movement in working capital

 

 

 

Increase in trade and other receivables

 

(3,412)

(1,693)

Increase in trade and other payables

 

1,142

1,693

Cash generated from in operations

 

917

-

 

 

 

 

 

 

 

-

Cash flow from investing activities

 

 

 

Cash received on Acquisition

 

1,475

-

Net cash used in investing activities

 

1,475

-

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

2,392

-

 

 

 

 

Cash and cash equivalents at beginning of period

 

-

-

 

 

 

 

Cash and cash equivalents at end of period

 

2,392

-

 

 

 

STRIDE PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the period ended 28 February 2015

 

1.    General information

 

The unaudited pro forma condensed interim consolidated financial statements for the six months ended 28 February 2015, which were approved by the Board of Directors on 27 May 2015, do not comprise statutory accounts.

 

2.    Basis of preparation

 

The pro forma interim condensed consolidated financial statements for the six months ended 28 February 2015 have been prepared using accounting policies consistent with International Financial Reporting Standards as adopted by the EU (IFRS) and have been prepared on the basis of International Financial Reporting Standards ('IFRSs') and International Financial Reporting Interpretations Committee ('IFRIC') interpretations as adopted by the European Union that are effective for the period beginning 1 September 2014.  

 

In the current reporting period, the Group has adopted a number of revised Standards and Interpretations including IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities.    However, none of these have had a material impact on the Group's reporting.  In addition, the IASB has issued a number of IFRS and IFRIC amendments or interpretations.  It is not expected that any of these will have a material impact on the Group.

 

The pro forma interim condensed consolidated financial statements for the six months ended 28 February 2015 have been prepared on a going concern basis.

 

3.    Accounting policies

 

The principal accounting policies are set out below.

 

Basis of consolidation

 

The financial information for the 6 month period ended 28 February 2015 has been prepared on a pro forma basis.  Post period end a restructuring was undertaken whereby the group headed by Daub Alderney Limited was acquired the Company as part of a share for share exchange. The pro forma condensed consolidated financial statements therefore incorporate the financial information of the Company and entities as if they had been controlled by the Company as at 28 February 2015.

 

These pro forma condensed consolidated financial statements show the combination of businesses achieved through a group reorganisation that falls outside the scope of IFRS 3 'Business Combinations'.  Accordingly, following the guidance regarding the selection of an appropriate accounting policy provided by IAS 8 'Accounting policies: Changes in accounting estimates and errors', these pro forma condensed consolidated financial statements have been prepared using the principles of merger accounting set out in FRS 102 section 19 and UK Generally Accepted Accounting Practice (UK GAAP).

When merger accounting is applied, the investment is recorded in the company's balance sheet at the nominal value of shares issued together with the fair value of any consideration paid.  In the pro forma condensed consolidated financial statements, merged subsidiary undertakings are treated as if they had always been a member of the group.  The corresponding figures for the previous period include its results for that period, the assets and liabilities at the previous balance sheet date and the shares issued by the company as consideration as if they have always been in issue.  Any differences between the nominal value of the shares acquired by the company and those issued by the company to acquire them are taken to a separate merger reserve.

 

A subsidiary is an entity controlled directly or indirectly by the Company. Control is achieved if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.  Acquisitions of subsidiaries are accounted for using the acquisition method.  The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree.  Acquisition-related costs are recognised in the income statement as incurred.  The acquiree's identifiable assets and liabilities are recognised at their fair values at the acquisition date.

 

The results of subsidiaries acquired or disposed of during the period are included in the pro forma condensed consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group.

 

Uniform accounting policies have been adopted across the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

                     

Functional and presentational currency

 

The pro forma condensed consolidated financial statements of the Group are prepared in Pounds Sterling (GBP) and are rounded to the nearest £1,000. This constitutes the functional and presentational currency.

 

Foreign currencies

 

Transactions entered into by the Group in a currency other than the functional currency are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on retranslation of unsettled monetary assets and liabilities are recognised immediately in the pro forma profit and loss.

 

On consolidation, the results of overseas operations are translated into sterling at rates ruling when the transaction took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at the opening rate and the results of overseas operations at the actual rate are recognised in pro forma other comprehensive income and accumulated in the foreign exchange reserve.

