Gaming Realms Regulatory News (GMR)

Gaming Realms plc

(the "Company" or the "Group")

Interim results for the six months ended 30 June 2017

Group on track to deliver positive Adjusted EBITDA in full yearAdjusted EBITDA loss reduced significantly in H1

Gaming Realms plc, which creates, publishes and licenses next generation mobile games, today announces its interim results for the six months ended 30 June 2017.

Financial highlights:

· Like-for-like** revenue growth of 5% to £15.7m (H1/16: £14.9m) driven by the continued success from the Company's proprietary mobile platform ("Grizzly") and our own unique Slingo IP driven games, plus steady growth in social publishing, which contributed £4.0m (H1/16: £3.4m) of social gaming revenues in H1/17

· Adjusted EBITDA loss reduced by 71% to £0.9m (H1/16: £3.1m), with Loss before Tax on continuing operations reducing by 30% to £4.1m (H1/17: £5.8m)

· Continued execution in cost reductions, in particular marketing optimization on real money gaming, was 26% lower at £4.8m (H116: £6.5m), whilst revenues grew 5% to £10.7m (H1/16: £10.2m) and head count reduction of 28 staff through synergies in our social publishing for annualized costs saving of approximately £2.0m, reflecting both improved operational and marketing efficiency

Operational highlights:

· Launch of 'white label' real money gaming sites, dealornodealcasino.com (March 2017) and loveislandgames.com (June 2017) in partnership with Endemol and ITV respectively

· Continued investment in product development, in line with the Group's strategy of highly focused investment in our games (with three games launched in the period), platform and player acquisition

· Signed four licensing partnerships for distribution of our games on our Remote Game Server ("RGS") with Caesar's Interactive, Rush Street Interactive, Resorts Digital Gaming and Pala Interactive

Post-period end:

· The Group has gone live in New Jersey with Resorts Digital Gaming and Rush Street Interactive

· Remote game server to be launched with Pala Interactive, Caesars Interactive, Betfair and Bwin in New Jersey and Betvictor in Europe in H2 2017

· Newly developed technical solutions for tighter monitoring of bonus abuse will improve average lifetime values on real money gaming

· £1.1m raised from existing shareholders and management at 11p per share

· The Company has appointed an adviser who is in discussions with a number of lenders to finance the repayment of the deferred consideration to Real Networks in December 2017

Outlook for 2017:

· The Group is expected to be EBITDA positive for 2017 as a whole and significantly EBITDA positive in H2 2017

· Real money gaming average daily revenue up 11% so far in Q3 2017 compared to same period in 2016

· Social publishing is now EBITDA positive

Following significant cost optimization and continued growth in real money gaming while bringing the social publishing to profitability, the Group has successfully executed its strategic deliverables within its control for H1/17. Delays in 3rd party integrations of our RGS to other operators, particularly New Jersey and the UK in H1, will result in a reduction in our anticipated licensing revenue for the year. This, coupled with the earlier than previously forecast timing of the new Point of Consumption tax in H2/17, is likely to impact EBITDA for 2017. However, the Board remains confident that profitable growth will continue and these are simply short term timing issues.

Patrick Southon, Chief Executive, said:

"The Group has made significant progress towards profitability in the first half of 2017, with H1 losses reduced, the Board anticipates that the Group will be EBITDA positive for the year as a whole. 

Our strategy of focusing our resources and capital on real money gaming, whilst continuing to deliver content to other operators, is driving revenue growth. Additionally, our focus on synergies, cost management and reduction is driving improved profitability.

The Group has been successful in agreeing new B2B content licences for the Slingo Originals portfolio of games and has launched new real money gaming sites dealornodealcasino.com and loveislandgames.com in partnership with Endemol and ITV respectively.

Further progress is expected in the second half of 2017 across the business with the RGS partnerships with Resorts Digital Gaming and Rush Street Interactive becoming fully operational, the first European partnership with BetVictor recently launched and our game portfolio expanded."

- Ends -

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About Gaming Realms

Gaming Realms creates and publishes innovative real money and social games for mobile, with operations in the UK, U.S and Canada. Through its market leading mobile platform and unique IP and brands, Gaming Realms is bringing together media, entertainment and gaming assets in new game formats. The Gaming Realms management team includes accomplished entrepreneurs and experienced executives from a wide range of leading gaming and media companies.

Business review

Overview

The Board is pleased to report that the Group has made further progress during the first half of the year during which it delivered revenues of £15.7m (H1/16: £16.6m,) and a reduction of £2.2m in Adjusted EBITDA loss to £0.9m (H1/16: £3.1m). The reduction in Adjusted EBITDA loss was primarily due to the Group's cost synergy execution and focused marketing strategy in the period, which included a reduction in marketing spend of £3.0m to £6.5m (H1/16: £9.5m).

