proforma: £1.7m lower31 Jul 2014 16:01
Point of Consumption tax
In the March 2013 Budget, the UK Government confirmed its intention to apply a 'Point of Consumption' (POC) tax to operators providing remote gambling into the United Kingdom. As widely reported it is currently expected that the POC tax will be applied from December 2014 and charged as 15% of net revenue.
As a leading operator within the UK gaming market, NetPlayTV will pay such POC tax on the majority of its net revenue. We estimate that the potential effect of the POC tax on the Group, if the regulation had been in place during 2013, would have been a reduction of circa £1.7m in profit for the year after incurring a gaming tax charge of £4.2m and implementing applicable contractual offsets and cost base efficiencies as outlined in points 1 and 2 below.
1. Contractual offsets: NetPlayTV has a number of contractual offsets with suppliers, where the revenue generated is directly linked to the amount payable to a supplier, and the potential additional cost due to the POC tax will consequently reduce the amount payable to these suppliers.
2. Consolidation of locations and cost base efficiencies:NetPlayTV currently runs two TV operations: one in the UK and one outside the UK. The Group may look to consolidate this into one location within the UK and has also already identified further cost efficiencies that can be achieved.
In addition to these two factors, the Board believes there are further opportunities for the Group to pursue as a result of the POC tax charge, including:
3. Opportunity to take market share and consolidation: There will be competitors within the UK gaming market who will have very low or negative profits after the introduction of the POC tax and maybe forced to exit the market3. NetPlayTV is well positioned to take advantage of a potential increase in market share. This also presents further opportunities for NetPlayTV to take part in the inevitable consolidation within the industry.
4. Operational gearing: While the POC tax will impact the EBITDA margin, the operational gearing in the business means that the EBITDA margin will rise again as the business continues to scale.
5. International expansion: Expanding our customer base internationally is a longer term objective and will further counterbalance the POC tax impact on our business.
Sign In
Follow the stocks