 

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the pro forma condensed consolidated statement of comprehensive income as part of the profit or loss on disposal.

 

Revenue recognition

               

Net gaming revenue (NGR) derives from online gambling operations and is defined as the difference between the amounts of bets placed by the players less the amount won by players.  It is stated after deduction of certain bonuses, jackpots and prizes granted to players.

 

Net gaming revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured.  Revenue is recognised in the accounting periods in which the transactions occur. 

 

Cost of sales

 

Cost of sales consists primarily of gaming taxes.

 

Distribution costs

 

Distribution costs represent the costs of delivering the service to the customer and primarily consist of technology infrastructure, promotional and advertising costs together with gaming and regulatory testing costs all of which are recognised on an accruals basis.

 

Administrative expenses

 

Administrative expenses consist primarily of staff costs, corporate and professional expenses, all of which are recognised on an accruals basis.

 

Goodwill

 

Goodwill represents the excess of the cost of a business combination over the total acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired.

 

Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus the amount of any non-controlling interests in the acquisition. Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability.

 

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the pro forma condensed consolidated statement of comprehensive income 

 

Externally acquired intangible assets

 

Externally acquired intangible assets including intellectual property rights, software applications and licenses are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives which is typically over a period of 3-5 years or over the length of the license.

 

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual or legal rights. The amounts ascribed to such intangibles are arrived at using appropriate valuation techniques (see section related to critical estimates and judgements below).

 

The significant intangibles recognised by the Group, their useful economic lives and methods used to determine the cost of intangibles acquired in a business combination are as follows:

 

 

Intangible asset

Useful economic life

Valuation method

Brands

4 years

Discounted cash flows

Customer relationship

 

5 years

 

Discounted cash flows

 

 

 

 

 

 

 

 

Property, plant and equipment

 

Depreciation is calculated to write-off the cost of fixed assets on a straight line basis over the expected useful lives of the assets concerned. The principal annual rates used for this purpose are:

 

Fixtures, fittings and equipment

-

20 - 25% straight line

Computer equipment         

-

33% straight line

 

Subsequent expenditures are included in the carrying amount of an asset or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits will flow to the Group and the cost of the item can be measured reliably. All repairs and maintenance are charged to the consolidated statement of comprehensive income during the financial period in which they are incurred.

 

Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are included in the pro forma condensed consolidated statement of comprehensive income.

                                                                                 

Impairment of property, plant and equipment and internally generated assets

 

Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end.  Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.  Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

 

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units ('CGUs').  Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from the synergies of the combination giving rise to the goodwill.

 

Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income.  An impairment loss recognised for goodwill is not reversed.

 

Financial instruments

 

Financial assets and financial liabilities are recognised on the Group's pro forma condensed statement of financial position when the Group becomes party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are de-recognised when the obligation specified in the contract is discharged, cancelled or expired.  Financial assets are either categorised as loans or receivables or available for sale.  There are no assets classified as held-to-maturity or fair value through profit or loss.  All financial liabilities are classified as amortised cost and no liabilities are classified as fair value through profit or loss.

 

 

Trade receivables

 

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment. Appropriate provisions for estimated irrecoverable amounts are recognised in the statement of comprehensive income when there is objective evidence that the assets are impaired. Interest income is recognised by applying the effective interest rate, except for short term receivables when the recognition of interest would be immaterial.

 

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable.  For trade receivables, which are reported net; such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the pro forma condensed statement of comprehensive income.  On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

 

Cash and cash equivalents

 

Cash and cash equivalents comprise cash held at bank, demand deposits, and other short-term highly liquid investments that have maturities of three months or less from inception, are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

 

Trade and other payables

 

Trade payables are initially measured at their fair value and are subsequently measured at amortised cost using the effective interest rate method; this method allocates interest expense over the relevant period by applying the 'effective interest rate' to the carrying amount of the liability. Player liabilities are the amounts that customers place in their accounts along with any bonuses and progressive jackpots. These liabilities are recognised at fair value and subsequently at amortised cost.

 

Current and deferred tax

Taxation represents the sum of the tax currently payable and deferred tax.

 

Current tax

 

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit

reported in the pro forma condensed consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the pro forma condensed consolidated statement of comprehensive income.               