Real money gaming

Our proprietary platform continues to be the focus of the Group's strategy with revenue growth of 5% to £10.7m (H1/16: £10.2m) despite the reduction in marketing spend and transactional costs (together representing 65% (H1/16: 86%) of revenue). The Group continues to invest heavily in platform and game development and player acquisition and engagement.

During the period, the Group have developed and launched three proprietary games on the Grizzly platform taking the Slingo Originals' portfolio of proprietary games to eleven from eight at 31 December 2016. Overall, the Group's own proprietary games have contributed 36% (H1/16: 21%) of gross gaming revenue.

Mobile content and delivery continues to drive game play on mobile devices with 87% (H1/16: 84%) of funded players using mobile devices.

Social publishing

The social publishing segment has shown improved performance with revenue up 16% to £4.0m (H1/16: £3.4m). This was led by the growth on Slingo Arcade which launched in December 2016. The Group focused marketing spend on its key apps which has also led to improved returns on investment with marketing spend as a percentage of revenue reducing to 42% from 57% in H1/16.

The Group continues to review its allocation of resources and investment. It has seen significant benefits from the integration of the social business in the period which resulted in its first EBITDA positive month in June 2017.

Licensing

During the period, the Group entered into four new licensing deals with Resorts Digital Gaming, Rush Street Interactive, Pala Interactive and Caesars Interactive. The licensing deals will allow us to expand our presence in New Jersey, where the Group will distribute its Slingo Originals proprietary games through the Group's RGS.

* EBITDA and adjusted EBITDA are non-GAAP measures. Adjusted EBITDA excludes acquisition, restructuring and other expenses, net foreign exchange gains and losses and share based payment charges.

** excludes disposed activities in the comparative period.

Consolidated statement of profit or loss and other comprehensive income

for the 6 months ended 30 June 2017

* EBITDA and adjusted EBITDA are non-GAAP measures. Adjusted EBITDA excludes acquisition, restructuring and other expenses, net foreign exchange gains and losses and share based payment charges.

Consolidated statement of financial position

as at 30 June 2017

Consolidated statement of cash flows

for the 6 months ended 30 June 2017

Consolidated statement of changes in equity

for the 6 months ended 30 June 2017

Notes forming part of the consolidated financial statements

For the 6 months ended 30 June 2017

1. Accounting policies

General Information

Gaming Realms plc ("the Company") and its subsidiaries (together "the Group").

The Company is admitted to trading on AIM of the London Stock Exchange. It is incorporated and domiciled in the UK. The address of its registered office is One Valentine Place, London, SE18QH.

The results for the six months ended 30 June 2017 and 30 June 2016 are unaudited.

Basis of preparation

The financial information for the year ended 31 December 2016 does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2016 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2016 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the board of directors on 12 September 2016. The financial information in this interim report has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards as adopted for use in the EU (IFRSs). The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 December 2016 and which will form the basis of the 2017 financial statements. There are no new standards, interpretations or amendments which became effective in the period which have had a material effect on the Group's financial information. Management are considering whether IFRS 15 Contracts with customers and IFRS 16 Leases, which are effective for periods beginning after 1 January 2018 and 1 January 2019 respectively, will have a material effect on the Group's future financial statements.

The consolidated financial statements are presented in sterling.

Adjusted EBITDA

EBITDA is a non-GAAP, company specific measure. Adjusted EBITDA excludes adjusting items from EBITDA. Adjusting items are non-recurring material items which are outside the normal scope of the Group's ordinary activities. These items are separately disclosed in order to enhance the reader's understanding of the Group's profitability and cash flow generation. Adjusting items include costs arising from a fundamental restructuring of the Group's operations, acquisition costs, non-trading foreign exchange gains/losses and share-based payment charges. The comparative adjusted EBITDA has been restated to reflect the including of foreign exchange gains/losses as an adjusting item. This has resulted in a decrease in adjusted EBITDA of £78,747 in H1/16 and £273,695 in 2016.

2. Segment information

The Board is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance. The Group has three reportable segments. The social publishing provides freemium games to the US and Europe. Licensing includes IP brand and content licensing to partners in the US and Europe. The real money gaming products and marketing services operates our brands and provides other digital marketing services to both gaming and non-gaming clients in the UK.

Revenue by product:

Geographical information

The Group considers that its primary geographic regions are the UK, including Channel Islands, USA and the rest of the world. No revenue is derived from real money gaming in the US. Revenues from customers outside the UK (including Channel Islands) and USA are not considered sufficiently significant to warrant separate reporting. All non-current assets are based in the UK.

3. Finance income and expense

The deferred consideration in relation to the acquisition from RealNetworks, Inc. was retranslated at the period-end exchange rate which resulted in a gain of £169,311 (6M 30 Jun 2016: loss of £566,103, 12M 31 Dec 2016: loss of £849,092) charge in the current period.

4. Tax credit

The reasons for the difference between the actual tax charge for the period and the standard rate of corporation tax in the UK applied to profits for the period are as follows:

5. Loss per share

6. Intangible assets