                                                                                                                                                             

Deferred tax                                                                                                 

 

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the pro forma condensed consolidated statement of comprehensive income, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

 

The carrying amount of deferred tax assets is reviewed at each pro forma condensed consolidated statement of comprehensive income date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred tax is measured using tax rates that have been enacted or substantively enacted by the Pro forma condensed consolidated statement of financial position date and are expected to apply when the related deferred tax asset or liability is realised or settled.

 

Corporate social responsibility tax

 

Certain companies within the Group are subject to Corporate Social Responsibility tax at a rate of 2 per cent. of the chargeable income of the preceding financial year.

 

Operating leases

 

Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group, these are classified as operating leases. The total rentals payable under the lease are charged to the condensed consolidated statement of comprehensive income on a straight-line basis over the lease term.

 

Pension costs

 

The Group operates a defined contribution scheme. The amount charged to the condensed consolidated statement of comprehensive income in respect of pension costs and other post-retirement benefits is the contributions payable in the period. Differences between contributions payable in the period and contributions actually paid are shown as either other liabilities or prepayments in the Pro forma condensed consolidated statement of financial position.        

 

Share capital

 

Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset.

 

Adjusted EBITDA

 

The Group defines Adjusted EBITDA as the operating result before depreciation, amortisation, finance costs, and income or expenses that relate to exceptional items as well as non-cash charges relating to share-based payments.

 

Critical accounting estimates

 

The preparation of pro forma condensed consolidated financial statements under IFRS requires the Group to make estimates and judgments that affect the application of policies and reported amounts. Estimates and judgments are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

 

Reference is made in this note to accounting policies which cover areas that the Directors consider require estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. These policies together with can be found below:

 

-       Revenue recognition;

-       Intangible assets and impairment of goodwill; and

-     Acquisition accounting and fair value of acquired assets and liabilities including contingent   consideration

 

 

4.    Earnings per share

 

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

 

 

 

 

 

 

Unaudited 6 Months to 28 February 2015

Unaudited 6 Months to 28 February  2014

Basic and diluted

 

 

Profit / (loss) after tax (£'000)

1,565

(127)

 

Weighted average number of shares for the purposes of calculating basic earnings per share

 

41,666,667

 

31,202,105

Effect of contingent share consideration on business combinations and acquisition of intangibles

 

Weight average number of shares for the purposes of calculating diluted earnings per share

 

3,584,051

 

 

45,250,718

 

 

 

-

 

 

31,202,105

 

 

 

 

The number of shares in issue represents the initial subscription on incorporation and the shares issued to acquire the group headed by Daub Alderney Limited as part of the share for share exchange.

 

     5.        Intangible assets

 

 

 

Software and licences

Goodwill

Brands names

Customer relationship

Total

 

 

 

 

 

 

 

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

Cost          

 

 

 

 

 

At 31 August 2014

764

-

-

-

764

Acquired through business combinations (see note 9)

-

9,718

1,171

5,521

16,410

Additions

5,358

-

-

-

5,358

At 28 February 2015

6,122

9,718

1,171

5,521

22,532

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

At 31 August 2014

764

-

-

-

764

Charge for the period

416

-

141

535

1,092

At 28 February 2015

1,180

-

141

535

1,856

 

 

 

 

 

 

Net Book value

 

 

 

 

 

 

At 31 August 2014

-

-

-

-

-

At 28 February 2015

4,942

9,718

1,030

4,986

20,676

 

 

6.    Trade and other receivables

 

 

Unaudited

At  28 February 2015

Unaudited

At 31 August 2014

 

£'000

£'000

 

 

 

Trade receivables

                         154

67

Other receivables

108

106

Amounts due from related parties

8,106

5,374

Prepayments

790

199

 

9,158

5,746

 

 

The Directors consider that the carrying amount of the trade receivables, other receivables and the amounts due to relate parties approximate to their fair value due to their short term maturity.

 

7.    Trade and other payables

 

 

Unaudited

At 28 February 2015

Unaudited

At 31 August 2014

 

£'000

£'000

Amounts falling due within one year

 

 

Trade payables

832

434

Corporation tax

70

-

Other taxation and social security

915

-

Other payables

28

-

Amounts due to related parties

367

218

Client liabilities and progressive prize pools

1,903

427

Accruals and deferred income

206

163

 

4,321

1,242

 

The Directors consider that the carrying value of trade and other payables is approximate to their fair value.

                               

8.  Related party transactions

 

The Group receives payment processing services from a company related by common control.  Fees charged during the period totalled £556,000 (H1 2014: £272,000). In addition to providing processing services the company held cash on behalf of the Group and acted in a treasury function, the total amount due to the Group at 28 February 2015 was £4,606,000 (2014: £655,000). No provision has been recognised in respect of these amounts and no amounts were written-off in any of the periods.  Of the amount due, £2,380,000 was novated to the ultimate controlling party prior to the IPO.

 

The ultimate controlling party prior to the IPO also holds cash on behalf of the Group and, at 28 February 2015 the amount due was £2,119,000 (2014: £2,994,000). No provision has been recognised in respect of these amounts and no amounts were written-off in any of the periods. As noted above, post period end an amount of £2,380,000 was novated to the ultimate controlling party prior to the IPO and the balance was cleared by way of a dividend. In addition, the following transactions were undertaken with the ultimate controlling party:

 

·      Contribution of its 100 per cent. investment in the equity share capital of Baldo Line SRL by way of a capital contribution to the Group. The asset and liabilities have therefore been transferred at book value and a capital contribution of £364,000 based on net asset value has been recorded;

·      Acquisition of the  IP rights of its designated software used in the business of Daub Alderney Limited  for £875,000; and

·      Contribution of a 24.5 per cent. investment in the equity share capital of QSB Gaming Limited.

 

Post-acquisition of the trade and assets of Table Top Entertainment Limited (see note 10), a company related by common control continued to hold cash on behalf of the Group totalling £1,375,000 (2014: £Nil).  This amount was received in full post period-end.

 

The Group entered into related party transactions with a number of companies under common control for the provision of software platform, marketing and other back office services. The total purchases in the period ended 28 February 2015 were £832,000 (H1 2014:  £180,000).  No amounts were due at the period end (2014: £Nil).

 

The Group received execution and management of marketing and software development services from Spacebar Media Limited (which was subsequently acquired by the Group on 1 February 2015 for £6,000,000 - see note 10) a company related by common control. Purchases of services in the period prior to acquisition was £1,000,000 (2014: £482,000).

 

On the 1 February 2015 the Group acquired certain assets from a company related by common control for £46,000.  

 

 9.  Acquisitions

 

Acquisition of Table Top Entertainment Limited ("TTE")

 

On 4 September 2014, Daub Alderney Limited acquired the trade and assets of TTE, a company incorporated in Alderney and whose principal activity is the operation of online casino and bingo gaming sites. The total consideration was £12,500,000 comprising £3,430,000 of initial consideration settled through the issue of 670,760 shares of £0.0001 each, and further contingent consideration based on certain targets on first and second anniversary dates to a maximum of £9,070,000, also to be settled in shares.

 

The principal reason for this acquisition was to enhance the Group's brands and revenue volumes, by acquiring established and leading brands with strong player bases. The Group also intends to use the expertise and the know-how acquired in the development of new product lines and operational efficiency. Details of the provisional fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

 

 

 

 

                                        

 

Book value

Fair value

 adjustment

 

Fair value

 

 

£000's

£000's

£000's

 

 

 

 

 

 

Client liabilities

(145)

-

(145)

 

Progressive prize pools

(784)

-

(784)

 

Cash

929

-

929

 

Property plant and equipment

66

-

66

 

Brands

 

1,171

1,171

 

Customer relationships

-

5,521

5,521

 

Total net assets

66

6,692

6,758

 

 

 

 

 

 

Fair value of consideration paid

 

 

 

 

Initial consideration

 

 

3,430

 

Discount on initial consideration

 

 

(519)

 

Fair value of contingent consideration

 

 

7,713

 

 

 

 

 

 

Total consideration

 

 

10,624

 

 

 

 

 

 

Goodwill

 

 

3,866

 

The Goodwill recognised on the acquisition of the business and assets of TTE, which is not deductible for tax purposes, relates to the presence of certain intangible assets, such as knowhow and other operating synergies.

 

Discount on initial consideration - under the terms of the business purchase agreement, the Group is entitled to the net profits derived from the acquired business from 31 July 2014 until 4 September 2014 (legal completion date) which has been returned by way of cash proceeds. This amounted to £519,000 and has been deducted from the initial consideration. Acquisition related costs have been borne by a related party and are immaterial.

 

The contingent consideration was initially recorded as a liability based on the fair value at acquisition and was being unwound over the respective earn-out periods to the first and second anniversaries. However, on 18 May 2015 the terms of the existing earn-out were terminated and new arrangements were entered into such that, with effect from completion of the IPO, the earn-out, and hence liability would be met by certain shareholders as opposed to shares being issued by the Company. The liability at the date of the variation, which included unwinding of the discount to the date of the variation of £689,000, totalled £8,402,000 and was transferred to a capital contribution reserve.

 

Acquisition of software license

 

On 4 September 2014, the Group acquired the software and related programs from NextTec Software Inc in respect of the underlying gaming platform and software used by TTE. The contingent consideration payable is based on a percentage of Net Gaming Revenue generated from the use of the software up to a maximum of £5,325,000.

 

The amounts are payable on the first, second and third anniversary dates and will be settled through the issue of shares. The number of shares issued to satisfy the liabilities arising on the anniversary dates will be based on the average share price for the previous 30 days as adjusted to reflect a minimum market capitalisation of £75 million. The asset acquired has therefore been provisionally fair valued at the date of acquisition and an intangible asset recorded of £4,132,000 with a corresponding entry to the shares to be issued reserve.                                                                                                                      

 

Acquisition of Spacebar Media Limited

 

On 1 February 2015, the Group acquired 100 per cent. of the voting equity instruments of Spacebar Media Limited, a company with common shareholders. Spacebar Media Limited is a UK company whose principal activities are execution and management of marketing services together with development and maintenance of online gaming software.

 

The principal reason for this acquisition was to leverage the knowledge and experience of Spacebar Media Limited, developed over a number of years in the software development arena and the marketing consultancy of online gaming brands, for the exclusive use of the Group.

 

Details of the provisional fair value of identifiable assets and liabilities acquired, purchase consideration and

Goodwill are as follows:

 

 

 

                                        

 

Book value

Fair value

 adjustment

 

Fair value

 

 

 

£000's

£000's

£000's

 

 

 

 

 

 

 

 

Property plant and equipment

65

-

65

 

 

Trade and other receivables

339

-

339

 

 

Cash

26

-

26

 

 

Trade and other payables

(282)

-

(282)

 

 

 

 

 

 

 

 

Total net assets

148

-

148

 

 

 

 

 

 

 

 

Fair value of consideration paid

 

 

 

 

 

Deferred consideration

 

 

6,000

 

 

 

 

 

 

 

 

Goodwill

 

 

5,852

 

 

The goodwill recognised in the acquisition of Spacebar Media Limited, which is not deductible for tax purposes, includes certain intangible assets such as, expertise and know-how, which do not qualify for separate recognition. Acquisition related costs have been borne by a related party and are not material.

 

The deferred consideration was settled in March 2015 in cash following a capital contribution in cash of £6,000,000 by the ultimate shareholder prior to the IPO.

 

 

10   Post Balance sheet events

 

 

Pre-IPO Dividend

 

On 13 April 2015 the Group declared a pre-IPO dividend totalling £7,500,000 comprising of £4,500,000 to be allocated against a receivable due from Gal Holdings Limited (formerly Daub Limited) and to be paid pre-Admission, with the remaining £3,000,000 being paid in cash.

 

Share capital reorganisation and placing

 

Post period end the Company issued 41,666,467 shares to acquire the entire issued share capital of Daub Alderney Limited and, as part of the IPO, issued a further 8,484,848 shares at a price per share of £1.32. Total proceeds (prior to expenses) from the IPO were £11,200,000.

 

 

 

STRIDE GAMING PLC

COMPANY BALANCE SHEET

For the period ended 28 February 2015

 

 

Unaudited

At 28 February 2015

 

 

 

£

 

 

Current assets

 

Trade and other receivables

200

 

 

Total assets

200

 

 

Equity attributable to equity holder:

 

Share capital

200

Total equity

200

 

 


This information is provided by RNS
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